On 20th October 2020, the United States Department of Justice (DoJ) sued Google, alleging that the company had abused its dominant position in a way that it has harmed its competitor as well as the customers. 11 states of the country have come together with DoJ to file an antitrust lawsuit against Google under Section 2 of the Sherman Act, for “unlawfully maintaining monopolies in the markets for general search services, search advertising, and general search text advertising in the United States through anticompetitive and exclusionary practices”.
While commenting on the issue, Managing Partner of OP Khaitan & Co — Gautam Khaitan, says, “This is one of the radical action by the state against such a giant company since it sued Microsoft almost two decades back.” He also added that the lawsuit against Google is part of the US federal government’s aggressive action against major companies including Amazon, Apple, and Facebook amongst others.
Section 2 of the Sherman Act makes it illegal to “monopolise, or attempt to monopolise, or combine or conspire with any other person or persons, to monopolise any part of the trade or commerce among the several States, or with foreign nations”. Section 2 of the Sherman Act has been unchanged since its introduction in the year 1860 during the time of rapid economic growth and industrialisation. “If Google is found to be in contravention of the Act, there can be civil penalties in terms of automatic treble damages, injunctive relief and related lengthy consent decrees, reasonable attorney fees, and costs and possible disbarment from government contracts,” says Gautam Khaitan.
Earlier in October 2020, the US House of Representatives presented a report of a bipartisan investigation into the working of Amazon, Apple, Google, and Facebook. Noteworthy, these companies have been in the eyes of many national governments for being huge spenders. There are a lot of allegations on these companies for steamroll their competition either by buying out their rivals or pushing vendors to not work with these companies. “This was an ‘unfair’ route through which these companies were trying to monopolise the market,” he added.
The probe, which started in July 2019, held that these companies were now acting as a ‘gatekeeper’ over a key channel of distribution. This effectively ensured that they had full control over what information was passed on in their respective domains. Therefore, the report in question called for the big technology companies to be split up for a “presumptive prohibition against future mergers and acquisitions by the dominant platform”.
The suit deals with the business of general search engines which are primarily distributed on mobile devices (smartphones and tablets) and computers (desktop and laptops). These devices contain web browsers and other “search access points” that call on a general search engine to respond to a user’s query. The most effective means of distribution is to be the pre-set default general engine for mobile and computer. This leaves the present default general search engine with de facto exclusivity.
The DoJ alleged that, for years, Google has entered into exclusionary agreements, including tying agreements and engaged in anticompetitive conduct to lock up distribution channels and block rivals. The suit also put allegation such as Google pays billions of dollars each year to distributors- including popular-device manufacturer such as Apple, LG, Motorola, and Samsung; major 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.
Khaitan says,“The further allegations made against Google are that its anticompetitive practices are especially pernicious because they deny rivals scale to compete effectively. General search services, search advertising, and general search text advertising require complex algorithms that are constantly learning which organic results and ads best respond to user queries; the volume and velocity of data accelerated the automated learning of search and search advertising algorithms. By using distribution agreements to lock up a scale for itself and deny it to others, Google unlawfully maintains its monopolies.”
DoJ, while referring to the two-decade-old landmark judgement, the United States v. Microsoft alleged that Google’s practices are anticompetitive under long-established antitrust law as recognised in Microsoft case which held that anticompetitive agreements by a high-tech monopolist shutting off effective distribution channels for rivals, such as by requiring pre-set default status and making software undeletable, were exclusionary and unlawful under Section 2 of the Sherman Act.
Importance of Lawsuit
This lawsuit brings together the bipartisan effort, involving both the Democratic and the Republican parties, to look into the monopolistic powers of Google.
“The problem for Google would be continued scrutiny into its biggest revenue-generating segment. The company uses this segment for generating revenue through advertisements originating from its search engine or that of its affiliated websites. Additionally, the big tech companies are also likely to face more questions and probes from state governments in the country, which have recently hauled firms up for not doing more to control their influence on day to day aspects of life,” says Gautam Khaitan.
Interestingly, Google seems to be a repeat offender in these issues. A decade ago in 2011, the company faced similar allegations related to its ‘questionable’ overwhelming dominance in the search market. The 2011 complaint was filed by a Washington-based non- profit research agency, Electronic Privacy Information Centre. Though five commissioners of the Federal Trade Commission (FTC) voted not to pursue a case against Google, the company had to, as a part of a settlement process, implement a strict user data security policy and agree to independent privacy audits for the next 20 years.
Through filing the lawsuit, the DoJ seeks to stop Google’s anticompetitive conduct and restore competition for consumers, advertisers, and all companies now reliant on the internet company.
Impact in India
For the past three years, Google has had multiple run-ins with the Competition Commission of India for alleged abuse of its dominant position in the search engine market, the Android smartphone and television market, as well as the Google Flight services.
In 2019, India’s antitrust body had also held Google guilty of misuse of its dominant position in the mobile Android market. Allegedly, the company had imposed “unfair conditions” on device manufacturers to prevent them from using other operating systems. In February 2018, the CCI has fined Google for Rs. 136 crores for unfair business practices in the online search market. It held that Google had “allocated disproportionate real estate” for its affiliates, to the disadvantage of other companies that were trying to gain market access. CCI further held that “besides, it was also found that Google has provided a further link in such commercial units which leads users to its specialised search result page (Google Flight) resulting in unfair imposition upon the users of general search services as well”.
Google has challenged the CCI finding in the National Company Law Appellate Tribunal and the Hon’ble Supreme Court of India.
The suit filed by DoJ will help Indian courts in determining the complex issue of antitrust and misuse of the dominant position of Google in the general search engine market.
The antitrust lawsuit is not the first against the tech giant Google. The European Union has already ordered Google to pay $1.7 Billion for abusing its dominant position in online search advertising. This was the third fine on Google by European Union, the first one being in July 2018, Google was fined $4.9 Billion for unfairly pushing its apps on smartphone users and thwarting competitors, followed by a $2.7 billion fine for using its search engine to steer consumers to its shopping platform. While Google slowly works through appeals, there are also more cases ongoing against the company in Europe and elsewhere.
“Google’s practice of general search engine, by far the most effective means of distribution is to be the present default general search engine for mobile and computer search access points. Even where users can change the default, they rarely do, says Gautam Khaitan. The de facto exclusivity of the search engine and exclusionary agreements by Google stops other companies to enter the market. This practice forecloses competition for internet search. The other companies are denied vital distribution, scale, and product recognition ensuring they have no real chance to challenge Google.