Why the US government is suing Google

The Department of Justice says the company’s anti-competitive business practices harm Americans.

After a 14-month investigation, the United States government filed a landmark lawsuit against Google on Tuesday, arguing that the search giant used unfair practices to preserve its search and search advertising monopoly.

The Department of Justice and 11 states filed the lawsuit against Google in a federal court, accusing Google of using money it makes from its dominant position in search to pay other companies to help maintain its lead and block out competitors. Google pays Apple billions each year to be the default browser on Safari, for example, and search comes preloaded on devices using Google’s Android operating system.

“Two decades ago, Google became the darling of Silicon Valley as a scrappy startup with an innovative way to search the emerging internet,” states the suit. “That Google is long gone. The Google of today is a monopoly gatekeeper for the internet.”

In a press briefing, Justice Department officials said the government is stepping in to protect access to a free market for customers and Google’s competitors. They argue that Google has illegally maintained its monopoly through exclusive business deals that put its own search and browser on phones and keep out competitors.

“If the government does not enforce the antitrust laws to enable competition, we could lose the next wave of innovation,” Justice Department spokesperson Marc Raimondi said in a press briefing. “If that happens, Americans may never get to see the next Google.”

The case argues that Google’s anticompetitive practices are harming three key groups: American consumers, who “are forced to accept” its often-controversial privacy practices; advertisers, who have to pay a “toll” to Google to reach their customers; and competing tech companies, who “cannot emerge from Google’s long shadow.”

The announcement unveils the biggest antitrust case against a tech company since the Microsoft antitrust case in 1998. “Google’s practices are anticompetitive under long-established antitrust law,” the new complaint reads. The DOJ likened the situation to Microsoft, which made its internet browser the default on Windows operating systems and made it impossible to delete.

The Justice Department’s suit poses a potential existential threat to Google’s business if it results in breaking off Google’s search engine — which accounted for about $21 billion last quarter, or more than half of its total revenue — from its other lines of business, such as cloud computing and video.

Google rebutted the basis of the lawsuit, calling it a “dubious complaint” and arguing that consumers can easily use other products besides its own.

“Today’s lawsuit by the Department of Justice is deeply flawed,” a Google spokesperson said in a statement. “People use Google because they choose to — not because they’re forced to or because they can’t find alternatives.”

The suit was filed amid heavy political tension between major tech companies and the US government, with Attorney General Bill Barr reportedly speeding up the timing of the lawsuit so that it would be filed before the presidential election in November.

Here’s a breakdown of the case, its political consequences, and the complicated path ahead for Google and the DOJ.

The case against Google

The DOJ considers Google search to be a monopoly in the US, where nearly 90 percent of internet searches are through Google. The complaint says that Google is illegally trying to maintain its dominance through anticompetitive practices.

In its lawsuit, the Justice department claims that Google has used exclusive business contracts to limit rival companies’ ability to put their products on Google’s Android mobile devices, and incentivizes device manufacturers like Apple and carriers like Verizon to use Google search instead of other search engines.

The suit argues these practices violate the century-old Sherman Antitrust Act, which outlaws companies from “every contract, combination, or conspiracy” to monopolize.

And the suit says Google uses its profits from its massive hold on the search industry to maintain that grip by paying companies like Apple, LG, and AT&T to make it the default search engine on their devices, thus making it harder for potential rivals to compete.

“For many years, Google has used anti competitive 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 report reads.

Google said its contracts are similar to how other companies promote their products.

“[L]ike countless other businesses, we pay to promote our services, just like a cereal brand might pay a supermarket to stock its products at the end of a row or on a shelf at eye level,” the company wrote in a response to the DOJ complaint.

The DOJ said that Google’s contracts help Google maintain its search monopoly because its scale contributes to its effectiveness: The more user data it has, the better its search results are. Additionally, the more people use Google search, the more advertisers will pay Google to reach them.

“Google deprives rivals of the quality, reach, and financial position necessary to mount any meaningful competition to Google’s longstanding monopolies,” the report reads. “By foreclosing competition from rivals, Google harms consumers and advertisers.”

The DOJ complaint is also notable because rather than focusing on how Google’s monopoly could raise prices, it focuses on how lack of competition could lower quality, according to Thomas Campbell, former director of the FTC’s antitrust arm and a professor of antitrust law at Chapman University.

“Normally in antitrust cases the argument is that because of exclusionary conduct, a market is monopolized and the price to the consumer is higher,” Campbell told Recode. In this case, “the main point is the benefit of having a search engine that protects your privacy is lost.”

The lawsuit is more narrow than a report earlier this month from Congress’s House Judiciary Subcommittee on Antitrust, which also discussed how Google allegedly prioritizes its own search results over competing search platforms, like restaurant reviews on Yelp or flight queries on Expedia.

A chart showing Google’s dominance in search, smartphone OS, and digital ads.

Rani Molla/Vox

The DOJ case also limits its focus to search, rather than discussing other industries where Google is dominant, including online advertising, smartphone operating systems, and web browsers. Critics say it uses that dominance in each to reinforce its other business lines.

Democratic state attorneys general may address these other issues in future lawsuits. The DOJ could also expand the scope of its lawsuit as the case proceeds.

