Public Knowledge competition policy experts watched the Department of Justice’s landmark U.S. v. Google case live from the E. Barrett Prettyman United States Courthouse. View the week one, week four, and closing argument recaps.
There’s a popular video online that depicts a person presenting their dog with two closed hands to choose from. The dog assumes that only one hand will hold the treat. When the dog chooses the owner’s left hand, he finds a treat there and happily gobbles it up. However, afterward, the owner opens his other hand and reveals that it contained 10 times the amount of treats as the chosen hand. The dog was tricked – and the video ends with a deep betrayal lingering in his eyes.
As a dog owner, I think about this video a lot – not only because it’s extremely funny, but also because I think it is analogous to the user experience online. Big Tech’s market dominance limits our choices – the dominant players decide what features we receive, how we receive them, and when. Moreover, Big Tech puts forth the assumption that, with robust competition enforcement, these features wouldn’t exist – the alternative is an empty hand. For consumers, this assumption is cemented through the power of defaults. As the dog learned in the video, this assumption couldn’t be further from the truth.
Remedies
The U.S. v. Google trial for search and search advertising has been called the most monumental antitrust case in 20 years. It centers on how Google’s control of search defaults on user devices whittles down competition and prevents other search engines from truly competing. We at Public Knowledge have closely tracked the trial proceedings, the latest of which you can read here.
Google’s control over the status quo persuades consumers that Google is the best, if not the only, option. In the face of this dynamic, the remedies from this case need to be effective enough to cut through the power of defaults (where companies guarantee themselves as the default option, leading consumers to regard them as the best and effectively only available choice) and allow smaller rivals to effectively compete as market alternatives.
The closing arguments of the trial drew many comparisons to the landmark Microsoft case, in which the court concluded that Microsoft violated Sections 1 and 2 of the Sherman Act for unlawfully tying their Windows operating systems to Microsoft’s Internet Explorer browser software. Microsoft was also found liable for entering exclusive dealing arrangements with manufacturers to restrict modifying or substituting software with non-Microsoft products, and preventing the licensing, distribution, and promotion of non-Microsoft products.
Despite Google working to distinguish itself from the Microsoft case throughout arguments, the Department of Justice did well identifying analogous claims: Google’s browser default contracts with Apple and its restrictive agreements with Android. However, the potential remedy for Google’s alleged anticompetitive pricing mechanisms for search advertising remains unclear. Much like the Microsoft consent decree, with effective remedies, Judge Mehta could clear the pathway to robust competition in online search.
Google’s Default Payments
Google pays around $18 billion per year to Apple to make Google the default search engine on desktop and mobile Apple products. Judge Mehta could enjoin Google from making these payments to be the default search engine on any search access point on Apple devices. Given the strength of DOJ’s arguments, this remedy seems likely and feasibly enforceable by the courts. But how this remedy would materialize in the market is left up to Apple itself.
Without Google as the mandated default search engine, there are several possibilities, including:
- Apple could introduce a choice screen for users to select a browser default.
- Apple could produce its own search engine to compete with Google.
- Apple could sign a similar agreement with a rival search engine.
- Apple could require users to manually type in their search engine of choice.
Choice screens would be beneficial to users given that they provide the opportunity for users to see what options are available, and for search engine rivals to get more exposure to an established customer base. Apple could also take the opportunity to develop their own search engine to compete, which may lead to a more competitive search engine market. Apple could likewise sign a similar agreement with a rival company as Google – but given that rival search engines such as Bing, Yahoo, or DuckDuckGo have a fraction of the revenue, a new agreement with a rival would reap a fraction of the financial benefit. Lastly, Apple could merely require users to manually enter in which search engine they would like to use. This last outcome seems the least plausible – users are now accustomed to their devices choosing search engines for them, so it’s unlikely they would be satisfied with this chore.
Google’s Exclusionary Contracts with Mobile Manufacturers
Google uses restrictive licensing conditions that lock in product design choices for Android in order to cut off various distribution channels for rival search engines. Judge Mehta’s potential remedy out of this case would be to enjoin any agreements that require Android to pre-install Google search and prevent Android from installing rival search engines. Like the Microsoft consent decree mandated Microsoft to allow users and manufacturers to modify Windows desktop and defaults, Google could be required to allow users of Google-controlled search access points in Android to configure their own default search engines.
As with an injunction on default payments to Apple, this remedy seems likely and enforceable. In fact, Google already offers this remedy in Europe. Android could employ several methods to allow users to select a variety of default browsers and search widgets on their mobile devices. These remedies would remove barriers to competition in the search marketplace, significantly undermining the power of defaults and introduce users to more search options.
Google’s Search Advertising Bid Process
Judge Mehta’s approach to remedies on the search advertising claims may be tricky. As a recap, DOJ alleges that Google’s text ad bidding process uses a process called “squashing,” which switches the winner and runner-up in an auction and, in turn, forces even higher bids and boosts prices. Likewise, Google uses a “Polyjuice” program that makes lower bidders look like higher bidders, inflating prices. If the conduct is indeed found anticompetitive, it may be difficult for the court to impose a standard on an algorithm that isn’t regarded as judicial overreach into the pricing dynamics of the market. A good remedy here would focus on addressing the anticompetitive harms to auction participants with easily enforceable, objective rules.
Final Thoughts
With robust antitrust enforcement, the economy will benefit from a wellspring of market choices, where companies can effectively compete with each other on features users enjoy. This will lead to a whole new world of innovation. In order to achieve it, we need to disrupt the assumptions that dominant tech platforms peddle about competition and innovation. The Microsoft consent decree arguably allowed browsers like Google Chrome and Firefox to take their place in the internet browser market. Much like Microsoft, the anticipated remedies in U.S. v. Google (2020) could be the key. However, while incredibly important, this case has been four years in the making – more can and should be done to work toward this future now. We need Congress to pass bipartisan antitrust legislation that mandates structural separation, addresses self-preferencing, and outlaws conflicts of interests presented by digital platform marketplaces like Google. Likewise, we need an independent digital regulator designed to investigate the technical harms materializing in consolidated digital markets.