The DOJ’s Weak Case Against Google
This post is part of the “Governing the Internet” blog series, which features a range of viewpoints on topics involving internet regulation.
The series is co-sponsored by the Regulatory Transparency Project and the Federalist Society’s Practice Groups.
The Department of Justice’s (DOJ) long-awaited antitrust case against Google has arrived. The lawsuit, which was joined by 11 Republican state attorneys general, alleges that the company uses anticompetitive practices to preserve a monopoly for its search engine and advertising business.
As with all complaints, charging clauses toward the end are a good place to start. They demonstrate what practices the DOJ thinks violate the law. Many of the common complaints from Google critics are missing. There are no allegations of search bias, anticompetitive acquisitions, Google Play store fees, scraping, self-preferencing, or display ads. Many in the anti-Google crowd are probably disappointed with this complaint.
So, what is alleged? The complaint alleges that Google has acted anticompetitively by making deals with browser developers, phone manufacturers, and mobile carriers to default to Google search in their products. The complaint alleges that this conduct has enabled Google to maintain and abuse its monopoly in three markets: general search, general search advertising, and general search text advertising.
Market definition is the key to this case, and it appears the DOJ has gotten it wrong. First, as others have pointed out, Google’s contracts affect the market for the distribution of search engines, where the choke point isn’t Google – it is the phone manufacturers and web browser developers. That is very different from U.S. v. Microsoft, where the DOJ alleged that Microsoft controlled distribution of competing products and used that control to limit competitors.
But even looking at the three markets in the complaint, the definition seems arbitrarily narrow. For example, the complaint never mentions the second largest online advertising platform, Facebook. The DOJ seems to dismiss competition from other types of online advertising:
Other forms of advertising are not reasonably substitutable for search ads. For example, “offline” ads such as newspaper, billboard, TV, and radio ads cannot be targeted at a specific consumer based on the consumer’s real-time, self-disclosed interests. Similarly, other forms of online ads, such as display ads or social media ads, do not enable advertisers to target customers based on specific queries and are generally aimed at consumers who are further from the point of purchase.
That’s not necessarily wrong, but it will need a lot of elaboration. To me, it looks like DOJ is throwing three different overlapping market definitions at the court to see what sticks.
The complaint alleges that Google harms the market for general search services by 1) reducing the quality of search services (including privacy, data protection, and use of consumer data); 2) reducing choices in general search services; and 3) impeding innovation. These charges can be difficult to prove. In particular, the types of contracts Google was using likely improve privacy, data protection, and use of consumer data by setting conditions on how the underlying Android OS can be modified. The DOJ likely has an uphill climb with this first count.
Counts two and three focus on alleged competitor harms through general search ads and general text ads. DOJ alleges that Google’s conduct in these markets has 1) raised ad prices higher than they would be otherwise; 2) reduced quality of ad services; 3) reduced incentives to develop innovative new products. These two counts may be easier to substantiate than the first, but will still be difficult. In particular, DOJ will have to show that internet ad prices, which have fallen 42 percent over the last decade, would have fallen even further.
Overall, the complaint alleges very little that is new. It focuses on contracts that have been debated repeatedly (particularly in Europe) and refined over time in response to objections and political pressure.
More generally, DOJ faces the perennial antitrust problem: vigorous competition harmful to competitors is often great for consumers. Many of the behaviors described in the complaint have pro-consumer, pro-competition explanations, even if competitors dislike them.
How should we think about the broader implications of this lawsuit?
Antitrust is a powerful but blunt instrument. It should be wielded in service of consumers, not for political reasons against political opponents. The complaint against Google here is weak, which suggests political motivations for bringing the case now rather than developing it further.
Antitrust enforcement can ensure competitive markets that benefit consumers. But politicized antitrust benefits a few companies and politicians at the expense of everyone else. For the DOJ to win this case, it must clearly show how Google harms consumer welfare. Right now, that case is unclear.