The US Vs Google case is a federal antitrust lawsuit filed by the United States Department of Justice (DOJ) against Google LLC on January 24, 2023. The suit accuses Google of illegally monopolizing the advertising technology (adtech) market in violation of sections 1 and 2 of the Sherman Antitrust Act of 1890.
Background of US Vs Google case:
In the 2000s, Google began expanding in the adtech market through acquisitions. They acquired companies like DoubleClick, Invite Media, and AdMeld. The DoubleClick acquisition faced privacy group criticism. This led to a petition to the FTC by Electronic Privacy Information Center (EPIC) for a thorough review. Ultimately, the FTC approved the $3.1 billion acquisition of DoubleClick in December 2007.
In 2021, Google’s adtech division was the second-largest revenue generator, making about $31.7 billion. This division ranked below only Google Search in terms of revenue. Jonathan Kanter, Assistant Attorney General for the Antitrust Division, likened Google’s adtech dominance to major financial institutions owning the New York Stock Exchange.
In the 117th United States Congress, a bipartisan group of senators proposed legislation to dismantle Google and other “Big Tech” firms due to concerns over their supposed market control. This legislation, known as the Advertising Middlemen Endangering Rigorous Internet Competition Accountability (AMERICA) Act, was reintroduced during the 118th Congress.
Allegations in US Vs Google case
The DOJ alleges that Google has used its dominance in the adtech market to stifle competition and raise prices for advertisers. The suit specifically focuses on Google’s alleged anticompetitive practices in the areas of:
Preinstalling Google Chrome on Android devices: Google allegedly requires Android device manufacturers to preinstall Google Chrome as the default web browser on their devices. This gives Google an unfair advantage over its competitors, such as Mozilla Firefox and Apple Safari.
Negotiating exclusive contracts with mobile carriers: Google allegedly negotiates exclusive contracts with mobile carriers to ensure that Google Search is the default search engine on their devices. This prevents consumers from having a choice of search engines.
Using its dominant position in search to favor its own adtech products: Google allegedly gives its own adtech products preferential treatment in its search results. This makes it more difficult for competitors to compete in the adtech market.
Apart from the DOJ’s lawsuit, 38 state attorneys general filed a separate antitrust lawsuit against Google in October 2020. They alleged that Google misused its market dominance in the search engine industry. These lawsuits represent the most substantial antitrust challenges Google has faced to date.
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What is Microsoft doing in US Vs Google case ?
Eight months ago, Satya Nadella expressed determination to challenge Google’s dominance and make them “dance.” However, in a recent statement, he acknowledged Google’s formidable power and admitted that Microsoft couldn’t effectively compete against it. Let’s delve into the reasons behind this shift in position.
Microsoft invested $10 billion in OpenAI, reshaping its image into an AI powerhouse. In February, they launched Bing Chat, powered by OpenAI’s GPT-4 due to this significant investment. Satya Nadella boldly declared that AI-powered Bing was ready to challenge Google and revolutionize the search engine landscape.
Fast forward eight months: Bing’s market share remained stagnant at 3%, and in fact, experienced a slight decline. What went wrong?
Satya Nadella unveiled the reason during his testimony in the US Vs Google case: “default” plays a crucial role. Google pays Apple $10 billion annually to be the default search engine on iPhones. On Android devices, Google Search is the default option.
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Newton’s first law of Motion
Human nature tends to stick with defaults due to convenience and inertia. People often hesitate to switch from the pre-set option. This inherent behavior is why breaking Google’s search monopoly proves immensely challenging, even with a superior search engine.
To make Bing the default on iPhones, Nadella suggested renaming it with Apple’s brand. The idea was to retain users, gather data, improve Bing, and challenge Google’s dominance. However, Apple declined this, sticking with Google.
This decision left Bing with a meager 3% share, underlining the impact of default settings on user choices and the struggle to break Google’s monopoly.
Google Search is the world’s Greatest Business Model
In July 2017, Google’s Vice President for Finance, Michael Roszak, referred to the company’s search advertising business as the ‘world’s greatest business model,’ comparing it to illicit businesses like cigarettes or drugs in terms of economic impact. This statement came to light in a document released online by the Justice Department.
Roszak elaborated on the unparalleled success of Google’s search advertising model, stating that it defied traditional economic principles of supply and demand. He emphasized that Google’s model allowed them to focus primarily on the supply side—advertisers, ad formats, and sales—while not being heavily constrained by the demand side of users and queries.
The Justice Department used the document as evidence in an antitrust case against Google. Google objected to its use, claiming it wasn’t an official business record but a hyperbolic statement from a public speaking class.
Conclusion:
In a YouGov and The Economist poll, 41% of Americans approved of the lawsuit, 19% disapproved, and 40% were undecided.
Google denied DOJ’s allegations, claiming bias towards specific players in the competitive ad tech sector.
The case outcome may significantly affect the tech industry, potentially requiring Google to alter practices and foster more competition if antitrust violations are proven.
[1] United States v. Google LLC (2023)
[2] The Verge
