Google Abuses Its Monopoly Power Over Search, Justice Department Says In Lawsuit

Oct 20, 2020
Originally published on October 21, 2020 1:46 pm

Updated at 3:24 p.m. ET

The Justice Department filed an antitrust lawsuit Tuesday against Google alleging the company of abusing its dominance over smaller rivals by operating like an illegal monopoly. The action represents the federal government's most significant legal action in more than two decades to confront a technology giant's power.

Justice Department lawyers accuse Google of harnessing its internet gatekeeper role to enrich the company's vast business empire, stifling competitors and hurting consumers through exclusionary agreements, including deals such as the one it struck with Apple making Google the default search engine on the Safari browser on iPhones.

Justice Department officials said Google spending profits made from its powerful position to buy special treatment for its search engine on devices and Web browsers created a "self-reinforcing cycle" of monopoly power abuse.

"If the government does not enforce the antitrust laws to enable competition, we could lose the next wave of innovation. If that happens, Americans may never get to see the next Google," Deputy Attorney General Jeffrey Rosen said at a Tuesday press conference.

"The Google of today is a monopoly gatekeeper for the internet," the complaint says. "For many years, Google has used anticompetitive tactics to maintain and extend its monopolies in the markets for general search services, search advertising, and general search text advertising — the cornerstones of its empire."

In the suit, Justice Department lawyers ask a federal court to stop Google from maintaining its fierce grip over Internet search and search advertising. The government is asking a federal judge to provide structural relief "as needed" to resolve the alleged anticompetitive behavior.

While the complaint does not specify what remedy the suit is seeking, Justice officials said "nothing is off the table."

Gene Kimmelman, a former senior antitrust official at the Justice Department, said, if successful, the suit could lead to the breakup of parts of Google's business, such as spinning off the Google Chrome business and Google's Android phone line into separate enterprises.

"Those kind of splitting off of assets to enable competitors to grow and challenge the dominant search provider, Google, are things you could imagine the government asking for," Kimmelman said.

Eleven Republican-led states joined the lawsuit, which was filed in U.S. District Court for the District of Columbia. New York Attorney General Letitia James, a Democrat, said she and other state attorneys general are expected to wrap up their investigation of Google soon and they may ask to join the Justice Department suit.

"Absent a court order, Google will continue executing its anticompetitive strategy, crippling the competitive process, reducing consumer choice, and stifling innovation," Justice Department lawyers wrote.

In a statement, Google called the lawsuit "deeply flawed."

"People use Google because they choose to, not because they're forced to, or because they can't find alternatives," the company said. "This lawsuit would do nothing to help consumers. To the contrary, it would artificially prop up lower-quality search alternatives, raise phone prices, and make it harder for people to get the search services they want to use."

Kimmelman said the suit may usher in a new wave of legal and regulatory troubles for Big Tech.

"I do think it is the beginning of the new era in policy. It's the end of hands-off of the tech sector. It's probably the beginning of a decade of a series of lawsuits against companies like Google," he said.

The lawsuit sets up a high-stakes showdown between the Trump administration and Google two weeks before the presidential election, raising questions about the suit's timing.

President Trump has promised to hold Big Tech accountable, repeatedly accusing tech companies of being biased against conservatives despite the notion not being supported by evidence.

Attorney General William Barr, who took over the Google case after the head of the department's antitrust division recused himself over a conflict of interest, called it "a monumental case" for American consumers.

Barr said in a statement that Google has leaned into its monopoly power so much that "no one can feasibly challenge Google's dominance in search and search advertising."

The lawsuit also sets up the biggest battle over the power of a dominant technology company since the government sued Microsoft in 1998 for using its heft to squash competition.

More than 80% of online searches in the U.S. happen on Google, according to the complaint. On mobile devices, it controls about 95% of searches, Justice Department officials said.

On top of search, Google's Chrome is the most popular web browser in the world. Google also owns hugely popular video site YouTube. Online advertising is highly concentrating in Google, which along with Facebook commands what some call an "ad duopoly," elbowing out tech competitors and publishers for coveted advertising dollars.

That dominance has enabled Google to build a massive advertising business that generates nearly all of its $160 billion in yearly sales. Google captures almost 30% of U.S. digital ad dollars, according to research group eMarketer, ahead of Facebook and Amazon.

Critics say Google has created a stranglehold in search that allows it to show more ads and keep people locked into its properties, such as YouTube and Maps. They say it has done that by striking deals to become the default search engine in many browsers and devices, favoring its own content and websites over those of its competitors in search results and building up a deep trove of data on users and rivals.

Another rival, Yelp, the local search and review site, applauded the Justice Department's Tuesday action.

"By systematically reducing the quality of its search results in order to entrench and extend its search and search advertising monopolies, Google is directly harming consumers," Yelp said in a statement.

In a lengthy report released by House Democrats this month on the unchecked power of Big Tech, lawmakers wrote of Google that "no alternative search engine serves as a substitute."

"Google increasingly functions as an ecosystem of interlocking monopolies," the report said, because of the company's ability to tie together its search and ads business with the data it collects.

