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It may be the biggest swipe at Big Tech’s monopoly position since Microsoft was forced to relinquish its death grip on the Internet in 2001. The decision by a federal judge Monday that Google is maintaining an illegal monopoly on Internet search may reshape the web. Come learn what’s going on.
Monopoly isn’t a game
In a 237-page ruling that could upend the Internet as we know it, Federal Judge Amit Mehta in Washington, D.C. on Monday declared that Google was abusing its monopoly position in the Internet search business to stifle competitors, and said he’ll have the company back in court in a few months to discuss how to fix the situation.
Mehta was specifically looking at the contract Google has with Apple to pay about $20 billion a year to make Google the default search engine on the world’s 1.4 billion iPhones. Google is now the default search engine for 91% of internet searches worldwide. (A monopoly is legally defined as having a market share of 70% or more). And search revenue matters. Google made $48.5 billion dollars from search in the second quarter, that’s 57% of parent Alphabet’s total revenue for the quarter.
The ruling marks the first time in nearly a quarter-century that the federal government has stepped in to block the big business of big tech by arguing that today’s mega-giants have too much power in the market, are squelching competitors, and are denying consumer choice. While tech insiders and court watchers say it’s too early to know just how Judge Mehta plans to unwind Google’s monopoly, or whether Google’s appeal will overturn the judge’s decision, it’s clear that this is a watershed moment for our global entanglement with big tech. It’s also clear that America’s century-old antitrust laws, built to fight railroads and oil companies, don’t need to be reinvented.
“For the tech industry, this ruling is seismic,” said Rebecca Haw Allensworth, a professor at Vanderbilt Law School in Nashville, and an antitrust expert. “It makes clear that antitrust tools can be adapted for digital markets, and the argument that large tech companies innovate is not a defense against antitrust action.”
The two key takeaways from Judge Mehta’s decision, Allensworth said in an interview with Weekend Brief, are that scale is in fact a barrier to entry, and that the Google case shows the power of default choice. “Especially in digital markets, we are all sheep,” said Allensworth, who holds degrees from Yale, Harvard and Oxford.
Getting past our natural sheep-ness will make a solution difficult to impose. Consumers naturally want the best search engine, and unless Google gets worse (let’s wait to pass judgment on its new AI), everyone will still opt for Google, even if Apple makes iPhone users select their search engine. Honestly, when was the last time you Yahoo’d anything?
The decision also dismantles Google’s argument that its monopoly should be ignored, said Allensworth. “The tech industry says you can’t use anti-trust law against us because we brought you innovation. This decision turns that on its head, and shows that it’s monopolies that harm innovation.”
Some tech watchers say strict punishment may stifle innovation and keep consumers from getting the best services.
“There’s a possibility that nothing comes out of this, and there’s just a fine,” Scott Devitt, managing director for equity research at Wedbush Securities, said in an interview. But, he added, “if large tech companies are no longer allowed to embed their services into another company’s because they have the best product, that becomes a problem for the whole industry.”
Big tech doesn’t like aggressive antitrust action, the kind that’s been revived under President Joe Biden, whose administration has launched five anti-trust actions against big tech, including Apple, Amazon and Meta. “There’s a pretty consistent view in big tech that Lina Khan is bad and needs to go,” Devitt said, referring to the FTC chair who has worked to get both her agency and the Department of Justice to bust big tech.
“We do need controls in place,” Devitt said, “but I don’t know how you address some of these issues that were created by natural monopoly and provide a better customer experience than any other.” The sheer size of the incumbent big tech firms makes it impossible now for anyone else to catch up, he notes. “I think the companies will prevail in the end and will continue to be successful no matter what the government does.”
Looking back to look forward
Tech watchers looking to see what will happen are re-reading the final agreement that the Justice Department signed with Microsoft in 2001, following a multi-year antitrust lawsuit that forced Microsoft to ease its grip on the internet. As Quartz’s Laura Bratton reported,
The court found Microsoft monopolized computer operating systems through unlawful exclusive arrangements with computer makers and internet service providers, and ordered it to break up into two entities. Microsoft appealed the decision, and the DOJ ended up settling with the company in 2001. The settlement kept Microsoft’s software intact but barred the company from making deals with PC-makers and internet access providers. It also forced Microsoft to share parts of its then-private source code with other software developers so they could make their apps available on Windows.
