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Google Sued in Antitrust Case

 

The United States Government filed suit today against Google in what may well become an historic antitrust case. The filing accuses Google, the world’s largest tech giant, of violating antitrust law to stifle competition in the internet marketplace.

Related: Google Quietly Removes “Don’t Be Evil” from its Code of Conduct

Anti-trust law in the United States was written more than a century ago to keep any one entity from being able to monopolize an otherwise free market. Antitrust law in the US is a collection of federal and state government laws that regulate the conduct and organization of business corporations. Antitrust law is intended to promote competition for the benefit of consumers. The main statutes which theoretically underpin US antitrust law are the Sherman Act of 1890, the Clayton Act of 1914 and the Federal Trade Commission Act of 1914.

These Acts which make up antitrust law serve three major functions, perhaps most importantly:

1. Section 1 of the Sherman Act prohibits price-fixing and the operation of cartels. It also prohibits other collusive practices that unreasonably restrain trade.
2. Section 7 of the Clayton Act restricts the mergers and acquisitions of organizations that would likely substantially lessen competition.
3. Section 2 of the Sherman Act prohibits the abuse of monopoly power.

Civil and Criminal Enforcement

Civil 
Federal antitrust laws provide for both civil and criminal enforcement of antitrust laws. The Federal Trade Commission, the Antitrust Division of the U.S. Department of Justice, and/or any private parties sufficiently affected may bring civil actions in the courts to enforce the antitrust laws.

Criminal
Criminal antitrust enforcement is prosecuted by the U.S. Justice Department, though most U.S. states also list antitrust statutes in their law books, which govern commerce occurring solely within a state’s borders.

Antitrust Law Debates
Some economists hotly contest the scope of antitrust laws and the degree to which they might conflict with an enterprise’s freedom to conduct business, or to protect smaller businesses, communities, and consumers. Some economists argue that antitrust laws impede competition and discourage businesses from activities that would be beneficial to society. One view argues that antitrust laws should focus solely on the benefits to consumers and overall “efficiency.” Another broad range of legal and economic theory sees the role of antitrust laws as also controlling economic power in the public interest.

Antitrust Laws Should be Enforced, say most Economic Experts
Most economics experts recognize the importance of antitrust laws. A 2011 survey of 568 members of the American Economic Association found that 87 percent of those who responded broadly agreed with this statement: “Antitrust laws should be enforced vigorously.”
That, unfortunately, has not yet happened where Google is concerned, though today’s filing gives one hope that Google’s virtual tech monopoly on the web can be broken.

Biggest Antitrust Tech Filing since 1998 Microsoft Suit
The U.S. Justice Department said the antitrust lawsuit against Google marks the biggest government case taking on huge tech power since the lawsuit that targeted Microsoft in 1998.

Both Republicans and Democrats support Google Antitrust Suit
The filing is joined by 11 states. Many democrats, including David Cicilline and Elizabeth Warren, praised the filing by William Barr, though Ms. Warren hedged her praise by also calling Mr. Barr “corrupt.” (It’s difficult to keep up with the mud slinging on both sides; we’re heartily trying to write this blog as straight news.)

Rep. David Cicilline (D-R.I.) responded to the antitrust suit by pointing to the House antitrust subcommittee’s recent report finding that Google holds monopoly or near-monopoly power, along with other tech giants such as Apple, Facebook, Twitter, Youtube. “This [antitrust lawsuit] is long overdue,” Mr. Cicilline tweeted. “It is time to restore competition online.”

Google Owns 80% of Search Queries in the U.S.

CNN reported that the complaint alleges, in part, that Google pays billions of dollars a year to device makers such as Apple, LG, Motorola, and Samsung. Google also pays billions to browser developers such as Mozilla and Opera to be their default search engine. In addition, that payment arrangement, in many cases, prohibits those engines from doing business with Google’s competitors. Consequently, “Google effectively owns or controls search distribution channels accounting for roughly 80% of the general search queries in the United States.”

Unfair Competition
The Washington Post added that the DOJ found that with its unmatched reach, Google further profits through lucrative ads that appear alongside Google’s own search results. The lawsuit charges that massive profits from that business allowed Google to maintain and strengthen its foothold and make it impossible for other search engines to compete.

Google Response
Google’s response was to call the lawsuit “deeply flawed.” The tech giant said the suit was based on “dubious antitrust arguments.” Further, Google claimed the suit would “make it harder for people to get the search services they want to use.” (Because Google knows what people want to use, apparently?)

Google Monopoly Gatekeeper of the Internet, says AG Barr
Attorney General William Barr said in a statement the legal action was a “monumental case” which followed 16 months of the Justice Department’s antitrust division collecting “convincing evidence” about Google, which Mr. Barr called “the monopoly gatekeeper of the internet.”

Tech History Repeating Itself?
“Twenty-five years ago, the Department of Justice sued Microsoft, paving the way for a new wave of innovative tech companies—including Google,” said Mr. Barr. “The increased competition following the Microsoft case enabled Google to grow from a small start-up to an internet behemoth.”

“Unfortunately,” Mr. Barr continued, “once Google itself gained dominance, it resorted to the same anti-competitive playbook.”
In a Twitter thread Monday ahead of the antitrust lawsuit announcement, Open Markets Institute wrote: “Google. . . acquired its dominance of the internet search market by bribing smartphone manufacturers and wireless operators not to install rival search engines on devices they sold.”

Public Citizen Weighs in, Unimpressed with Suit
A competition policy advocate at Public Citizen, Alex Harman, suggested the lawsuit deserves little praise from anti-monopoly advocates because it amounted to merely “a thinly veiled political stunt.”

“The Trump DOJ’s narrow focus and alienation of the bipartisan state attorneys general is evidence of an unserious approach driven by politics and is likely to result in nothing more than a choreographed slap on the wrist for Google,” said Mr. Harman.

Mr. Harman further framed the filing as “a missed opportunity to bring about a structural reckoning with one of the most powerful and wealthy companies in the world so that President Trump and Mr. Barr can score political points. He said state attorneys general are better equipped to lead the charge, though that effort is still underway, as best we can tell, and eleven states attorney generals have joined this DOJ suit.

We sincerely hope that this effort by the DOJ and the state attorneys general will seriously address and temper Google’s obvious monopoly power on the internet. We all depend on it these dark days, especially now when so many of us live locked up at home. For many, the internet is our main means of communication.

The stakes in this suit could hardly be higher.

Reuters noted this week that Google has faced similar legal challenges in other countries. Last year, the European Union fined Google $1.7 billion for stopping websites from using Google’s rivals to find advertisers. In 2017, the EU  fined Google $2.6 billion for favoring its own shopping business in searches. In 2018, Google was fined $4.9 billion for blocking rivals on its wireless Android operating system.

Since Google is worth more than a trillion dollars, those fines come as mere slaps on the wrist for the tech giant.

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