Judge to weigh competition harm vs. Google gains in search antitrust case

Two weeks ago, the U.S. Justice Department completed its evidentiary phase in its Google antitrust trial, with closing arguments scheduled for May 2024. Can an industry giant legally engage in anticompetitive business practices if they improve its product and its customers’?

Apparently, Judge Amit Mehta has “no idea” how he will rule in this landmark case that could determine the future of the internet and antitrust law. Unsurprisingly, the judge is stumped.

“Antitrust law is very unsettled about what courts should do when they find both harm and benefit,” Stanford University antitrust law scholar Doug Melamed told “Courts usually find one or the other, not both.”

Google has a search monopoly, which it gained by sharing ad revenue with smartphone makers in exchange for being the default search engine on Apple and Android devices. According to Statista, Google’s market share has been 83%–91% since 2015. Google’s default agreements have prevented competitors from challenging its monopoly.

However, those agreements generated data that improved Google’s search products, benefiting Google, its consumers, and advertisers.

“So you might have a finding that the default agreements both harm competition and create benefits—legitimate, cognizable benefits,” Melamed said, adding that the court must rule on the defaults’ lawfulness when they weaken competitors and preserve Google’s monopoly.

The arguments of each side
The U.S. sued Google in 2020 for “unlawfully maintaining monopolies in the markets for general search services, search advertising, and general search text advertising in the United States.” The suit seeks to restrain Google and seek remedies for its actions, including fines, divestment, data sharing, and business changes.

The government used Google’s $26 billion in 2021 payment to be the default search engine across platforms and its sweetheart deal with Apple to support its claim. Apple received $18 billion to make Google Safari’s default search engine that year. Google pays Apple 36% of Safari search advertising revenue, according to trial testimony.

In court, Microsoft and DuckDuckGo CEOs testified that their search engines would have been more successful, even competitive with Google, if they had made similar deals with Apple. According to The Information, Microsoft CEO Satya Nadella offered $15 billion per year to make Bing Apple’s default search.

Android devices often come pre-loaded with 11 Google apps, including Chrome, Search, and Play. The company shares revenue with smartphone makers and wireless carriers for setting Google Search and Chrome as defaults.

The government claims that Google’s actions have hurt its rivals’ ability to compete with its monopoly. Google’s default agreements prevent competitors from accessing all its data, so they can’t improve their products to attract and retain customers.

Google says default agreements are good business. All of that data has allowed it to collect incremental data to improve its product, which benefits search advertisers and consumers.

The DOJ may argue that competition suffered more than Google benefited in its closing arguments. Thus, at what point is Google investing heavily in product development, and when is it simply erecting a barrier to entry?

How this trial could go
Melamed says the court could rule in favor of Google because the default app status it purchased generated product benefits, but this could be a weak rationale depending on the evidence.

The court could compare Google’s default status price to the value of the data it gained. Not all of that information is public, but the judge may have it as evidence. Some experts think Google gets declining marginal returns from its data, meaning its incremental data from defaults is worth less to the company than to its rivals. If confirmed, Google crossed the line from paying to do good business to handicapping competition. The harm would outweigh the benefits, making defaults illegal.

Melamed also suggested relying on “exclusive dealing law precedent,” which states that these defaults hurt rivals and benefit them, but Google is a monopoly and has a limit to its power. The court may prohibit Google from buying default status on more than a certain percentage of devices.

Finally, the court could agree with Assistant Attorney General Johnathan Kanter, who is overseeing litigation, that the defaults are illegal because the law prohibits conduct that handicaps rivals and monopolizes a market. Whether Google’s business and consumers benefited is irrelevant.

Melamed defined market power as the ability to profitably charge above the competition. If you can raise prices without consumers switching to the competition, you have market power. That means that if you can do so profitably, you will.”

Zooming out
Enforcers want to show that antitrust law is still relevant and that the DOJ can limit Big Tech. The ruling may impact other Google cases.

Google settled an antitrust lawsuit with Match Group. Google began another Fortnite trial with Epic Games. The latter wants to show that Google Play and its commission structure are anticompetitive.

The DOJ also sued Google in January for monopolizing advertising technology.

Google’s case may affect other big tech antitrust cases. The FTC sued Amazon in September for unfair monopoly practices and anticompetitive behavior. Years ago, the DOJ began investigating Apple’s policy on third-party apps on its devices and whether it unfairly favors its own products. The FTC is pressuring Facebook to sell Instagram and WhatsApp.