After a year-long Congressional investigation into Google’s anti-competitive practices, members of the US Department of Justice (DOJ) and 11 state attorneys general have filed a landmark lawsuit to finally contest the tech giant’s monopolistic control over the online marketplace.
On October 20th, the lawsuit was filed in a Washington, D.C. courthouse under The Sherman Act, a federal statute dating back to the 1890s Gilded Age where trustbusters banned companies from fixing prices or taking overreaching steps to rig the markets in their favor, believing this control stifled healthy competition. The DOJ complaint alleges that Google is “unlawfully maintaining monopolies” in its search and online advertising through “anticompetitive and exclusionary practices.”
As a result, the case argues that Google’s actions ultimately make searches less useful for consumers, given that users “are forced to accept” their often controversial practices without a second thought, particularly regarding the collection of privacy data. This also makes ads more expensive for advertisers who “must pay a toll” on Google’s terms in order to reach these highly centralized consumers. There’s also the throttling of any potential competitors standing in Google’s way, outsiders who simply “cannot emerge from Google’s long shadow” given all the institutional obstacles which force their hands towards being the “foreclosed competition.”
“Two decades ago, Google became the darling of Silicon Valley as a scrappy startup with an innovative way to search the emerging internet,” the lawsuit states. “That Google is long gone. The Google of today is a monopoly gatekeeper for the internet, and one of the wealthiest companies on the planet, with a market value of $1 trillion and annual revenue exceeding $160 billion. For many years, Google has used anticompetitive tactics to maintain and extend its monopolies in the markets for general search services, search advertising, and general search text advertising — the cornerstones of its empire.”
The case continues to argue the marketplace is a pseudo-competition between Google, DuckDuckGo, Microsoft’s Bing and smaller search engines, the supposed fair competition in the online world. In reality, the estimates from Business Insider claim Google accounts for over 90 percent of the market share of all internet searches across its search engine, apps, and their video subsidiary Youtube. In maintaining their trillion-dollar operation, the lawsuit scrutinizes Google’s deals with major tech, mobile, and handset companies such as Apple, LG, Motorola, Samsung, Verizon, AT&T and T-Mobile. Details include requiring Google to be the default option for search tools on these platforms, forbidding the preinstallation of competing search applications, and even making some Google apps completely undeletable on certain devices. The case argues these deals rob competitors of a fair rivalry, throttling the opposition of “effective paths to market and access, at scale, to consumers, advertisers, or data.”
According to internal documents cited as evidence, Google refers to the loss of these contracts as a “Code Red scenario” to their revenue advantage, alleging the search giant pays Apple $8–12 billion-per-year alone to maintain a symbiotic hold on the market, increasing both of their own company’s valuable scale while denying such scale to their respective competition. The DOJ used Google’s own estimates to say these deals make up for 80 percent of Google’s 90 percent market share, 50 percent of which is being achieved through Apple devices alone. For DuckDuckGo, Bing, or any mom and pop search engine, there are no such monopoly profits to buy preferential treatment to inflate their influence. To prevail, the DOJ has to show that Google is unethically dominating the market, and that the deals put the competition at a disadvantage. Both of these counts appear to be self-evident on the deals alone.
But it doesn’t stop there.
Among the cited evidence were training documents, independently verified by The Markup, which instructed new employees to use caution and avoid certain words in their communications. This included a “notorious line” from Google’s own Chief Economist Hal Varian who said: “We should be careful about what we say in both public and private. ‘Cutting off the air supply’ and similar phrases should be avoided.” This is a direct reference to the 90’s antitrust case levied against Microsoft and Bill Gates, where their former executive associate, Paul Maritz, got into hot water after he said he wanted to “cut off Netscape’s air supply,” according to The Associated Press. “Words matter, especially in antitrust law,” Varian reportedly added, imploring employees to avoid terms such as “bundle,” “tie,” “crush,” “kill,” “hurt,” or “block” competition, to avoid lawful suspicions regarding Google as a “market power.”
