Google is a monopolist and “has acted as one to maintain its monopoly,” according to Judge Amit P. Mehta of the US District Court of the District of Columbia (Washington, DC), who has ruled in a case brought against the Alphabet subsidiary by the governments of the US and the state of Colorado.
The court finds for the Plaintiffs that:
- “there are relevant product markets for general search services and general search text ads” [emphasis added]
- “Google has monopoly power in those markets”
- “Google’s distribution agreements are exclusive and have anticompetitive effects”
- “Google has not offered valid procompetitive justifications for those agreements”
- “Google has exercised its monopoly power by charging supracompetitive prices for general search text ads,” which conduct has “allowed Google to earn monopoly profits”
The court finds for the Defendant that:
- “there is a product market for search advertising but that Google lacks monopoly power in that market”
- “there is no product market for general search advertising” [no monopoly outside search-related text ads]
- “Google is not liable for its actions involving its advertising platform”
What is a monopoly?
To establish criteria for monopolistic behavior, Judge Mehta cites several cases, among them Brown Shoe Company v. US (definition of a product market), American Tobacco v. US (raising prices to stifle competition) and especially US v. Microsoft, the antitrust case of the late 1990s, which examined, among other things, the bundling of Microsoft’s browser with its operating system.
The possession of monopoly power, the court finds, is insufficient but necessary to establish an antitrust violation. “A firm is a monopolist if it can profitably raise prices substantially above the competitive level,” but “a firm need not actually have earned monopoly profits or excluded competition to possess monopoly power.”
A few arguments
It came out in court that Google had found in 2020 that “it would not lose search revenue if were to significantly reduce the quality of its search product.” “Just as the power to raise price ‘when it is desired to do so’ is proof of monopoly power,” the court reasons, “so too is the ability to degrade product quality without concern of losing consumers. […] The fact that Google makes product changes without concern that its users might go elsewhere is something only a firm with monopoly power could do.”
“Although there is no minimum percentage, the Supreme Court has recognized that two-thirds of a domestic market can constitute a ‘predominant share.’” Plaintiffs demonstrated that “by query volume, Google enjoys an 89.2% share of the market for general search services, which increases to 94.9% on mobile devices […]. This overwhelms Bing’s share of 5.5% on all queries and 1.3% on mobile, as well as Yahoo’s and DDG’s [DuckDuckGo’s] shares, which are under 3% regardless of device type. […] Nor is this market dominance of recent vintage. Google has enjoyed an over-80% share since at least 2009 […]. That is a durable dominant share by any measure.”
The court agrees with Plaintiffs that there exist barriers to entry into the market for general search services: namely, “(1) high capital costs, (2) Google’s control of key distribution channels, (3) brand recognition, and (4) scale.”
Google countered with: “(1) evidence of new entrants; (2) the emergence of nascent technology like artificial intelligence; and (3) its own emergence in a market that, prior to its entry, was dominated by other firms, most notably Yahoo.” It also cited growth in the number of queries as inconsistent with its monopoly power. For the court, though, “none of these contentions demonstrate low barriers to entry.”
Also undisputed is the power of Google’s brand: “After all, ‘Google’ is used as a verb. Even on Bing, ‘google.com’ is the number one search.”
Moreover, no producer of browsers or devices can afford not to choose Google as its default general search engine (GSE). According to Apple’s Senior Vice President of Services, Eddy Cue, a witness in the case, “there’s no price that Microsoft could ever offer [Apple] to” make Bing its default search engine. The court cites a letter from Mozilla to the Department of Justice: “Switching the Firefox default to a rival search engine, the court writes, “‘would be a losing proposition’ because no competitor could monetize search as effectively as Google. […] If ‘no price’ could entice a partner to switch, or if doing so is viewed as a ‘losing proposition,’ Google does not face true market competition in search.”
And one reason these firms cannot afford to switch away from Google is that they would be “sacrificing the hundreds of millions, if not billions, of dollars that Google pays them as revenue share.” “Apple, Verizon, AT&T, and T-Mobile have all sought and failed to obtain greater flexibility under the relevant contracts,” the court writes. “These are Fortune 500 companies, and they have nowhere else to turn other than Google.” This argument rests on the testimony of Sridhar Ramaswamy, former Google Senior Vice President of Ads and Commerce and co-founder of the now-defunct search engine Neeva, which was acquired by the company he now serves as CEO, Snowflake. The revenue payments, Ramaswamy said, “provide an incredibly strong incentive for the ecosystem to not do anything.” The court concludes: “When the distribution agreements have created an ecosystem that has a ‘strong incentive’ to do ‘nothing,’ is ‘resist[ant] to change,’ and is ‘basically [frozen] in place,’ there is no genuine ‘competition for the contract’ in search. It is illusory.”
According to The Information, Google pays more than $20 billion in commissions to Apple in exchange for its search engine’s default status on iPhones and on the Safari browser and has similar deals with Samsung and Firefox.
Points in Google’s favor
As noted above, the court finds that Google has monopoly power in text ads generated through search (“general search text ads market”), not in ads generated through search in general (“search ads market”). In fact, the court denies that a general market for search ads exists.
Otherwise, the judge has so far declined to rule on any remedies to Google’s misconduct.
More lawsuits underway
The present case is more than three years in the making. Discovery ran from December 2020 to March 2023, and the bench trial ran for nine weeks from September 2023, with closing arguments this past May. Mehta praised the lawyering as “first rate throughout.” That said, Judge Mehta received last year a notice of sanctions from Judge James Donato of the District Court of Northern California, who had found that Google had been deleting evidence (in-house chats in particular) and thereby thwarting discovery in another antitrust case, brought by Epic Games, 38 states and others. The US then filed a motion to sanction of its own for the present case. ArsTechnica has been following these stories. And Google is not yet through the legal thicket.
As mentioned in our recent article on Alibaba’s B2B search project, the video hoster Rumble has two lawsuits pending against the company. The first dates to 2021 and alleges that by “rigging its search algorithms such that YouTube is the first-listed links ‘above the fold’ on its search results page, Google, through its search engine, was able to wrongfully divert massive traffic to YouTube, depriving Rumble of the additional traffic, users, uploads, brand awareness and revenue it would have otherwise received.” It seeks damages “well in excess of” $2 billion.
The second suit, filed this year in the US District Court for the Northern District of California, alleges “a number of anticompetitive and exclusionary practices across its range of digital advertising products known as the ‘ad tech stack’” and is seeking “injunctive relief and damages in excess of $1 billion.”
