Is the DOJ’s Google antitrust lawsuit just the beginning?

Last week, in the wake of highly publicized congressional hearings and a report about the abuse of monopoly power by the major technology companies in the digital marketplace, the Department of Justice, along with 11 states, filed what some have characterized as a landmark antitrust lawsuit against Google. The lawsuit, alleging that Google has unlawfully maintained monopolies in the markets for online search and search advertising, is certainly significant. It is the first time in almost two decades -- since the government's battles with Microsoft in the late 1990s -- that the DOJ has filed a major monopolization case under Section 2 of the Sherman Act. The question now is whether this case is just the beginning -- and whether the DOJ and the Federal Trade Commission intend to follow through on the growing consensus that additional antitrust actions are warranted against Amazon, Apple and Facebook in order to restore competition in their respective digital markets.

The report issued earlier this month by the majority staff of the U.S. House Subcommittee on Antitrust, Commercial, and Administrative Law found that the major tech companies -- Google, Amazon, Apple and Facebook -- have been permitted to achieve positions of industry dominance and power not seen since "the era of oil barons and railroad tycoons." The report was particularly critical of the federal antitrust agencies for their failure to block the tech giants, including Google, from achieving and then abusing monopoly power. It also observed in scathing fashion that the DOJ had "not filed a significant monopolization case in two decades." In short, the report found that the major tech companies now "have too much power," and that without effective oversight and a return to robust antitrust enforcement, "[o]ur economy and democracy are at stake."

Just weeks after the report was issued, and following the DOJ's own investigation that is reported to have lasted over a year, the DOJ filed suit against Google for unlawfully maintaining and extending monopoly power in general search services, search advertising, and general search text advertising. Noting that Google is long past its early days of being a "scrappy startup with an innovative way to search the emerging internet," the complaint alleges that the Google of today is "a monopoly gatekeeper for the internet," with a market value of $1 trillion, and that it is responsible for almost 90% of internet searches in the U.S.

The DOJ alleges that Google has maintained its monopoly position by, among other things, entering into numerous exclusionary agreements, including tying and long-term de facto exclusive arrangements, all designed "to lock up distribution channels and block rivals." Significantly, the DOJ asserts that Google now pays billions of dollars per year to the major device manufacturers (Apple, LG, Motorola and Samsung), the major U.S. wireless carriers (AT&T, T-Mobile and Verizon), and browser developers (Mozilla, Operate and UCWeb) -- all for the purpose of maintaining critical default status on leading devices and platforms for general online search in the U.S. The purpose and effect of these agreements, according to the DOJ, is to prohibit the few remaining search rivals in the U.S. market (Bing, DuckDuckGo and Yahoo!) from posing any kind of a competitive threat to Google. Asserting that Google's many interlocking agreements are anticompetitive, and calling the billions in annual payments "exclusionary payoffs," the DOJ alleges that without judicial intervention, Google will continue to foreclose competition in the online search and advertising markets in the U.S. The complaint further asserts that Google's agreements and conduct also threaten to stifle competition in emerging access points for search, noting internal Google documents predicting that emerging voice platforms "will become the future of search."

Google, for its part, has publicly responded to the DOJ's complaint by denying wrongdoing, and pointing to the fact that its dominance in search is not due to unlawful activity but rather consumer preferences. As Google's vice president asserted in a blog post, "People use Google because they choose to, not because they're forced to, or because they can't find alternatives."

While the battle between the DOJ and Google is likely to span years -- with an expected focus on the proper definition of the alleged markets and whether Google has monopoly power -- the key question from our perspective is whether this lawsuit is a harbinger of new cases to come. As some antitrust experts have observed, it is certainly noteworthy that the DOJ seemingly took great care in the complaint to identify the extensive dealings and agreements between Google and Apple.

By way of background, the complaint explains that Apple has never developed its own general search engine. Instead, Google's search engine has become the default for Apple's Safari web browser. The DOJ alleges that Google pays Apple $8 to $12 billion per year in advertising revenue for this privilege -- resulting in approximately 15% to 20% of Apple's worldwide net income. Citing Google's internal view that losing default status on Apple devices would be a "Code red" scenario, the complaint quotes a senior Apple employee writing that after a 2018 meeting between the CEOs of Apple and Google, "Our vision is that we work as if we are one company." The import of the DOJ's allegations suggest that the two tech behemoths are actively supporting and reinforcing their respective monopoly positions in the digital marketplace. (It should be noted that 10 years ago the FTC closed a major investigation of Google's acquisition of the mobile advertising company AdMob, because the FTC believed that Apple was poised to compete in the mobile ad network marketplace. That prediction never came to pass and instead the two firms have endeavored to work together.)

It is also interesting to note that the DOJ's complaint against Google makes express reference to its last major monopolization case against Microsoft. At the time, in the late 1990s, the DOJ's case against Microsoft was initially viewed as historic and groundbreaking. That case was also predicated on alleged exclusionary agreements and tying arrangements. Microsoft was alleged to have engaged in various anticompetitive practices to maintain its dominance in the Windows operating system by targeting and eliminating perceived competitive threats, including Netscape's then-popular web browser. Microsoft, like Google in the modern era, was alleged by the DOJ to have forced major industry participants to install and set Microsoft's Internet Explorer as the required default browser, thus creating barriers to entry to unlawfully prevent rivals from competing. As many will recall, the district court judge presiding over the trial actually ordered the breakup of Microsoft. But after the D.C. Circuit Court of Appeals issued an important if somewhat mixed ruling -- affirming the lower court's findings of monopolization but remanding for a more thorough analysis of the tying claim and the structural remedy -- the DOJ (under the new George W. Bush administration) settled the case and allowed Microsoft to remain intact. Critics contended that what had started as a case analogous to the historic antitrust cases breaking up Standard Oil and AT&T, had ended with a whimper. Others, who are less critical, suggest that the DOJ's case served its purpose by forcing Microsoft to modify its behavior and ultimately allowed the next generation of innovative companies like Google to breakthrough and survive.

The DOJ's complaint against Google is somewhat vague as to the remedies it seeks. Publicly the DOJ has suggested that all options remain on the table. Yet, based on the existing allegations in the complaint, and with striking parallels to the Microsoft case, it seems unlikely that the DOJ will seek a formal break up Google. (Of course, that prediction may depend, at least in part, on who wins the presidential election next week). But, at a minimum, we expect that the DOJ will ask a court to enjoin those anticompetitive aspects of the existing agreements between Google and industry participants -- so that competition can be restored in the general search and advertising markets. That would certainly be welcome news to rivals competing in that space. But in our view, the key question is whether the DOJ and FTC will expand their enforcement efforts to take on the other tech industry giants. As the U.S. House Subcommittee report found, the concentration of power among these tech giants is literally putting our economy and democracy at risk. While the lawsuit against Google is certainly a welcome beginning, it will take more than a single lawsuit to open up competition in the digital marketplace and protect our democracy. 

The views expressed herein are the authors' own.