The most important antitrust trial of recent decades begins. More than 20 years after Microsoft’s defeat, the Biden administration is bringing Google to trial, accused of having “illegally maintained” its monopoly position.
The stakes are high and concern the small white bar on which Google has built an empire worth over 1,700 billion dollars (1,590 billion euros). “This case is about the future of the Internet and whether Google’s search engine will ever face significant competition,” said Kenneth Dintzer, head of the U.S. Justice Department legal team that dragged Google into court together with prosecutors from 38 states.
A bipartisan battle
The main accusation is that of having entered into multibillion-dollar deals with companies such as Apple and Samsung to prevent other rivals from undermining its lead in web searches. These practices, according to the US government, have curbed innovation and harmed competitors, advertisers and consumers. According to the company, however, Google’s success is simply due to the superiority of its search engine, which users freely choose to use.
It is the first time since the 1990s that the US government has brought an antitrust lawsuit against a big tech company. The monopolist at the time was Bill Gates’ Microsoft, condemned in 2001 for imposing its own browser, Internet Explorer, on consumers. This time, Google would limit users’ choice. As then, the Department of Justice claims, it is necessary to resort to the courts to “restore the role of competition and open the doors to the next wave of innovation”.
The Mountain View giant currently controls around 90% of the search engine market, leaving competitors like Bing the crumbs. A domain which, according to the US administration, is the result of restrictive agreements with smartphone manufacturers, browser developers and telephone companies. The agreements, with an annual value of over 10 billion dollars, serve to guarantee that the search engine is the default alternative on PCs and mobile phones.
The trial began on September 12, almost three years after the US administration, led at the time by Donald Trump, filed the lawsuit as part of a bipartisan offensive against the technology giants.
In the coming weeks, US Justice Department lawyers will have to demonstrate how, starting in 2010, Google has used anti-competitive tactics to defend its huge lead in web searches from potential rivals such as Yahoo, Bing and DuckDuckGo. For the Alphabet group, searches are the essential ingredient in its most important business, advertising: in 2022, search-related adverts generated almost 60% of the revenues of the group to which Google belongs, for an amount equal to 162, 45 billion dollars.
According to the prosecution, the agreements represent a “powerful strategic weapon” for Google which has allowed the company to accumulate more and more data with which to improve its product. “This vicious circle, this wheel, has been spinning for more than 12 years,” Dintzer summarized. «And it always works to Google’s advantage».
Cards exposed
In support of this thesis, the Justice Department cites emails and internal communications in which Google employees discuss the company’s choices. «If Microsoft [Bing] had the same traffic as us, its quality would improve significantly, while if we had the same traffic as them, ours would decrease significantly. This is a fact,” reads a message dating back to 2009, written by a Google engineer.
«We need to incentivize telephone operators to include Google», reports another email from 2011. «Without an exclusive search agreement, a large operator can and will include alternatives to Google… If we don’t do it, I bet it will be Microsoft and Yahoo to make agreements through operators for search on Android”.
Other messages were sent by Google’s chief economist, Hal Varian, cited as the first witness. During the first hearing, Dintzer read several emails in which Varian made sure of the terms used by colleagues in communications. In one from 2003 he invited us to be “sensitive” to the perception of monopolistic behavior on the part of Google, asking us to avoid over-the-top phrases like those that had received much prominence in the Microsoft trial, first of all the famous request to “remove the ‘air’ to the competition. Another document is a 2011 presentation in which rules are set out to avoid off limits terms in antitrust matters (the title: “Antitrust bases for the research team”). Ban words like “scale,” “network effects” and “package” and any war or sports metaphors. An internal document, read by Dintzer, also invites us to avoid references to “markets or market shares or dominant position”.
Several conversations are not on record because Google tried to hide them. Dintzer accused the firm of letting the lawyers participate in the exchanges in order to keep them confidential, as they were subject to professional secrecy. He also showed a message in which CEO Sundar Pichai asked to delete the chat history. “They erased history, your honor, so they could rewrite it here in this courtroom,” Dintzer said.
Only “fragments and documents out of context”, downplayed John Schmidtlein, the company’s lawyer. For Google’s lawyers, the reason for the company’s success is not to be found in the agreements to give prominence to the search engine, compared to those that cereal brands make with supermarket chains to place their products on the shelves. Instead, users freely choose the alternative they deem best.
This is the case, the company reminds us, of those who use Windows and generally choose to search with Google even though the Alphabet group’s products are not pre-installed on PCs. Or that of users of the Safari (Apple) or Firefox (Mozilla) browsers, who can change the default search engine and typically choose not to. Proof, according to Google’s lawyers, that it is not the agreements contested by the Department of Justice that guarantee Google’s position, but the choices of users.
Who pays
From the prosecution’s point of view, consumer satisfaction is not enough to justify tactics branded as anti-competitive. Google’s behavior would in fact have hindered competition, preventing potential rivals from innovating their products. Without these practices, companies like Microsoft would have more room to improve their offering, being able to count on a greater amount of searches.
The result, according to the US government, is a worsening of the experience for consumers, also from the point of view of the use of personal data. If Google had not been able to limit competition, according to Dintzer, it would have been forced to do more to protect user privacy, a long-standing problem for the Mountain View company.
Other victims of the contested practices are advertisers. According to the indictment, Google exploited its monopoly position to charge higher prices on advertisements that appear on search results pages. An aspect that will also be addressed in depth in another lawsuit, filed by the American administration last January. The 10 billion that Google pays every year thus translates into an “enormous cost for the community”, Dintzer said.
What will change
This isn’t the only case Google faces in the United States. Another federal lawsuit concerns, as mentioned, the violation of competition rules in the advertising market.
Other proceedings brought by states concern privacy, competition in the Play Store and also other alleged violations of antitrust rules.
As for the tech sector, other big names have also come under the scrutiny of the US administration. In recent months the Federal Trade Commission (FTC), led by the young Lina Khan, has tried, so far unsuccessfully, to block Microsoft’s acquisition of the video game manufacturer Activision Blizzard. She previously attempted to stop Meta from buying a virtual reality start-up.
But the most important process, and the one destined to act as a watershed, is the one that has just begun. From the outcome of “US v. Google” will be understood if the antitrust legislation currently in force in the country, based on rules dating back to 1890, is still relevant. Or whether new laws will be needed to fight 21st century monopolies.
The sentence will not arrive before 2024. In the coming weeks, Google CEO Sundar Pichai and Apple executives will probably be heard, as well as representatives of rivals such as Microsoft and DuckDuckGo. In the event of a guilty verdict, Judge Amit Mehta will have to start another trial to determine the penalties. In the likely event of an appeal, it will take years to put an end to the case.
If Google loses, the judge could order it to be broken up. A measure considered drastic by experts, who believe it is more likely that new constraints will be imposed on the company’s activities, which would, for example, prevent agreements such as those made with Apple and Samsung. An outcome similar to that of the Microsoft trial, which ended in 2001 with a plea agreement which, according to many observers, paved the way for a new generation of companies. First among these, a start-up called Google.
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