Coincidentally, the DOJ recognized more historical parallels between modern Google and 90’s Microsoft, which previously held its own 90 percent market share of all computer software at the time. The lawsuit highlights how during the Microsoft case, the company had deals requiring preset default and exclusivity status on previous computerware, making their own software undeletable by contractual obligations. At the time, these contracts were considered to be exclusionary and unlawful under Section 2 of the Sherman Act. Given that monopolizing seems to be a feature — not a bug — of Google policy, such deals will likely face the same fate today.
“Back then, Google claimed Microsoft’s practices were anticompetitive, and yet, now, Google deploys the same playbook to sustain its own monopolies,” the lawsuit declares. “But Google did learn one thing from Microsoft — to choose its words carefully to avoid antitrust scrutiny.”
Despite their best redirective efforts, there’s just no putting the toothpaste back in the tube as people have noticed the game. The lawsuit will also look into allegations of Google’s self-preferencing with regards to advertising their own services. Just two weeks ago, members of the House Judiciary Committee were privy to hearings from executives at Yelp, the app known for helping users find quality searches for restaurants or other businesses, which testified to Google favoring reviews conducted on their services, often at the expense of consumers in terms of quality. Luther Lowe, Yelp’s senior vice president of public policy, argued in his prepared testimony: “it had conditioned consumers to expect for the best or most relevant results from around the web — even though they no longer were. By doing so, Google physically demoted non-Google results even if they contained information with higher quality scores than the information Google.”
According to the complaint, Google’s market dominance strategy also included pushing “organic links further and further down the results page” in favor of ads and its own vertical search products.
Another investigation done by The Markup found that 41 percent of the first page of mobile search results is dedicated almost exclusively to Google content, including its vertical search products such as Google Flights and its jobs search. The DOJ argues this pushes other websites “below-the-fold,” the often unexplored pages which most users rarely use. As such, these websites have to “buy more search advertising from Google to remain relevant.” By comparison, the investigation found that for Google content, 63 percent of the search results were “above the fold,” serving as another definitive example of Google extending their own influence at the expense of others.
This was also the conclusion of the Judiciary Committee’s 449-page report, which featured a section dedicated exclusively to Google’s self-preferential treatment. Lawmakers even used the same language as the current DOJ lawsuit, framing the company’s dramatic character arc of “scrappy start-up” into “the kinds of monopoly we last saw in the era of oil barons and railroad tycoons.” The DOJ lawsuit also draws attention to John Rockefeller’s Standard Oil, the most feared monopoly of the 20th century. Google will contest this comparison, of course, but Rockefeller’s game wasn’t all that different from today’s landscape.
Standard Oil often used predatory price cutting, the practice of using one's monopoly profits to manipulate the market when the competition comes along. When you held a 90 percent control over the energy market with $1 trillion in today’s cash, you could afford to slash your own prices so ridiculously low, it’d force the competition to either leave the market or die. Sure, consumers and advertising partners could benefit from these periods of “offers they couldn’t refuse.” It was the doomed competition who had to pick up the tab. In a similar way, Google can argue they’re entirely “free” — at least to the users who don’t have to pay the fee. It’s their competition who ultimately pays the price.
Remember, Google’s predatory size isn’t just a part of the business, but rather the business being sold under your nose. According to DOJ, “Google’s search index contains hundreds of billions of webpages and is well over 100,000,000 gigabytes in size.” And as noted by The Hill’s Kim Wehle, this data is given “willingly (if not unwittingly)” through “searches, clicks, and swipes” by none other than… you! “When asked to name Google’s biggest strength in search,” the complaint continues, “Google’s former CEO explained: ‘Scale is the key. We just have so much scale in terms of the data we can bring to bear.’ By using distribution agreements to lock up scale for itself and deny it to others, Google unlawfully maintains its monopolies.”
“Google then monetizes the consumer’s information and attention by selling ads,” the complaint concludes, ensuring competitors are locked-out and unable to utilize the “complex algorithms that are constantly learning” how to adapt to online marketing. It’s certainly a brilliant economic strategy the tech giant likes to keep in-house and close to the chest.
