The case that could upend the Internet: United States v. Google

September 16th, 2023

Thanks for joining again this Saturday. 

Yesterday, the first week of trial concluded in U.S. et al v. Google, which some have called the most consequential antitrust case in a generation. The case represents Google’s “biggest legal threat ever,” according to the Wall Street Journal.

The outcome could shatter the modern digital marketplace as we know it.

What’s the case all about and what are the implications? We offer that analysis below.

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About 90% of all internet searches happen on Google – a mammoth market share that earns the company more than $200 billion in annual advertising revenue. That Google holds a monopoly or near-monopoly on internet search is self-evident.

But the mere presence of a monopoly is not in itself illegal. The Supreme Court held in 1966, “The offense of monopoly under Sec. 2 of the Sherman Act has two elements: (1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.”

The Department of Justice (DOJ) alleges Google’s business practices violate the second test. Google struck multi-billion dollar deals to have internet browsers and cell phone manufacturers (e.g., Apple) make Google the default search option, and users rarely change the default search option.

Those deals “fuel Google’s scale advantage and diminish search rivals’ ability to compete,” DOJ wrote in a pre-trial brief. “By keeping Google’s rivals at a small scale, Google has likewise made them less attractive business partners to companies who would otherwise assist in improving those rivals’ products.”

The key competition argument here is this: a) successful search engines offer accurate responses to user queries, b) a search engine offers more accurate responses by adjusting its results using data obtained through user queries, therefore c) restricting a rival search engine’s market share (i.e., through deals that make Google the default search engine) handicaps that rival’s ability to improve its product and compete fairly.

In simpler terms, Google has a monopoly, and it uses monopoly profits to further entrench itself and handicap rivals.

Google, for its part, counters that its deals with browsers and manufacturers reflect the superiority of its product – that Google beat out its rivals because it’s better and consumers prefer its service.

Last week, Kent Walker, Google’s president of global affairs, wrote a blog post about the trial. “Our search distribution agreements reflect choices by browsers and device makers based on the quality of our services and the preferences of consumers,” Walker wrote. “People don’t use Google because they have to – they use it because they want to.”

Whether Google wins or loses will hinge on whether the court believes Google struck default search deals on the merits of its product or to maintain its monopoly.

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But even if Google loses outright, what are the potential consequences?

The judge could order Google broken up, but that seems unlikely. Paul Gallant, a tech-policy analyst at Cowen Washington Research Group, told the Wall Street Journal that new constraints on how Google does business are the most likely outcome. “Breaking up the company over unlawful payments to equipment manufacturers seems unlikely relative to the harm,” Gallant said.

Even so, Google faces yet more antitrust lawsuits from DOJ. In January, DOJ and several attorneys general sued Google over its digital advertising technologies, alleging Google “cemented its dominance in tools relied on by website publishers and online advertisers, as well as the digital advertising exchange that runs ad auctions.”

European regulators have also gone after the company aggressively.

Whether Google loses its grip over internet search from one big case or cumulatively over many future cases – if at all – remains to be seen. But a full or partial dismantling would open the playing field to competitors as AI threatens to change everything about the internet.

One might view such an outcome as poetic, in a sense. After all, it was DOJ’s antitrust action against Microsoft in the 1990s that opened the market up to Google in the first place.

The trial is expected to take place over the next 10 weeks, and kicked off with the DOJ arguing that the tech giant is using Microsoft’s past practices – as DOJ proponents look to have a new ruling on the books that reflects modern times, or at least attempt to catch up with EU’s big tech digital regulatory moves.