In a landmark decision, US District Judge Amit Mehta has ruled that Google's dominance in the search market is a result of illegal monopolistic practices. The judge found Google's actions have stifled competition and innovation, and that the company's default search agreements with device manufacturers and browsers are a key factor in its market dominance.
Here is a breakdown of what happened:
The case against Google
The ruling comes after a 10-week trial and is a major victory for the US Justice Department, which filed the lawsuit nearly four years ago. Google has announced plans to appeal the decision. The core accusation is that Google spent billions on exclusive deals to maintain its dominance in the search engine market, violating US antitrust laws.
What are antitrust laws?
Antitrust laws are regulations that promote fair competition by preventing monopolies, anti-competitive practices, and other activities that could harm consumers or other businesses.
In the United States, key laws include the Sherman Antitrust Act of 1890, which prohibits monopolies and actions that restrain trade, and the Clayton Antitrust Act of 1914, which addresses specific unfair practices. The Federal Trade Commission Act of 1914 established the Federal Trade Commission (FTC) to investigate and prevent unfair competition.
The FTC and the Antitrust Division of the Department of Justice (DOJ) enforce these laws. They investigate companies and take action if they find any violations.
The DoJ's arguments
The DoJ argued that Google's agreements with wireless carriers, browser developers, and device manufacturers, especially Apple, were anti-competitive. In 2021, Google reportedly paid over $26 billion to companies like Apple to make its search engine the default option on devices like iPhones and browsers like Safari and Mozilla.
Google's search-based advertising is a major revenue source, generating $175 billion in 2022. For comparison, Microsoft's Bing made about $12 billion.
Google has an 89.2 per cent share of the market for general search services, increasing to 94.9 per cent on mobile devices.
Google's defence
Google argued its dominance was due to the quality of its search engine. They plan to appeal the decision, stating that while the ruling recognises their search engine's quality, it restricts their ability to make it readily available.
District Judge's verdict
The trial spanned several months, with testimonies from Google CEO Sundar Pichai and other top executives. Judge Amit Mehta's 277-page decision labelled Google a "monopolist" and highlighted the sheer volume of Google's search queries compared to rivals. Mehta noted that Google "enjoys an 89.2% share of the market for general search services, which increases to 94.9% on mobile devices." He concluded that while Google violated antitrust laws, it did not have "anticompetitive effects."
The judge acknowledged that while Google's search engine is widely recognised as the best available, its market share is significantly bolstered by these agreements. The judge pointed out that other search engines, like Microsoft's Bing, can capture significant market share when not overshadowed by Google's default status. For instance, Bing holds an 80% share of the search market on the Microsoft Edge browser. He then ruled against the tech giant.
US Attorney General Merrick Garland called the decision an "historic win for the American people," saying that no company is above the law.
Implications
Following the ruling, Google's parent company Alphabet's shares fell by 4.6%.
The court will now decide on the remedies Google must undertake. This could include restrictions on Google's ability to enter into exclusive deals.
Google's president of global affairs, Kent Walker, said the company intends to appeal the decision.
Jonathan Kanter, head of the DoJ's antitrust division, believes the ruling will pave the way for innovation and protect access to information. Meanwhile, the Consumer Choice Centre, a lobbying group, criticised the decision as a step in the wrong direction.
The ruling is part of a broader crackdown on Big Tech. The DoJ has another pending case against Google related to digital advertising, and the Federal Trade Commission (FTC) has filed lawsuits against Amazon and Meta.