What is the Google ‘monopoly’ antitrust case and how does it affect consumers? Premium

Google has lost the antitrust case filed against it by the U.S. Department of Justice that focused on the company’s search engine dominance, and expensive partnerships to push its product

The high-profile court proceedings took place across 10 weeks last year [File] | Photo Credit: REUTERS

The story so far: Google on Monday (August 5, 2024) lost a major antitrust case brought against it by the U.S. Department of Justice that sought to establish that the tech giant had a monopoly in the web search and advertising sectors. The 10-week-long bench trial that took place in September 2023 saw high-profile tech leaders, including Google CEO Sundar Pichai and Microsoft CEO Satya Nadella, testifying before the U.S. District Court for the District of Columbia. The lawsuit accused Google of using its dominant position in the search engine market to elbow out rivals and maintain monopoly. The tech giant’s exclusive deals with handset makers were brought before the court as evidence. And, in the end, U.S. District Judge Amit Mehta ruled that Google was a monopolist.

What happened to Google in the antitrust case?

According to the ruling, Google’s search dominance was majorly achieved through a strategy of exclusive distribution agreements, or default distribution. This refers to the way Google entered into lucrative contracts with “browser developers, mobile device manufacturers, and wireless carriers” so that it was the first or default search engine that users of such services or new phones were given. Google pays for this privilege and has shelled out more than $26 billion for it in 2021, per the court.

“After having carefully considered and weighed the witness testimony and evidence, the court reaches the following conclusion: Google is a monopolist, and it has acted as one to maintain its monopoly. It has violated Section 2 of the Sherman Act,” the ruling noted, referencing a U.S. law that views business monopoly or attempts at monopolising as an offence.

Per the court, Google used its monopoly power in two markets: general search services and general search text ads.

“Importantly, the court also finds that Google has exercised its monopoly power by charging supra-competitive prices for general search text ads. That conduct has allowed Google to earn monopoly profits,” reported the filing.

Furthermore, the court harshly criticised the way Google failed to preserve employee correspondence that could have served as evidence.

However, some of the court’s conclusions were in favour of the tech giant. It was determined that Google did not have monopoly power in the search advertising market. The court also noted there was no product market for general search advertising and that Google was not liable for actions involving its advertising platform.

The court ruled that Google had monopoly power in two product markets | Photo Credit: Sahana Venugopal/THE HINDU; compiled on Canva

In addition to this, Google will not be sanctioned for the way it failed to preserve employee chat messages, though the court warned it might not be so “lucky” in a future case.

Interestingly, the judge observed that Google had brought out the “industry’s highest quality search engine, which has earned Google the trust of hundreds of millions of daily users.”

How do monopolistic practices harm the consumer experience?

Regulators around the world monitor how businesses use technology in their countries, to prevent the concentration of power in the hands of a few entities. This ensures healthy competition in the market segment, so that all participants are striving to do better for their customers.

When a monopoly comes into existence, however, rivals may be forced out of the market while the company with the most power is able to abuse customers because they have very few other options. Such companies also lose the incentive to keep improving the quality of their product.

The court ruling in the Google case even pointed to this as a risk factor.

“Google’s indifference is unsurprising. In 2020, Google conducted a quality degradation study, which showed that it would not lose search revenue if it were to significantly reduce the quality of its search product,” observed the filing, adding, “The fact that Google makes product changes without concern that its users might go elsewhere is something only a firm with monopoly power could do.”

What did the U.S. Department of Justice say?

The U.S. DOJ hailed the ruling as a public victory for internet users in the U.S.

“This victory against Google is an historic win for the American people,” said Attorney General Merrick B. Garland in a statement on the DOJ website. “No company — no matter how large or influential — is above the law. The Justice Department will continue to vigorously enforce our antitrust laws.”

Google is far from the only company in the regulator’s line of vision, as the U.S. DOJ is also reportedly teaming up with the U.S. Federal Trade Commission (FTC) to act against other large tech players on antitrust grounds, including Microsoft, OpenAI, and Nvidia, per The New York Times.

The court ruling pointed out the stark difference between Google and Bing’s user share | Photo Credit: Sahana Venugopal/THE HINDU; compiled on Canva

What happens next?

Google will be appealing the ruling. In the meantime, the court has asked both parties, Google and the Department of Justice, to find a remedy ahead of their meeting with Judge Mehta on September 9. The remedy, in this case, could consist of anything between breaking up Google and ordering the search giant to end its exclusive deals with the mobile handset makers.

The former could fundamentally alter the dynamics of the consumer digital business market as Google plays a key role by providing its platform to both individuals and businesses for interactions. In the latter case, in terms of immediate effect, handset makers could lose the billions of dollars they receive from Google to pre-load the company’s search engine in the smartphone.

This hefty payment to smartphone makers, particularly Apple, disincentivises them from innovating a rival search engine. Apple, during the hearing, said that it will continue to use Google as its default search engine.

Apart from this lawsuit, the Justice Department is set to go against Google in another antitrust trial that deals with the internet company’s ad technology.

(This story has been updated with details about the remedy)

Published - August 07, 2024 12:23 pm IST