Earlier this week, the U.S. Government filed its long-expected antitrust suit against Google. The Justice Department is claiming that Google has abused its dominant position in search and advertising to keep competition down.
The move follows an investigation into the search giant by the DOJ, which began about a year ago.
I have to say, the DOJ's complaint feels a bit half-baked for several reasons.
First, this is a tough case to start with – and not just because Google will mount a massive, rigorous defense that will likely either bog down or out-lawyer the regulators.
Additionally, U.S. antitrust law is traditionally based on harm to the consumer – with monopolistic activity raising prices or suppressing access to superior product.
Google search is free and quite good at its task, as measured by its U.S. consumer satisfaction score that has ranged from 75% to 86% over the last 18 years, and currently sits at 79%. Direct consumer harm is a tough one.
Instead, the DOJ suit is focused solely on search.
That strategy was startlingly limited, considering the main critics of the search giant have always pressed that Google/Alphabet’s monopolistic advantage is leveraging its advertising-based business model across the business verticals, where it has strong market share or investment.
Let's take a closer look:
- Search (✔)
- Browsers - Chrome (❌)
- Mobile operating systems - Android (❌)
- Online advertising - Ads and Adsense (❌)
- Video sharing - YouTube (❌)
- Email - Gmail and Calendar (❌)
- Navigation - Maps (❌)
- Devices - Chromebook, Pixel, Home, Nest (❌)
- Intelligent assistants - Google Assistant (❌)
- Cloud computing - Cloud and Drive (❌)
- Office collaboration - Workspace (❌)
- Internet access - Fiber (❌)
- Autonomous vehicles - Waymo (❌)
- AI - DeepMInd (❌)
- Healthcare - Verily and Calico (❌)
- Smart Cities - Sidewalk Labs (❌)
- Venture/equity investment - Google Ventures & CapitalG (❌)
- R&D/moonshot projects (❌)
A suit that doesn't solve the issues in travel
The DOJ's leading complaint is that Google is engaging in monopolistic behavior by buying rights as the exclusive default search engine on various device manufacturers (Apple, LG, Motorola and Samsung), cellular networks (AT&T, T-Mobile and Verizon) and browser developers (Mozilla, Opera and UCWeb).
It also claims Google shouldn’t be spending billions of dollars per year for those exclusive rights – whose prices are negotiated by each partner and not unilaterally set by Google. Those expenditures also arguably lower the cost (or improve the profitability) of those devices, networks and browsers.
The rather strained reasoning is that search dominance (actually monetizing that search dominance through advertising) allows Google to outbid others. Since advertising generates over 80% of Alphabet’s total revenue, this also funds all those other lines of business, like Calico trying to cure death…
The complaint doesn’t even attempt to quantify the damages: It asks the court to "enter structural relief as needed to cure any anticompetitive harm." That’s a pretty open-ended remedy for something that the U.S. government and 11 states in the country feel is monopolistic.
Doesn’t the old saying go, "If you can’t measure it, you can’t manage it"?
Shouldn’t litigation have a desired outcome that is easily described? The DOJ certainly didn’t hurdle that low bar here.
Is the court supposed to exclude Google from engaging in discussions to negotiate exclusive rights? Are those partners prohibited from selling the rights to any firm?
Would consumers simply get a list of browsers and search engines to select when they install? Since users pretty much love the Google product, wouldn’t that potentially leave Google with comparable market share and billions of dollars saved?
A second-hand suit
I hate to say it, but this also smells political – the announcement of stripped-down litigation, just prior to an election that is supported by 11 states dominated by the Republican party (all having Republican State Attorneys General, State Houses, State Senates, U.S. House of Representatives, U.S. Senate and Governors - the only exceptions being three of the states having Democrat governors and one of those with a single Democrat U.S. Senator).
With clear bipartisan concern over monopolistic behavior of the large online players – particularly Facebook, Apple, Amazon and, to a lesser degree (having been scrutinized and punished a couple decades ago), Microsoft.
Speaking of Microsoft, this suit is VERY different from the one against Microsoft for bundling of its Internet Explorer browser with its Windows operating system and making IE impossible to delete.
Expedia Group CEO Peter Kern applauded the suit, but it completely missed Expedia’s primary complaint that Google directs users to its own properties over other sites that specialize in product search within specific business verticals – like Expedia in travel.
Bottom line – I just don’t get it. Google is the sole target. The 16-month investigation by the U.S. House of Representatives antitrust investigators published a 450-page report taking exception with Amazon, Apple, Facebook and Google that raised a wide range of issues that extended well beyond search.
It would have seemed a whole lot smarter to go after specific practices deemed "anti-competitive" as opposed to a single company under such narrow, relatively shaky claims.
For example, the obvious ones – Amazon and Google favoring their own products in search e-commerce results; the tollgates governing access to Apple’s App Store and Amazon’s Marketplace; privacy concerns with Facebook and Google’s use of user data; Apple and Facebook for duplicating features of App Store or competitive sites; the scope of acquisitions/scale that could lead to divestitures that promote competition.
It’s hard to say if the DOJ is being lazy, naive or just political at this point.
The European Union, after finding that taking action against Google for its search practices over the past decade has not really reduced their dominance, is now working on its Digital Services Act – focusing on data access and advertising practices.
That would seem to have a better chance of success at leveling the competitive playing field with clearly defined, industry-wide regulation.
My money is on the European Union's Margrethe Vestager coming up with a more effective outcome than the U.S. DOJ – even if expansions to the suit are dribbled out over time.