News

U.S. Finds Google a Search and Advertising Monopoly

• By Gladys Rama
• August 06, 2024

After years of litigation, a federal court on Monday determined that Google used anti-competitive practices to secure and maintain its market dominance in Internet search and advertising.

"Google is a monopolist, and it has acted as one to maintain its monopoly," wrote Judge Amit P. Mehta in a ruling filed with the U.S. District Court for the District of Columbia.

Four Years in the Making
Google is in violation of Section 2 of the Sherman Act, Mehta concluded, referring to the federal law established in the late 19th century to break up monopolies like the Standard Oil petroleum trust. Section 2 makes it illegal to create, or conspire to create, a monopoly within the United States. Notably, it's the same law that was successfully used against Microsoft in the landmark antitrust case involving Internet Explorer and then-browser rival Netscape.

Monday's ruling is the culmination of a nearly 4-year-old lawsuit filed by the U.S. Department of Justice (DoJ) and multiple states. The lawsuit accused Google of using prohibitively restrictive agreements with partners like Apple, Mozilla, Opera, Verizon and Samsung to secure its position as the default search engine on the vast majority of the world's devices.

In the process, the suit contends, Google has stifled competition and discouraged innovation, while earning billions in Internet advertising revenue.

In an argument filed with the court in April, the DoJ noted that Google has paid multiple billions to OEMs like Apple and Samsung to ensure that its search engine is the only one that comes preloaded on the browsers of their devices -- to the detriment of competing search engines like DuckDuckGo, Yahoo and Microsoft Bing.

Per the DoJ's findings, in fiscal 2020, Google paid Apple $9.6 billion and Android OEMs $1.5 billion for driving browser search queries to its engine.

"Google's exclusive default position on browsers has excluded rivals from search shares they could get absent Google's contracts," the DoJ contended.

A 'Clear' Monopoly
The court agreed. In his Monday ruling, Mehta wrote:

The key question then is this: Do Google's exclusive distribution contracts reasonably appear capable of significantly contributing to maintaining Google's monopoly power in the general search services market? The answer is "yes." Google's distribution agreements are exclusionary contracts that violate Section 2 because they ensure that half of all GSE users in the United States will receive Google as the preloaded default on all Apple and Android devices, as well as cause additional anticompetitive harm. The agreements "clearly have a significant effect in preserving [Google's] monopoly."

Moreover, Mehta found Google's search advertising business to be an extension of its search engine monopoly. "Google has exercised its monopoly power by charging supracompetitive prices for general search text ads," he wrote. "That conduct has allowed Google to earn monopoly profits."

Google's search advertising revenue tripled between 2014 and 2021, noted Mehta, to total $146 billion. By comparison, Bing generated Microsoft less than $12 billion in 2022.

A 'Remarkable' Case
Mehta described the Google antitrust trial as "remarkable," involving millions of pages, petabytes of data, dozens of witness depositions and over 3,500 exhibits.

It was also markedly different than the Microsoft antitrust case at the turn of this century in one notable way: "This case has lacked the kind of nakedly anticompetitive communications seen in Microsoft and other Section 2 cases," Mehta wrote.

Mehta all but called Google deliberately obfuscative, carefully hiding business practices that it presumably knew would put antitrust watchdogs on high alert. In fact, Mehta said "the court is taken aback by the lengths to which Google goes to avoid creating a paper trail for regulators and litigants."

Google "trained its employees, rather effectively, not to create 'bad' evidence," he added.

The evasion is moot, however, as evidence of intent is not required to find a company in violation of Section 2 of the Sherman Act.