Perilous Remedies

After its antitrust victory against Google this month, the U.S. Justice Department became the dog that finally caught the car. After years of barking about Big Tech’s market power, enforcers have secured a ruling against Google for how it distributes its search engine through contracts with smartphone manufacturers like Apple and browsers like Mozilla. But the path forward is murkier than headlines suggest.

The DOJ’s most-discussed potential remedy would force Google to divest Android, according to reporting from Bloomberg. That would be a drastic step, one entirely disconnected from the core of the DOJ’s complaint, which concerned Google’s agreement to serve as the default search engine for iPhones and other devices. And it highlights a perennial antitrust temptation: reaching for dramatic, headline-grabbing remedies, rather than practicable solutions. Tim Wu, a former special assistant to President Biden for technology and competition policy, succumbed to this impulse. In the New York Times, Wu suggested that courts force Google to share all its AI technologies to remedy its allegedly anticompetitive search-engine practices. This is akin to prescribing open-heart surgery for a stubbed toe—it’s not just disproportionate, but entirely unrelated to the problem.

Such drastic remedies risk unintended consequences and invite appellate scrutiny. Judge Amit Mehta, who handed down the U.S. District Court of D.C.’s ruling in the Google case, inferred that the company had caused anticompetitive harm based on a misguided interpretation of the “reasonably capable of” standard from a landmark 2001 case, United States v. Microsoft. This standard assesses whether a company’s conduct is reasonably capable of contributing to monopoly power. In the Google case, Mehta applied the standard to determine if Google’s actions could harm competition, even without direct evidence of harm. Notably, Mehta considered Google’s impact on competitors, such as Microsoft, with its Bing search engine.

But as Judge Douglas Ginsburg, widely considered the primary author of the Microsoft opinion, has explained, this lighter standard was intended to apply to nascent competitive threats—not established rivals like Bing. By applying this standard to Google’s conduct, while considering extreme structural remedies, Mehta’s ruling may invite closer scrutiny from an appellate court, potentially including Judge Ginsburg himself.

We’ve seen this movie before. Following the original Microsoft antitrust trial, Judge Thomas Penfield Jackson ordered the company split in two. That radical remedy never materialized. The appeals court overturned it, citing judicial misconduct and questioning the remedy’s appropriateness given the same “reasonably capable” standard Judge Mehta applied here. The court explained that such drastic remedies require “a clearer indication of a significant causal connection between the conduct and creation or maintenance of the market power.” The case ended with milder behavioral remedies.

Some will argue that this proves the weakness of antitrust in the United States. But the European experience, where trustbusting authorities have fewer constraints, offers a cautionary tale. In 2018, the European Commission fined Google €4.34 billion for anticompetitive practices. As part of the remedy, Google implemented a choice screen for Android users, allowing them to select their default search engine from a list of options. This intervention, however, has had minimal impact, and Google’s search market share in Europe remains unchanged, above 90 percent. Does Google face better, or even fundamentally different, competition in Europe? And are consumers better off?

The U.S. court faces a similar dilemma. Prohibiting Google from entering into agreements to become a platform’s default search engine, or mandating EU-style choice screens, may not change market shares or user behavior. Such remedies, however, could have unintended consequences, potentially leading to higher costs for device manufacturers and browsers and resulting in higher prices for consumers.

Proposed actions like prohibiting Google from entering into revenue-sharing agreements for default search placement could significantly reduce the search revenue available to support these projects. If Google’s market share in search remains unchanged because it is the preferred product, but search revenue can’t support projects like Android (which, while open-source, receives significant investment from Google), or fund organizations like Mozilla (which relies heavily on royalties to develop Firefox), how will consumers have benefited? This conundrum may explain why the DOJ is considering a wrecking ball as a response, rather than a tailored solution like blocking the contracts that the court ruled illegal. 

The challenge in crafting remedies for the Google case foreshadows similar difficulties with the DOJ’s recent complaint against Apple. That complaint, like the one against Google, discusses Apple’s product-design decisions. Interestingly, the DOJ seems dissatisfied with both Apple’s integrated system and Google’s more open approach. In Apple’s case, the department argues that the closed ecosystem stifles competition and innovation; with Google, its complaint targets revenue-sharing agreements that support the development of competing platforms, such as Mozilla’s Firefox. 

If no existing business model satisfies the DOJ’s antitrust concerns, what future does the department envision for the tech industry? Does anyone believe that the judge can design it? The Google antitrust case and the broader push against Big Tech increasingly resemble the politician’s fallacy: “We must do something. This is something. Therefore, we must do this.”

Antitrust enforcers have caught the car. Now comes the hard part: figuring out what to do with it without causing a 20-car pileup. The challenge lies in crafting remedies that address anticompetitive behavior, without stifling innovation or harming the very consumers they aim to protect.

Photo by: Plexi Images/GHI/UCG/Universal Images Group via Getty Images