Tuesday saw the opening of a major antitrust case against Google, marking the government’s first big tech monopoly trial since Microsoft. As the Department of Justice and Google lay out their arguments, two remarkable issues are at stake. First is the nature of Google’s business, which raises questions about the very future of the internet because its products are ubiquitous. Depending on how this case plays out, we’ll see the first big test of whether the government has the legal authority—and the mettle—to regulate sprawling tech companies in the modern era.
The lawsuit hinges on Google’s flagship search engine, which brought in almost 60% of the company’s $280 billion revenue last year. About 90% of Americans search the internet with Google, and if you ask the DOJ, that’s because Google pays other companies such as Apple, Samsung, and Mozilla to make Google the default search tool on their products, and it pays manufacturers to bundle Google services on Android devices. The government argues that money is one of the key reasons Google doesn’t have serious competitors. Google pays Apple, $10 billion a year, for example. Why make your own search engine when Google lines your pockets?
If you ask Google, on the other hand, the company will tell you it’s because their tools are the best and the easiest to use.
“We plan to demonstrate at trial that our Search distribution agreements reflect choices by browsers and device makers based on the quality of our services and the preferences of consumers,” said Kent Walker, President of Global Affairs for Google and Alphabet, in a blog post. “Making it easier for people to get the products they want benefits consumers and is supported by American antitrust law. In sum, people don’t use Google because they have to — they use it because they want to.” The DOJ did not respond to a request for comment.
It might seem like a simple argument: Google has more money, so it can afford to shut its competitors out of the prime spots on browsers and mobile devices. Consumers want this, Google argues.
Since the 1980s, the presiding theory of antitrust law has held that a company is only a monopoly if it raises prices for consumers. That’s stymied the government’s ability to regulate web-based companies. Google is free, so there isn’t an immediate connection to consumer pricing. In this case, the DOJ is floating a new argument. Essentially, the government contends that consumers are harmed because Google stifles innovation by preventing other companies from entering the market, and eliminates its incentive to improve its own products because it has no real competition.
“If the DOJ loses, it becomes a very serious question of what’s it going to take,” said Harold Feld, Senior Vice President at Public Knowledge, an advocacy group, in an interview with Vox. “Other than an act of Congress, is there any way that a court is going to apply the antitrust laws to these new business models and new technologies?”
Google, of course, feels differently. The company will argue it’s constantly improving its products and paying to be the default engine is a reasonable and fair practice. The company says it does have competitors in the search business. Google cites numerous examples, including the fact that many internet searches start on platforms like Amazon, for example. There, we’ll see a fight over how the courts should define the market. The DOJ says a search that starts on Amazon is completely different from the kind of search that starts on Google.com.
Default options on tech products are a powerful thing. In Google’s blog post, the company includes a number of gifs that show just how easy it is to change your defaults. On an iPhone’s Safari browser, for example, Google points out that it takes just four taps to change the default search engine. On the other hand, many people might not realize it’s even possible to change the default search engine, and the vast majority of people who do know may never bother.
Google will say that interference in the markets will stifle innovation, not encourage it. In one sense, the DOJ has history on its side. It’s widely believed that the government’s success at kneecapping Microsoft’s alleged monopoly in the late ‘90s paved the way for companies such as Google and Meta. Microsoft is still worth $2.4 trillion as of Tuesday. In other words, antitrust regulation may boost innovation, not the other way around.
No matter who wins this case, you’ll see Google and the DOJ back in court in the near future fighting over some very similar issues, ones even more foundational to Google’s business. The tech giant is fighting two other antitrust cases in the US over its alleged monopoly in the online advertising business, one against the federal government, and another against a coalition of state attorneys general. Google faces yet another advertising antitrust case in the EU. The details are complicated, but the bottom line is Google’s own estimates say it eats up a stunning 35% of every dollar spent on digital advertising, and there’s a ton of evidence to suggest that the company uses its market power for self-dealing.
And win or lose, Google is in trouble. Legal experts talk about the “policeman at the elbow effect,” where the simple presence of government scrutiny forces a company to take fewer chances in the marketplace. That’s what happened when the DOJ began a 13-year antitrust battle against IBM in the 1960s. The DOJ lost the case, but IBM was distracted and had to move slowly, and Microsoft and Apple swooped in and knocked IBM off its perch. 20 years later, the same thing happened to Microsoft. Right on schedule, another two decades have passed, and now it could be Google’s turn.
Today, AI tools like ChatGPT pose an existential threat to the company’s search business. Google.com is the most popular website on earth, but Google needs to take big risks to fend off competition right now—which is exactly what it can’t do with the DOJ breathing down its neck.
Update, Sept. 12th, 2023, 1:37 p.m. EST: This story has been updated with a details about Google’s payments to Apple.