Google has long said it plays fairly and that its products — which are free to consumers — promote choice and competition.

The Justice Department and attorneys general from 50 states and territories have been investigating Google for more than a year, with probes focusing on its search and advertising businesses. It comes amid broader scrutiny of the power of Big Tech, which includes separate investigations into Facebook, Amazon and Apple.

Google has weathered challenges before, including a Federal Trade Commission investigation into its search business that ended in 2013 without finding any wrongdoing. The company has been fined more than $9 billion in the past few years by competition regulators in Europe.

Kimmelman said the FTC declining to sue Google seven years ago does not mean the tech behemoth was fully exonerated in the eyes of regulators.

"What may have looked more like a scrappy, small company trying to make it may look different after years of dominating across search and nobody else entering the market," he said. "The facts are more clear-cut now than they were seven years ago."

Editor's note: Google is among NPR's financial supporters.

Copyright 2020 NPR. To see more, visit https://www.npr.org.

NOEL KING, HOST:

The Department of Justice is suing Google. They say the company broke antitrust laws on its way to becoming the most dominant search engine in the world. Now, this lawsuit sets up the biggest fight over a tech giant's power in more than about 20 years. NPR's Shannon Bond covers Google, which, we should note, is among NPR's financial supporters.

Hey, Shannon.

SHANNON BOND, BYLINE: Good morning, Noel.

KING: OK. So Google is being accused of abusing its power. What does the Department of Justice say exactly?

BOND: Well, here is Deputy Attorney General Jeff Rosen at a press conference this morning.

(SOUNDBITE OF PRESS CONFERENCE)

JEFFREY ROSEN: Google is the gateway to the Internet and a search advertising behemoth. Google achieved some success in its early years, and no one begrudges that. But as the antitrust complaint filed today explains, it has maintained its monopoly power through exclusionary practices that are harmful to competition.

KING: OK - A little bit of lingo. What does he mean by that in simple terms?

BOND: Well, I think we all know Google has these huge businesses, right? It's the biggest search engine. Eighty percent of searches in the U.S. happen on Google, the DOJ says. And the company also sells $160 billion a year in ads. And basically, what this case is arguing is Google has got there and kind of created this monopoly unfairly. And so the Justice Department says it's done this by striking deals to become the default search engine in many browsers and on people's smartphones. It pays billions of dollars every year to do this. And the DOJ says that has blocked out competitors. It's allowed Google to keep making billions of dollars selling advertising.

The government described this feedback loop as the self-reinforcing monopolies. And ultimately, the government is arguing here, that has meant less choice for consumers - we just don't have another search engine to go to - and higher prices for the advertisers.

KING: A lot of companies in - several companies in Silicon Valley, several big ones, are facing the same kinds of accusations. What are the implications of this lawsuit for Facebook, for example?

BOND: Right. Well, as - let's just sort of back up a little bit. As you said at the top, you know, this is the most - biggest, you know, antitrust case in tech since the Microsoft case more than 20 years ago. And, you know, since then, Washington has taken a really hands-off approach to regulating tech. We've seen the industry thrive and grow largely without limits, but that's really beginning to change.

So, you know, in this specific case, the Justice Department and the attorneys general have been investigating Google for more than a year. We should say 11 attorneys general has joined the Justice Department in this suit. And they are also looking at other companies like Facebook, like Amazon, like Apple - both the Justice Department, the Federal Trade Commission, attorneys general. And those investigations are ongoing, so I think it would be fair to expect more of this in the future.

KING: OK. So this was just announced a few hours ago. What has Google said so far?

BOND: Right. So this morning, Google has said that the lawsuit is deeply flawed. It says, quote, "People use Google because they choose to, not because they are forced to or because they can't find alternatives." That kind of thing is what Google has been saying for a long time. And we should note, they've weathered challenges before. In 2013, there was a Federal Trade Commission investigation into the search business that ended with no accusations of wrongdoing. But at the same time, regulators in Europe have been taking a closer look. And Google has been fined more than $9 billion in the past few years over competition issues. So, you know, I think this is setting up for a big fight.

KING: Is it significant at all that this is happening two weeks before Election Day?

BOND: Well, I was just thinking, this is - there's long-standing Justice Department policy that the department not take any action in the runup to an election. The idea there is you want to avoid even the appearance of using the department's powers to influence an election. And certainly in this case, critics may say, you know, the department is violating that policy, if not in word, then in spirit.

You know, officials on the press conference this morning said this was not political. This was - you know, this is an investigation that's been going on for 16 months, and they felt the timing is right. But it's also, you know, not a secret. Attorney General Bill Barr has been outspoken about reining in big tech. It's something the Trump administration talks about a lot. You know, Democrats and Republicans in Congress have also been calling for action to rein in the power of big tech and to really kind of grapple with its influence on our lives. So, you know, I think we can expect to see more scrutiny of Google and the other tech companies.

KING: OK. NPR's Shannon Bond.

Thanks, Shannon.

BOND: Thank you. Transcript provided by NPR, Copyright NPR.