Google engages in anticompetitive conduct, DOJ says

The Justice Department accused Google of engaging in anticompetitive conduct to maintain illegal monopolies over search and search advertising in an antitrust lawsuit filed Tuesday.

The legal action is the government's most aggressive challenge to a tech company's market dominance since it sued Microsoft more than two decades ago on identical charges relating to restrictions it forced upon manufacturers and users to uninstall Internet Explorer. It could be the first lawsuit in a wave of antitrust enforcement against other major tech companies amid heightened scrutiny by regulators of Facebook, Amazon and Apple.

In the complaint filed in Washington, D.C. federal court, the department alleged the Alphabet-owned company abused its monopoly power through a series of exclusionary business agreements that prevent competitors from building scale. Google pays billions of dollars each year to mobile phone manufacturers, wireless carriers and browser developers, to secure default status for its search engine and in many instances, prohibit them from dealing with competitors, the lawsuit said.

"General search engine competitors are denied vital distribution, scale, and product recognition -- ensuring they have no real chance to challenge Google," Kenneth Dintzer of the Department of Justice, Antitrust Division wrote. "Google is so dominant that "Google" is not only a noun to identify the company and the Google search engine but also a verb that means to search the internet."

Google accounts for 80% of search queries in the country, according to the lawsuit.

Google Chief Legal Officer Kent Walker called the Justice Department's lawsuit "deeply flawed" in a statement. He claimed the lawsuit, if successful, will artificially prop up lower-quality search alternatives, raise phone prices and make it harder for people to get the search services they want to use.

"People use Google because they choose to, not because they're forced to, or because they can't find alternatives."

Eleven state attorneys general, all Republican, joined in the lawsuit with the Justice Department. They did not propose specific enforcement action but officials have not ruled anything out, including structural changes that might force Google to splinter its ad business or sell its Chrome browser.

The complaint detailed how Google leverages its lucrative advertising business to secure favorable contracts with distributors to preserve its monopoly power. U.S. v. Google LLC, 20-cv-03010 (District of Columbia, filed Oct. 20, 2020).

Donald Pepperman of Baker Marquart LLP said the lawsuit "strikes at the heart of Google's general search and search advertising core business models and the various tentacles that Google extends into vertical markets it also controls on its one stop shop search website."

The Justice Department alleged that Google provides a share of its search advertising revenue to its partners in exchange for status as the preset default general search engine. The company, for example, has a long-term agreement with Apple reportedly worth billions of dollars to require its search engine be the default on the iPhone-maker's Safari browser.

"In many cases, the agreements relating to mobile devices go even further, expressly prohibiting the preinstallation of any rival general search services, and the setting of other defaults to rival general search engines," Dintzer wrote.

In a blog post responding to the government's claims, Google countered that Apple features its search engine in its browser because "they say Google is 'the best.'"

"This arrangement is not exclusive -- our competitors Bing and Yahoo! pay to prominently feature, and other rival services also appear."

Santa Clara School of Law Professor called Google's defense "100% valid" since "consumers can easily bypass any of the search distribution deals that it's done to find alternate services." He anticipated that the Justice Department will likely respond that consumers, as a practical matter, don't do that.

"That's a theoretical point of competition but might not be one that works in practice," he said.

The Justice Department also took aim at Google forcing Android manufacturers that want to install Google's services to take a bundle of apps, including its search engine, feature them on the home screen and make certain apps undeletable.

Jeffer Mangels Butler & Mitchell LLP partner Mark Riera said the court will assess Google's procompetitive justifications for its business agreements. The company, for example, said in the blog post that its arrangement with Android manufacturers benefits consumers since it enables it to distribute the Android operating system for free, reducing the price people pay for phones.

Goldman also reasoned that Google requires Android licensees to uniformly package its products so they "cannot cherry pick services" to accommodate developers and ensure that its programs run smoothly -- another procompetitive justification that might also encourage innovation since more developers can make programs for Android.

But the case will likely turn on which side prevails in how the relevant market is defined, according to Bona Law PC partner Jarod Bona.

"They probably will go as far as to show they're not a monopoly -- that the market is broader than they think and that markets like this change quickly," he said.

Google will look to broaden the market as much as possible to include searches on Facebook, Twitter and Amazon, among other entities, to curtail its share of the search market, agreed Bona and Riera.

Still, Bona said it would be "surprising to see a judge not conclude that Google has monopoly in search in the end," adding that "it's not a slam dunk."