The agreement also signaled the end of Microsoft’s Internet Explorer browser, broadening access to the web and opening the door to Google’s dominant position in Internet search today.
What could happen this time?
Between Google’s appeal — if it is accepted by the Court of Appeals — and Judge Mehta’s remedies phase, it may be 18 months or more before we see any changes applied to Google, said Sam Weinstein, a professor at Cardozo Law School in New York and a former senior antitrust attorney at the Justice Department.
“The obvious remedy here is to say ‘Google, you can’t have these restrictive contracts anymore,’” with Apple and others, where Google is named the default search engine in exchange for sharing profits from the search activity, Weinstein said in an interview. “That’s the bad conduct of the case.” But, because most consumers prefer Google’s results to any other engine on the market, he added, “It might be that whatever remedy is assigned doesn’t change the game.”
Still, what could change?
There are still ways that even if consumers prefer to use Google, Judge Mehta may impose penalties that resemble the Microsoft case. For instance:
- Google’s search tech could be licensed to the creators of tailored browsers, like kid-friendly or privacy-first, or even Temu-free browsers. But they’d only work well if they were powered by the user data that Google collects on most of the 8 billion people on Earth.
- Phone makers could be forced to make users select a preferred browser.
- Competition from other browsers gaining access to users could force down the price of search ads.
- Google might be forced to spin off Chrome or search into a separate company.
- Users might gain more control over their data, and Google might be restricted in its ability to cull your data from multiple areas and resell it to advertisers and marketers. Such protection already exists in Europe.
Are the feds still gunning Big Tech?
Antitrust lawyers from both the Justice Department and the Federal Trade Commission have brought five major suits against big tech’s alleged monopolist practices. There’s still a case pending against Google over price fixing for internet ads, and Amazon, Apple and Meta all face antitrust lawsuits. The Google search case was the easiest to prove of the five, said Cardozo’s Weinstein. That’s because to win an antitrust case, regulators need to prove just two things: that the company has an effective monopoly on its market (defined as a 70% market share), and that it’s done something “bad” to get or keep its monopoly position, he said.
In 2019, the FTC and the Dept of Justice agreed to split their anti-trust cases, with Facebook/Meta and Amazon going to the FTC, and Google and Apple to the DoJ. Here are the remaining cases:
- Apple is charged with using its dominant market position to lock developers and customers into its iPhone universe. As the Justice Department wrote in its complaint: “Over many years, Apple has repeatedly responded to competitive threats … by making it harder or more expensive for its users and developers to leave than by making it more attractive for them to stay.” The government suit stems from Epic Games 2020 antitrust lawsuit against Apple challenging Apple’s ban on letting users make in-app purchases that didn’t go through the App Store.
- Facebook/Meta: The FTC says Meta is illegally maintaining its “personal social networking monopoly through a years-long course of anticompetitive conduct.” The government says Facebook has engaged in a “systematic strategy” that includes the purchase of Instagram and WhatsApp, and imposing anticompetitive conditions on software developers to “eliminate threats to its monopoly.”
- Amazon: Last year the FTC and a group of state attorneys general sued Amazon alleging it violates the law not because it is big, but because it engages in “a course of exclusionary conduct” that keeps competitors from growing and blocks new competitors from emerging. “By stifling competition on price, product selection, quality, and by preventing its current or future rivals from attracting a critical mass of shoppers and sellers, Amazon ensures that no current or future rival can threaten its dominance,” the FTC said.
- Google’s advertising suit: The Justice Department and a group of state attorneys general sued Google last year, alleging it unlawfully monopolizes digital advertising and overcharges users. The lawsuit aims to break up Google’s digital advertising business to allow more competition. A non-jury trial will begin on Sept. 9. Google says the Justice Department is engaged in a “meritless attempt to pick winners and losers in a highly competitive industry.”
Enjoy your weekend, and if you don’t have any plans, you can surely Google something to do. Or better yet, Yahoo it, or Bing!
— Peter Green, Weekend Brief writer