The complicated bipartisan politics behind Big Tech regulation

The lawsuit against Google comes at a time when there’s unprecedented public and political opposition to the financial and political power of major tech companies. Lawmakers on both sides of the aisle want to regulate Big Tech, though they disagree on why and how to regulate these giants.

President Trump, as well as many Republican and Democrat lawmakers, have argued with increasing urgency that major tech companies like Google have amassed far too much market power. They say the companies stifle competition and leave consumers with no choice but to use their services when they go online.

This is a departure from the decades-long prevailing legal attitude in the US government. Historically, the idea was that to break up a company, you have to prove not just that it’s a monopoly but that it’s charging customers more for its products than it would with greater competition.

That makes it harder to go after Google on antitrust grounds because its most popular products — search, email, browser, maps — are all free.

But in the past several years, there’s been a shift in that thinking, thanks in part to the scholarship of a new wave of influential legal academics dubbed the “hipster antitrust” movement, as well as rising bipartisan political opposition to Big Tech’s influence over the American public.

“It’s a major, major change in the government’s orientation toward monopoly power,” said Sally Hubbard, director of enforcement strategy at the Open Markets Institute, an antitrust nonprofit.

Earlier this month, the Democrat-led House Judiciary Committee concluded its year-long investigation into major tech companies, concluding that not just Google, but also Amazon, Facebook, and Apple, use monopoly power to protect their dominant positions in the industry. This investigation has set the stage for lawmakers to introduce new laws regulating the tech giants in the future.

The progressive flank of the Democratic party, such as Sen. Elizabeth Warren (D-MA) and Sen. Bernie Sanders (D-VT), have long argued that the US needs new laws to break up big tech companies, which they say have amassed too much market power and are hurting the American people and economy.

At the same time, Republicans have been ramping up their attacks on tech for a more specific reason: alleged and unproven “anti-conservative” bias. Facebook’s and Twitter’s recent efforts to fact-check and even block unsubstantiated claims made by Republican politicians and some conservative-leaning news outlets have further fueled these complaints.

Some conservatives, including Trump, are increasingly calling for Congress to repeal Section 230, a landmark internet law that protects social media companies from being sued for what people say on their platforms. Some Democrats, including presidential candidate Joe Biden, have also called for Section 230 reform, although not in the same manner Republicans are demanding.

On a press call with reporters announcing the case on Tuesday, DOJ’s Shores was clear in saying that the lawsuit does not address concerns about Section 230.

“The antitrust case is very separate from the questions about social media and some other technology issues that are out there about skew or bias that have been the subject, at least for us, with regard to the Section 230 of the Communications Decency Act,” said Shores.

But it’s impossible to separate the timing of its release from these larger talks of tech reform.

In fact, some have questioned whether the DOJ has rushed out its case against Google in order to file the suit before the election to please Trump, who has long been calling for this suit to move forward as part of his administrations’ larger confrontational policy against Big Tech.

If Biden wins the presidency, his administration’s Department of Justice could pursue the current case, refine the charges, or drop it altogether. Several legal experts told Recode that it’s likely that a potential Biden administration would pursue the case in some form given the bipartisan support for going after tech.

And the American public has also increasingly come to question Big Tech’s power, with roughly half thinking major technology companies should be regulated more than they are now, according to a June poll by Pew Research.

As Recode previously reported, even some Google employees (often anonymously, for fear of punishment by their employer) have argued that the company should be broken up to help Google return to its small, scrappy startup ethos — which they think it needs in order to continue innovating.

What this means for Google’s future

Google and the DOJ have a long and complicated road ahead before we see any meaningful resolution to this suit.

The case could take several years to play out in court; remember that Microsoft’s DOJ case took several years to come to a settlement.

Similarly, the Google case is expected to drag on for years — and of course there’s the real possibility that Google may eventually win, or settle with the US government to avoid a breakup, as Microsoft did.

But in the meantime, the mere threat of antitrust action is likely to loom over Google, putting the company in a defensive crouch, potentially slowing down its growth and preventing it from continuing the types of business practices that made it successful — such as buying up companies like YouTube, Android, and DoubleClick.

“When the Microsoft suit came down, we saw them change their behavior and it sent shockwaves through the industry,” said Open Market’s Hubbard, who said that, similarly, this suit could prevent not just Google, but the other tech giants like Amazon, Facebook, and Apple, from being as brazen in buying up competitors or enforcing questionable business contracts that reinforce their market power.

There could also be more force behind the DOJ’s suit if more state attorneys general sign on.

No Democratic state attorneys general have signed on to the case now, but some, such as New York State AG Letitia James, have said they may sign on to the DOJ’s case at a later time after they’ve finished their own independent investigations.

The DOJ, or states, may also file more lawsuits against Amazon, Facebook, and Apple. And as the case unfolds in court, Congress could pass new legislation.

Regardless of the DOJ’s suit’s eventual outcome, its filing marks a clear turning point for Big Tech. Giant companies like Google can no longer expect to continue skirting outdated regulations with impunity as they expand their empires; instead, they will face growing scrutiny and enforcement now that they’re increasingly seen as potentially harmful institutions whose powers need to be checked by the government.


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Via Recode

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