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Google Finally Gets Its Comeuppance
In a recent court order, federal district court Judge Amit Mehta said what most of us have suspected for years: Google’s market dominance in online searches isn’t a result of “happenstance,” but deliberate and intentional misconduct.
As Mehta said in his Aug. 5 ruling: “Google is a monopolist, and it has acted as one to maintain its monopoly,” in violation of the 1890 Sherman Antitrust Act.
That’s the same law that the greatest monopoly-busting president in American history, Teddy Roosevelt, used more than 100 years ago to break up the same type of corporate behemoths that were trying to control and dominate the U.S. economy.
Some of those targeted were single companies such as Google; others were “trusts” in which several companies conspired to combine their power to monopolize and control both prices and supply.
This may lead to Google being restricted in its market activities, or even the breakup of Google, just as the Ma Bell monopoly was broken up in 1982 when AT&T was the only telephone company in the country.
Or when Microsoft in 2001 finally settled an antitrust case against it, essentially for doing the same thing that Google has been doing—monopolizing the online search process—by bundling Microsoft’s web browser with Windows to make it harder for rival browsers to compete. That resulted in Microsoft’s search engine (remember Internet Explorer?) being the dominant web browser.
With Google, it’s about time.
This case has been a long time in the making. The Justice Department, along with 11 states, filed an antitrust lawsuit against Google in October 2020. Two months later, 38 states filed a similar lawsuit against Google, and it was consolidated with the first case. Trial didn’t start until three years later, lasted nine weeks, and involved dozens of witnesses and thousands of exhibits.
Mehta, in his ruling, explains something else that we all know: “The general search engine has revolutionized how we live.”
“Information that once took hours or days to acquire can now be found in an instant on the internet with the help of a general search engine,” the judge writes, adding: “And it all happens in the blink of an eye.”
Google makes its gargantuan profits by selling digital advertisements. As an example, Mehta notes, when you type the phrase “running shoes” into a general search engine, “sellers of running shoes will compete with one another in a split-second auction to place an advertisement on the results page, which if clicked takes the user directly to the seller’s website.”
For “more than 15 years,” the judge writes, “one general search engine has stood above the rest: Google.” That dominance made it one of the “world’s most valuable companies,” he said, with a parent company, Alphabet Inc., that has a market capitalization “of more than $2 trillion.”
In 2014, Google “booked nearly $47 billion in advertising revenue,” but by 2021, “that number had increased more than three-fold to over $146 billion,” Mehta wrote in his ruling.
Who was the closest competitor, with only 6% of the market? Microsoft’s Bing, which generated less than $12 billion in 2022.
By 2020, Mehta wrote, Google had “nearly 90% [of the market], and even higher on mobile devices at almost 95%.”
But how did Google become the dominant search engine? It did it the same way Microsoft did when it made its Internet Explorer the default web browser for all Microsoft products.
Mehta said in his opinion that Google for years “secured default placements [for its search engine] through distribution agreements” with big payments to “browser developers, mobile device manufacturers, and wireless carriers” that amounted to $26 billion in 2021 alone.
These entities all “agree to install Google as the search engine that is delivered to the user right out of the box at key search access points,” the judge wrote, and they are restricted by the agreements from preloading “any other general search engine on the device.”
This means more users of Google, more advertisers for Google, and “more advertisers means more revenue.”
The Justice Department and the states alleged that Google “unlawfully used the distribution agreements to thwart competition and maintain its monopoly in the market for general search services and in various online advertising markets.”
Mehta agreed, concluding that Google has monopoly power through its distribution agreements that “are exclusive and have anticompetitive effects.” Google provided no “valid procompetitive justification for those agreements,” the judge concluded.
Most “importantly,” he wrote, “Google has exercised its monopoly power by charging supracompetitive prices for general search text ads,” allowing it “to earn monopoly profits.”
By “supracompetitive,” Mehta means that Google has charged prices for advertising above what it could charge in a competitive marketplace. Just like Ma Bell could charge American consumers essentially whatever price it wanted when it was the only provider of telephone service.
I am old enough to remember how the price of telephone services, particularly long-distance rates, fell dramatically when the market was opened up to competition and new companies sprang up, including Sprint and MCI.
Mehta decided: “Google has violated Section 2 of the Sherman Act by maintaining its monopoly in two product markets in the United States—general search services and general text advertising—through its exclusive distribution agreements.”
Mehta noted that “merely possessing monopoly power is not itself an antitrust violation.” But the judge also found what he called the “essential” element in an antitrust violation: “barriers to entry” by others into the marketplace.
Mehta concluded that “these barriers exist,” including Google’s “control of key distribution channels.” These “are significant barriers that protect Google’s market dominance,” the judge found, and allowed the company to maintain its monopoly through the exclusive distribution agreements.
We don’t know yet what remedy Mehta will order to end Google’s monopoly, since that wasn’t part of his Aug. 5 order.
But there seems little doubt that the dissolution of Google’s monopoly—either through a banning of its exclusive distribution agreements or an actual breakup of the company itself—will result in the same surge of competition seen in other industries after an antitrust victory.
A competitive market will lower advertising prices across the board and make it easier for consumers to choose the search engine they want when they buy a new computer or mobile phone.
Of course, increased competition could have another positive impact: ending Google’s biased, left-wing stranglehold on the flow of information. As my Heritage Foundation colleague Daniel Cochrane and I have pointed out, “companies like Google use secret blacklists to suppress targeted websites and communications.” Those targets, Google believes, present politically incorrect views, articles, and opinions.
What’s more, we wrote, platforms such as Google “use proactive methods to push users toward content or actions that further Big Tech’s political agenda.” And politically biased “search algorithms, ‘suggested search’ features, [and] AI chat bots” all have “a significant cumulative effect on user attitudes.”
When Teddy Roosevelt ran for office in 1904, he promised Americans a “Square Deal,” one in which, among other things, he would wage a trust-busting war against the big monopolies and combines of his time.
It is about time that Americans got another “Square Deal” when it comes to the huge social media platforms that are controlling so much of our economy and information through anticompetitive misbehavior, raising our prices, and censoring and manipulating the marketplace of ideas.
Breaking up Google’s monopolist stranglehold is just a start.
The post Google Finally Gets Its Comeuppance appeared first on The Daily Signal.
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