As explained by Douglas Schmidt, a computer science researcher at Vanderbilt University, Google takes great pains to protect user privacy from data exposure… but not out of the goodness of their hearts, of course. “Google does a good job of protecting your data from hackers, protecting you from phishing, making it easier to zero out your search history or go incognito,” Schmidt wrote for Wired Magazine, “however, their business model is to collect as much data about you as possible and cross-correlate it so they can try to link your online persona with your offline persona. This tracking is just absolutely essential to their business.” Translation? The monster is indeed in the house… it’s just not the supposed third-party hackers who should be kept at bay.
“Today, millions of Americans rely on the Internet and online platforms for their daily lives,” added a statement from Attorney General William Barr, head of the DOJ and a former telecom executive at Verizon. “Competition in this industry is vitally important, which is why today’s challenge against Google for violating antitrust laws is a monumental case both for the DOJ and for the American people. Since my confirmation, I have prioritized the Department’s review of online market-leading platforms to ensure that our technology industries remain competitive. This lawsuit strikes at the heart of Google’s grip over the internet for millions of American consumers, advertisers, small businesses, and entrepreneurs beholden to an unlawful monopolist. This is an important milestone, but not the end of our review of market-leading online platforms.”
Google are already pushing back on Barr’s decision as a “deeply flawed” politically motivated stunt to help the Trump administration, which forces even a staunch Trump critic like me to urge readers not to take this bait. There’s no doubt the president has a record of attacking Google-owned properties for selfish reasons. Barr pushing prosecutors to wrap up inquiries into this lawsuit before Election Day is yet another piece of evidence of that. But this case will almost certainly outlast the administration’s influence, just as the Justice Department spent more than a decade taking on Microsoft until they finally decided to settle in 2001.
“It’s the most newsworthy monopolization action brought by the government since the Microsoft case in the late ’90s,” argued Bill Baer, a former chief of the Justice Department’s antitrust division. “It’s significant in that the government believes that a highly successful tech platform has engaged in conduct that maintains its monopoly power unlawfully, and as a result injures consumers and competition.” The lawsuit will likely result in the same decades-long stretch, out-lasting DOJ officials and state attorneys general currently working on the task. As such, it’s not enough for Google to simply wipe away their very real legal battle under the PR guise of bad faith political theatre, as detailed in their blog post.
“People use Google because they choose to — not because they’re forced to or because they can’t find alternatives,” wrote Kent Walker, senior vice president of Google’s Global Affairs “This isn’t the dial-up 1990s, when changing services was slow and difficult, and often required you to buy and install software with a CD-ROM. Today, you can easily download your choice of apps or change your default settings in a matter of seconds — faster than you can walk to another aisle in the grocery store.”
This response, however, isn’t that different than the ones offered by Rockefeller and Gates. Both tried to excuse anti-competitive business practices with the argument that in the short term everything looked good, at least as far as the consumer was concerned. But this benevolence towards
Low-costs, high-production, and ease-of-use don’t acquit someone of being a monopolist. As argued by the Times journalist Ron Chernow during the Microsoft case in 1998: “they simply affirm that [they’re] a very smart monopolist.” It’s not a matter of whether their control is good, but that the control of any market to this extent is ultimately bad both for business and consumers in the long run.
“Many people assume that the trust kings of the Gilded Age simply gouged consumers and sold shoddy products … [but Standard Oil] was dreaded more for its low predatory pricing than for fleecing customers. Incessant innovation and relatively cheap prices may be necessary conditions for maintaining a monopoly,” Chernow wrote.
Rockefeller built his empire by colluding with railroad partners for lucrative freight rates, secretly buying out his rivals, and throttling oil producers by controlling the pipelines. When competition appeared, he used his extensive control to slash prices beyond competitive levels. Gates had record computer sales and constant upgrades to computing software. It’s this appearance of market goods and fickle competition that is a necessary means to escape questioning of their power. Google is just improving the lyrics to the same old songs and hoping we all don’t notice. Thankfully, for now, the legal system isn’t listening.