The US Department of Justice (DoJ) has filed an antitrust lawsuit against Google for “unlawful monopolization.”
The department says that Google‘s behaviour harms competition for consumers by reducing the ability of new and innovative companies to develop their own products and services, as well as their ability to compete and innovate.
The most important monopoly case in the US was in 1998 when the Department of Justice opened proceedings against Microsoft. It is possible that the current process is politically motivated, given its timing.
Democratic candidate Joe Biden is elected president, and the anti-Google action is unlikely to go away. Should the court decide against Google, the consequences for Google could ultimately be dramatic. US Attorney General Eric Holder and US Attorney General Loretta Lynch have repeatedly stated that Google is biased against conservative beliefs. They have refused to rule out seeking jobs to dismantle the tech giant, saying nothing is off the table.
Google’s monopoly power
Google’s economic power is no secret, and regulators around the world, including the European Union, are investigating the company’s conduct and bringing lawsuits under competition and consumer laws. Specifically, the Justice Department accuses Google of illegally monopolizing advertising that appears in search results.
However, maintaining a dominant position is not against the law, and companies can enjoy a dominant position – even complete monopolies – as long as they do not do so by illegal means.
The Justice Department‘s main complaint is that Google has entered into several exclusion agreements that maintain its monopoly power by stifling competition from rivals and potential rivals. An exclusive agreement is an agreement that limits the negotiating capacity of at least one party with other actors.
The Justice Department claims that these agreements create a continuous, self-reinforcing monopoly cycle based on Google’s dominance of online search. Even if it is technically correct, it gives Google a significant advantage over its competitors, but it is also open to users to switch to other search engines. Google has responded by calling the lawsuit “deeply flawed,” according to a press release from the company’s legal team.
Does any of this matter when Google is ‘free’?
Google offers a service that is highly valued worldwide and does not impose any direct financial costs on users. Google has harmed search engine users by restricting competition and reducing the quality of search results, including the availability of relevant information such as information on search engines and search terms. But free services can still cause harm, and Google is doing so by using misleading advertising and other tactics.
The logic behind this claim is that the more successful you are, the less you may behave or be otherwise. In other words, Google competes for privacy by supposedly imposing privacy on its users, thereby worsening conditions. This is a reminder that it is not only the price that counts but also the quality of the service.
What might happen if the action succeeds?
Google could face substantial fines and damages if it violates the monopoly ban under the Sherman Act. Perhaps more troubling for Google is the possibility that the Justice Department could try to spin off its various businesses.
Google owns a number of highly successful services, including Google Maps, YouTube, Gmail, Google Docs and Google Drive, as well as the search engine itself. All of these are highly profitable companies that Google owns, giving it an advantage over other companies. They could join the lawsuit or appeal individually to the U.S. Court of Appeals for the Ninth Circuit in New York.
The lawsuit is unlikely to have much impact for the foreseeable future, and Google’s lawyers estimated that the case would not end up in the Ninth Circuit Court of Appeals in New York in a year’s time.
Could our competition watchdog be taking notes?
Following an investigation into digital platforms, the Australian Competition and Consumer Commission (ACCC) said Google had significant market power in 2019. Google has behaved “unlawfully,” as the Department of Justice claims, affecting the “Australian market.”
If true, it would be illegal for Google to engage in conduct that “significantly reduces competition in the market or has a purpose or probable effect,” in which case its market share is around 95%. This could include exclusive agreements concerning the “Australian market,” such as those between Google and the Australian Competition and Consumer Commission (ACCC).
While Australia’s consumer advocates may wait to see what happens to the US and EU cases against Google, the latest US Justice Department lawsuit could encourage the ACCC to consider action. The Commission’s investigation also examines Google’s use of data in its search engine and advertising business. In the UK, for example, it has sued Google over the way it uses user data.