Google faces landmark monopoly case in US

A landmark court action brought by the US government against Google, which will get under way on Tuesday, could have a key impact in determining the landscape of the tech sector for the years ahead.

The US department of justice and a group of attorneys general in states across the country will contend that Google abused its dominant position in the search engine market in effect to stifle competition from rival operators.

In the case, which was originally filed under the Trump administration in 2020, the department alleged multiple violations of federal antitrust legislation.

The department under the Biden administration subsequently filed a second antitrust case against Google which is based on the company’s market dominance in advertising technology.

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The US government’s action against Google represents the first monopoly trial against a tech giant since the proceedings against Microsoft more than 20 years ago.

The case this week centres on whether Google has locked in its dominant position and hobbled competition by paying companies such as Apple to make its product the default search engine on the iPhone as well as on other devices and platforms.

In essence, the US government argues that deals between Google and Apple and other companies directed billions of web queries to its search engine every day.

It contends that this reduced choice for users, hurt innovation in the industry and prevented other search engines such as Microsoft Bing and DuckDuckGo from building up market share.

Google has strongly denied the accusations. It maintains it did not violate antitrust law. The company said in a January court filing that its browser agreements were “legitimate competition” and not “illicit exclusion”.

Google is expected to argue in the case that customers prefer its products because of their quality. The company is expected to maintain that people use Google’s search engine because they want to rather than because they have to.

It is also likely to contend that it is easy to switch default search engines on devices and users could do easily if they wanted to use another product.

In the original complaint to the court filed in 2020 the department of justice and attorneys general in several states maintained that two decades ago, Google became the darling of Silicon Valley as a scrappy start-up with an innovative way to search the emerging internet.

“That Google is long gone. The Google of today is a monopoly gatekeeper for the internet, and one of the wealthiest companies on the planet, with a market value of $1 trillion and annual revenue exceeding $160 billion.”

“For many years, Google has used anticompetitive tactics to maintain and extend its monopolies in the markets for general search services, search advertising, and general search text advertising – the cornerstones of its empire.”

The department complaint said that for years, Google had entered into exclusionary agreements, including tying arrangements, and engaged in anticompetitive conduct to lock up distribution channels and block rivals.

“Google pays billions of dollars each year to distributors – including popular-device manufacturers such as Apple, LG, Motorola and Samsung; big US wireless carriers such as AT&T, T-Mobile and Verizon; and browser developers such as Mozilla, Opera and UCWeb – to secure default status for its general search engine and, in many cases, to specifically prohibit Google’s counterparties from dealing with Google’s competitors. Some of these agreements also require distributors to take a bundle of Google apps, including its search apps, and feature them on devices in prime positions where consumers are most likely to start their internet searches.

The department case maintained that Google’s exclusionary agreements covered just under 60 per cent of all general search queries.

“Nearly half the remaining queries are funnelled through Google-owned and -operated properties (eg, Google’s browser, Chrome). Between its exclusionary contracts and owned and operated properties, Google effectively owns or controls search distribution channels accounting for roughly 80 per cent of the general search queries in the United States. Largely as a result of Google’s exclusionary agreements and anticompetitive conduct, Google in recent years has accounted for nearly 90 per cent of all general-search-engine queries in the United States, and almost 95 per cent of queries on mobile devices.”

The case, which is before a judge in Washington, is expected to run for about 10 weeks with a ruling likely to be handed down sometime next year.

The US government and the state attorneys general are not seeking a monetary penalty, but rather an injunction barring Google from continuing the alleged anticompetitive practices.

Such an order could have significant business implications for Google including potentially some form a structurally breaking up the company.