Google is an Illegal Monopoly, Federal Court Rules

The Washington Post / Eva Dou, Gerrit De Vynck

14:27 JST, August 6, 2024

A federal court has found that Google illegally abused its market power to quash competition in internet search. The ruling hands the Justice Department its biggest victory in more than two decades in limiting the power of Big Tech companies to control and dominate the huge markets they have created.

“Google is a monopolist, and it has acted as one to maintain its monopoly,” Judge Amit P. Mehta of the U.S. District Court for the District of Columbia wrote in his judgment on Monday.

Mehta ruled that the Justice Department was right in saying that Google violated antitrust law by forging restrictive contracts with Apple and other phone makers that required them to install Google as the default search engine on smartphones. He also decried other practices of the Alphabet Inc. unit that prevented its rivals from competing on an even playing field.

“This victory against Google is a historic win for the American people,” said Attorney General Merrick Garland. “No company – no matter how large or influential – is above the law. The Justice Department will continue to vigorously enforce our antitrust laws.”

Google argued throughout the trial that its search engine faces competition from people looking for information in other places, such as on Amazon, TikTok, Reddit and increasingly on chatbots such as ChatGPT. In a statement after the ruling, Kent Walker, Google’s president of global affairs, said the court itself agreed that the company’s search engine is the best option.

“This decision recognizes that Google offers the best search engine, but concludes that we shouldn’t be allowed to make it easily available,” Walker said. “Given this, and that people are increasingly looking for information in more and more ways, we plan to appeal.”

Federal antitrust law has not been invoked against a big tech company since the Justice Department sued Microsoft more than two decades ago.

The Google antitrust case has been closely watched in antitrust law circles as the first of a string of cases federal prosecutors have launched against high-tech giants. Antitrust enforcers argue that Big Tech has gotten too powerful and doesn’t serve the public interest. Lawsuits have also been filed against Amazon, Meta and Apple.

Mehta wrote that Google has maintained its revenue growth and high operating profits by hiking its search advertising prices again and again, and that there was “no evidence” that market competition has been able to limit Google’s ability to raise these prices.

“The only apparent constraint on Google’s pricing decisions are potential advertiser outcry and bad publicity,” Mehta wrote. “Google, however, has managed to avoid those pitfalls by ramping up its pricing incrementally … many advertisers do not even realize that Google is responsible for the changes in price.”

The consequences of the ruling for Google and the broad online ecosystem are still unclear. The judge will rule on “remedies” for the case in the coming months. One potential measure would be for the court to block Google from paying to secure prime placement for its search engine on Apple’s iPhones and other devices and web browsers. But that could work out in Google’s favor, since its search engine might still be selected, and the company then wouldn’t have to pay the billions of dollars it currently does to secure that placement. Such a ruling could also end up depriving Apple of a significant source of revenue.

Other proposals from antitrust experts include requiring browsers and phone makers to directly ask consumers which search engine they would like to use when they first set up their device. This system has been tried before in Europe, where Google has still largely maintained its dominance.

Others have advocated for Google’s different businesses to be broken up. The company not only controls the world’s main search engine but also owns businesses that compete at different levels of the complex industry that helps connect advertisers to people online.

“The remedy must match the court’s striking verdict,” said Lee Hepner, a lawyer at the American Economic Liberties Project. “At a minimum that means an end to Google’s exclusive default agreements and breaking up business lines that have allowed Google to extend its monopoly into every corner of the internet.”

The news of Mehta’s decision was hailed by antitrust advocates.

“For a long time, Google was regarded as untouchable,” Open Markets Institute Executive Director Barry Lynn, a veteran antitrust activist, said. “This is the most powerful corporation perhaps in human history.”

Luther Lowe, head of public policy at Y Combinator and a longtime critic of Google, wrote on X that the ruling “could significantly reshape the competitive landscape to benefit ‘little tech’ by reducing Google’s gatekeeping power.”

In his ruling, Mehta chastised Google for discouraging its employees and executives from saving text and email conversations to lower the potential that they could become evidence in court cases. The company had been criticized for doing the same in its court case with video game company Epic Games.

“The court is taken aback by the lengths to which Google goes to avoid creating a paper trail for regulators and litigants,” Mehta wrote. Still, he declined to punish Google for doing so, saying the conduct didn’t influence the court case.

“Any company that puts the onus on its employees to identify and preserve relevant evidence does so at its own peril. Google avoided sanctions in this case. It may not be so lucky in the next one,” he wrote.

The case, U.S. et al v. Google, was filed in 2020 under the Trump administration, and prosecutors in the Biden administration’s Justice Department took it to court in September 2023.

The nine-week trial at the E. Barrett Prettyman Courthouse in Washington saw appearances by senior industry executives, including Microsoft chief executive Satya Nadella and Apple executives John Giannandrea and Eduardo Cue, to testify about Google’s restrictive contracts and why it has been difficult for other companies to break into the market.

Prosecutors had argued that Google foreclosed market competition in search engines by requiring device makers who wanted to use Google’s popular Android operating system to set Google search as the default. Google also pays Apple an estimated $19 billion a year to maintain Google search as the default search engine in iPhones and other Apple devices.

A separate Justice Department antitrust lawsuit against Google, focused on its advertising technology, is awaiting trial in federal court in Virginia.

Google is also facing antitrust scrutiny in other jurisdictions, including in the European Union, where antitrust regulators announced in March investigations into the company and others under the new Digital Markets Act, a new anti-monopoly law aimed at internet giants.