Google committed “antitrust evils,” colluded with Facebook, new lawsuit says
December 18, 2020
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by admin


A large Google logo is displayed amidst foliage.

Two separate coalitions of states have filed massive antitrust lawsuits against Google in the past 24 hours, alleging that the company abuses its extensive power to force would-be competitors out of the marketplace and harms consumers in the process.

Texas Attorney General Ken Paxton spearheaded the first suit, which nine other states also signed onto. The second suit is led by Colorado Attorney General Phil Weiser and Nebraska Attorney General Doug Peterson, and an additional 36 states and territories signed on.

Antitrust law isn’t just about a company being an illegal monopoly or even about being the dominant firm in its market sector. Although being a literal monopoly, with no available competition of any kind, can put you on the fast track to investigation, the law has broader concerns. Primarily, antitrust investigations are about anticompetitive behavior—in short, how a company uses its power. If you’re a big company because everyone likes your stuff best, well, you’re a big company, congratulations. But if you got to be the dominant company by cheating somehow—strong-arming other firms in the supply chain; targeting anticompetitive acquisitions; colluding with other firms to manipulate market conditions, and so on—that’s a problem.

With that in mind, let’s delve into what’s going on.

Wait—am I having déjà vu, or…

You have indeed heard this song before, and recently, too. Both new suits come in the wake of a suit the Justice Department and a group of 11 states—Arkansas, Florida, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Montana, South Carolina, and Texas—jointly filed against Google in October.

Three additional states also filed with the court today to join on to the federal case, so a total of 52 attorneys general—representing 49 states, Puerto Rico, Guam, and the District of Columbia—and the DOJ have now signed on to one or more of the three legal challenges. (Alabama appears to be the remaining state not yet participating in any of the cases at this time.)

For the time being, these two new lawsuits are separate and distinct both from the federal case and from each other. However, according to the DOJ, the coalition that filed its suit today also petitioned the court to consolidate the proceedings, so in all likelihood, this will eventually be one massive antitrust case.

What makes these new suits different from the first one?

The October suit is surprisingly narrow, considering how many segments of the digital marketplace Google’s parent company Alphabet either participates in or dominates. That case focuses almost entirely on Google’s search business, which the DOJ alleged the company monopolized illegally for more than a decade through “exclusionary agreements and anticompetitive conduct.” These both focus on other elements of Google’s business.

Such as… ?

The Texas-led suit (PDF) is focused on the online advertising market. According to that suit, Google uses its control of the advertising ecosystem to block potential competitors from competing in online advertising exchanges and unfairly uses its vertical integration to win realtime advertising auctions.

“Google is essentially trading on ‘insider information’ by acting as the pitcher, catcher, batter, and umpire, all at the same time” in the online advertising market, Paxton said when announcing the suit. “This isn’t the ‘free market’ at work here. This is anti-market and illegal under state and federal law.”

Google entered a series of agreements, codenamed Project Jedi, with other advertising firms to allow it to maintain its market share, the suit alleges. The most eye-popping of those deals is an agreement Google allegedly signed with Facebook in 2018, which “fixes prices and allocates markets between Google and Facebook as competing bidders in the auctions for publishers’ Web display and in-app advertising inventory.”

Basically, according to the suit, Facebook in 2017 figured out a way to make money from a new online-advertising bidding system. Google thought that new tactic posed an “existential threat” to its own massive slice of the advertising pie and made an agreement with Facebook: Facebook would cut back on the new tech, and Google would give Facebook a big edge in its own advertising auctions.

Tactics such as bid rigging and market division are explicitly, flatly illegal under antitrust law. “The Supreme Court has warned that there are such things as antitrust evils,” the suit begins, alleging that Google is guilty of such, and it “seeks to ensure that Google won’t be evil anymore.”

And the other suit?

The Colorado-led suit (PDF) focuses on Google’s search and search-advertising business, accusing the company of behaving anticompetitively in three key ways.

Firstly, the suit argues, Google “uses its massive financial resources to limit the number of consumers who use a Google competitor.” This holds particularly true in mobile, the suit alleges, which Google dominates entirely. Not only is Google the default search engine on Android, which is a Google product, but the company also pays Apple billions of dollars every year to be the default search engine on iOS devices as well.

Secondly, Google leverages its search-advertising business, SA360, in such a way as to prevent competition from arising, the suit alleges, by prohibiting interoperability with competitors and locking advertisers in. And thirdly, according to the suit, Google “throttles” those who try to go around Google to reach sites, products, and services directly. This harms “specialized vertical providers” by keeping them from reaching potential customers, especially on mobile.

What does Google have to say about this?

In response to the lawsuits, Google today published a lengthy corporate blog post explaining why Google search is Great, Actually, and should be left alone.

“Rigorous testing” has shown Google that consumers vastly prefer their search results to be chock-full of Google’s own modules, wrote Adam Cohen, Google’s director of economic policy. “We know that if you don’t like the results we’re giving you, you have numerous alternatives—including Amazon, Expedia, Tripadvisor and many others just a click away.”

Amazon, to consumers, is an e-retailer, streaming video company, and digital goods purveyor, not a search engine, and both Expedia and Tripadvisor are specifically for searches related to travel and hospitality, but it is indeed true that they exist.

The antitrust lawsuit “suggests we shouldn’t have worked to make Search better and that we should, in fact, be less useful to you,” Cohen added. “The claims being made have been closely examined and rejected by regulators and courts around the world, including the US Federal Trade Commission, competition authorities in Brazil, Canada, and Taiwan, and courts in the United Kingdom and Germany, who all agreed that our changes are designed to improve your search results. It’s also well established that the most important driver for our search results is the specific query—not your personal data.”

Google’s claims are accurate but misleading: while the FTC did back away from pursuing major action against Google in 2013, European regulators fined Google a total of more than $9 billion across three years for violating antitrust law: 2.4 billion euros ($2.7 billion) in 2017, related to search; 4.3 billion euros ($5 billion) in 2018, related to Android; and 1.5 billion euros ($1.7 billion) in 2019, related to AdSense. Regulators in several other nations such as Australia, Japan, India, and South Korea, are also reviewing Google’s competition practices.

What next?

The potential outcomes of these cases are unclear. We could be looking at the biggest antitrust action in a generation, a giant nothingburger, or anything in between.

None of the three cases specifically calls for Google to be broken up, unlike the Facebook antitrust lawsuits the feds and states filed last week. That said, they don’t exactly not seek breakups either. Instead, the suits are all calling for whatever “structural relief” might be deemed necessary alongside all the various fines, penalties, and injunctions against bad behavior they seek.

It’s going to be a very long, very ugly legal fight, no matter what happens. Even if the cases are consolidated into a single docket, as seems likely, don’t be surprised if it takes until 2025 or beyond for the case to wrap once and for all. For comparison, the DOJ filed its landmark antitrust case against Microsoft in May 1998; the court accepted what became the final settlement in November 2002, 4.5 years later.

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