Just the Tip of the Iceberg: DOJs Antitrust Suit Against Google Is a Full-Frontal Attack on Big Tech – Law & Crime

The U.S. Department of Justice (DOJ) and 11 state attorneys general filed a long-anticipated antitrust lawsuit in federal court on Tuesday alleging that Google maintains a monopoly in violation of federal law.

Two decades ago, Google became the darling of Silicon Valley as a scrappy startup with an innovative way to search the emerging internet, the complaint filed in the U.S. District Court for the District of Columbia begins. 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, the complaint continues. 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 advertisingthe cornerstones of its empire.

Filed under the auspices of the Sherman Antitrust Act, Mondays filing is the result of a year-long investigation and will likely take several years to litigateif the incoming administration even decides to maintain the case.

The Barack Obama administration was serially criticized for failure to hold large technology companies accountable for perceived violations of the countrys anti-monopoly laws even though European regulators have exacted several concessions and repeatedly fined companies such as Google over the last decade. This reticence may be explained by the Democratic Partys strong associations with Googlea trend that Obama in particular exacerbated during his time in office.

The lawsuit alleges that Googles vast suite of anticompetitive behavior has separately and collectively harmed competition by stamping out any meaningful competition in the realm of general internet search services, by excluding would-be rivals from effective and already-available distribution channels that would allow them to effectively compete and by impeding other potential distribution paths in general.

Additionally, the lawsuit claims that Googles tactics create a nearly impenetrable wall of barriers to entry for potential competitors on both desktop and mobile devices and that such tactics actually stunt innovation overallwhile insulating Google from having to actually do much in the way innovation or product improvement.

The heart of the DOJs case against the technology giant focuses on Googles exclusionary agreements and distribution agreements that have served the tech behemoth well by making multiple Google products the default access point for internet searches and other services across millions of desktop and mobile devices.

Between its exclusionary contracts and owned-and-operated properties, Google effectively owns or controls search distribution channels accounting for roughly 80 percent of the general search queries in the United States, the complaint notes. Largely as a result of Googles exclusionary agreements and anticompetitive conduct, Google in recent years has accounted for nearly 90 percent of all general-search-engine queries in the United States, and almost 95 percent of queries on mobile devices.

The lawsuit mentions several such agreementsspotlighting Googles partnerships with Apple and Android device manufacturers.

Google has contracted with Apple for many years to preset Googles search engine as the default for Apples Safari browser and, more recently, other search access points on Apples mobile devices, the complaint notes. When a consumer takes a new iPhone or iPad out of its box, all the significant access points default to Google as their general search provider. Indeed, Google has preset default status for an overwhelming share of the search access points on mobile devices sold in the United States.

Per the DOJ, Apples business relationship with Google is essentially an anticompetitive version of the quid pro quo [emphasis in original]:

Apple has not developed and does not offer its own general search engine. Under the current agreement between Apple and Google, which has a multi-year term, Apple must make Googles search engine the default for Safari, and use Google for Siri and Spotlight in response to general search queries. In exchange for this privileged access to Apples massive consumer base, Google pays Apple billions of dollars in advertising revenue each year, with public estimates ranging around $812 billion. The revenues Google shares with Apple make up approximately 1520 percent of Apples worldwide net income.

Although it is possible to change the search default on Safari from Google to a competing general search engine, few people do, making Google the de facto exclusive general search engine. That is why Google pays Apple billions on a yearly basis for default status. Indeed, Googles documents recognize that Safari default is a significant revenue channel and that losing the deal would fundamentally harm Googles bottom line. Thus, Google views the prospect of losing default status on Apple devices as a Code Red scenario. In short, Google pays Apple billions to be the default search provider, in part, because Google knows the agreement increases the companys valuable scale; this simultaneously denies that scale to rivals.

A similar situation has developed with Google and the companies that create Android-based mobile devices.

The lawsuit notes that Google uses preinstallation agreements which force manufacturers to pair devices running the Android operating system with Googles own cash-generating products to ensure that its entire suite of search-related products is given premium placement.

Other contracts, such as those focused on revenue sharing, force manufacturers into doing the samebut also expressly foreclose against manufacturers featuring apps developed by Googles competitors. Still other contracts inhibit startups from actually doing much with Androids technically open source code because they threaten would-be developers with losing access to Googles entire network if the company deems them guilty of so-called fragmentation.

All of this, the DOJ and the states claim, are the makings of a monopolistic monster.

Absent Googles exclusionary agreements and other conduct, dynamic competition for general search services would lead to higher quality search, increased consumer choice, and a more beneficial user experience, the filing alleges.

But theres likely an awful lot more in the offing.

[T]he complaint centers on Googles contracts with device manufacturers running Android and the way those contracts preference Google to lock in its dominance in Internet search and mobile search, antitrust law expert and University of Michigan Law Professor Daniel A. Crane told Law&Crime in an email.

Its a bit of a surprise that the complaint is so focused on anticompetitive vertical agreements as opposed to other things that many critics accuse Google ofsuch as the design of its search verticals and the way it sells advertising, Crane continued. But those additional claims may well come out in further complaints to be filed shortly. So consider this just the tip of the iceberg.

Read the full complaint below:

US v Google Complaint by Law&Crime on Scribd

[image via ALASTAIR PIKE/AFP/Getty Images]

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Just the Tip of the Iceberg: DOJs Antitrust Suit Against Google Is a Full-Frontal Attack on Big Tech - Law & Crime