The story so far: On September 12, Justice Amit Mehta of the U.S. District Court for the District of Columbia started hearing what is being described as the most important case about the future of the Internet. Over the course of the next 10 weeks, Justice Mehta will hear arguments of the U.S. Department of Justice (DoJ) and several U.S. States to the effect that Google used illegal tactics to maintain a monopoly in online search. Several top officials from Google, including CEO Sundar Pichai, are expected to be called in as witnesses. If the allegations against the $1.7 trillion Silicon Valley giant are upheld, Justice Mehta will begin a separate trial to decide on the action that needs to be taken. Other mega Internet companies such as Amazon and Meta are keenly watching the trial, as it will have major implications on how their own ‘anti-trust’ issues are dealt with.
What is the charge against Google?
The key allegation against Google is that its “arrangements” with Apple and other companies to be the default search engine on their devices, is unlawful monopoly building. The DoJ filed the charges on October 20, 2020, arguing that Google throttled competition from other search engines and caused harm to consumers, making it a prime anti-trust — targeting monopolies — case. “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 DoJ had said in its initial filing.
Since the extent of harm that has been caused to consumers is the key deciding factor in anti-trust cases, the DoJ is expected to show how the default search position for Google on various devices limited options available to consumers. Focus may also fall on how a lot of the real estate on Google’s search result pages is often taken up by the company’s own non-search services — such as user reviews — at the cost of rival services. Google’s default position also creates a ‘feedback loop’ in which consumers are regularly giving the search engine their personal preferences, allowing Google to fine-tune its algorithm and deliver better search results and advertisements. “Google’s contracts ensure that rivals cannot match the search quality ad monetisation, especially on phones,” Kenneth Dintzer, the main lawyer for the DoJ in this case told the Associated Press. “Through this feedback loop, this wheel has been turning for more than 12 years. It always turns to Google’s advantage.”
However, Google argues that the reason it controls 91% of the global search market is that it provides better quality of services, rather than a lack of competition. Google says that consumers can always choose to change the default option, and that any deals it has with device manufacturers like Apple are above board.
Is there a deal between Apple and Google?
While both Apple and Google have been secretive about their cooperation, several reports indicate that such a deal was renewed in 2017. According to The New York Times, while Google paid Apple to the tune of $1 billion in 2014, the latter now receives between $8 billion and $12 billion, amounting to 9% of its annual gross profits. Google’s willingness to pay such a huge amount is driven by the fact that 75% of its search revenue comes from iPhone and iPad users. It is also a precautionary measure as it holds back the creation of a rival search engine by Apple, one of the few companies that have the wherewithal to take on Google.
Google also understands a key lesson from behavioural economics — most people will not bother to change the default options made available to them.
Why is there a ‘techlash’ on anti-trust issues?
Google is no stranger to anti-trust cases, though not in the U.S. In 2017, it was fined $2.7 billion by the European Union for showing undue preference for its own services in search results. The EU has imposed a total fine of 8.25 billion euros on Google over three anti-trust investigations. The EU has also trained its anti-trust guns on other U.S. online giants such as Meta and Amazon.
On the other hand, the U.S. has been slow to act against homegrown behemoths, who also spend considerable amounts of money and effort on political lobbying. However, a massive ‘techlash’ has been building up in the U.S. in recent years with calls from both sides of the political aisle to restrict the influence that these companies can exert on aspects ranging from teenage mental health to personal privacy and the success of small businesses.
The current case against Google has the potential to redefine how anti-trust laws are wielded in the technology era against new business models. A key test of consumer harm under anti-trust law is the amount of monetary loss that has been sustained by consumers due to the monopolistic behaviour of companies. However, Google offers its search services for free. It remains to be seen how the DoJ, which has another anti-trust case in the pipeline against Google over its dominance in online advertising, will prove its point on consumer harm in this case.
Why are anti-trust cases important?
Anti-trust cases have the potential to completely revamp a sector of the economy. Such cases in the U.S. also have far reaching impact across the globe. The last major anti-trust case was over two decades ago, when the U.S. government took on the Bill Gates-led Microsoft that had near-total monopoly over the operating systems running personal computers.
In 1995, the Internet revolution was taking off with the Netscape browser being the key software for accessing the World Wide Web. Microsoft tried to squeeze out Netscape by bundling its Internet Explorer web browser for free with its Windows OS. The government took Microsoft to court in 1998, and in 2001 arrived at a deal that made Microsoft keep a more open Windows environment. Critics of this case say that it did not do much to shake Microsoft’s monopoly; Netscape lost its market leadership and eventually morphed into the Firefox browser from Mozilla Foundation. Others, however, say that the open environment that the deal ensured saw to it that Microsoft did not crush the smaller technology companies that were developing products around the Internet, including one that was formed in 1998 in a garage in Menlo Park, California — Google.