NOVEMBER 29, 2020
Google’s antitrust woes continue to mount.
The US Department of Justice has filed a landmark lawsuit against Google, alleging the sprawling tech giant illegally holds monopolies in search and search advertising. The US House of Representatives has hammered Google and other tech giants, releasing a scathing 449-page report on their allegedly anticompetitive practices. A coalition of several states, led by Texas Attorney General Ken Paxton, is conducting its own probe into Google.
Google headquarters in Mountain View, California. –
But the states’ investigation could face delays because of separate issues at Paxton’s office, according to a report published Saturday by The Wall Street Journal. The Texas attorney general has been accused by eight of his now-former employees of using his office to illegally interfere with an FBI investigation into a campaign donor, the report said.
The FBI is reportedly investigating Paxton’s office, and the incident could have an impact on the AG’s current cases, including the Google probe. The lead lawyer on that case, Darren McCarty, was one of the people who came forward against Paxton, and resigned in October, the report said.
Representatives of Paxton’s office and Google didn’t immediately return requests for comment.
The increased spotlight on Google comes as tech giants face a reckoning over their scale and influence. Legislators and regulators are concerned about how their power might ultimately harm consumers, especially by choking off competition from smaller players in Silicon Valley.
The search giant has come under antitrust scrutiny in the past. In 2013, the Federal Trade Commission wrapped up a two-year investigation into Google after allegations of biased search results. The agency, however, concluded that Google hadn’t violated antitrust laws.
Here’s what you need to know about the tech giant’s antitrust battles:
What are the antitrust issues facing Google?
Google’s dominance in web search, digital advertising and smartphone software are the primary areas of interest to lawmakers and regulators.
The company processes around 90% of all online searches in the US. That stranglehold is the foundation of Google’s massive advertising business, which generates almost all of the company’s $160 billion in annual sales. Google has been accused of hurting competitors by giving priority in its search results to its own products, like shopping ads or local business listings, over the listings of rivals. Critics also complain the tech giant takes content from publishers and other websites and uses it in prepared answers directly in search results, rather than simply providing a list of links that send users to other sites.
Google’s ad business is also under the microscope because the company owns every step in a complicated system that connects ad sellers and buyers. Rivals say the process gives Google an unfair edge over the market. Much of the company’s advertising prowess comes from acquisitions, including the 2008 buyout of the ad-tech firm DoubleClick.
The company also owns the Android operating system, the most popular mobile software in the world. Its dominance is hard to overstate; Android powers almost nine out of every 10 smartphones shipped globally. The tech giant has been accused of using that dominance to strong-arm partners to bundle Google’s apps, like search and Maps, into their offerings.
What exactly is in the DOJ lawsuit?
The DOJ’s case, which was filed jointly by 11 state attorneys general, is narrow. It alleges Google broke antitrust law by cutting deals with device makers to be the default search engine on their devices, a move that blocked competitors. Google, owned by Alphabet, also used the dominance of its Android operating system to pressure device makers to preload Google apps on their phones, the lawsuit says.
Another group of seven states reportedly plans to file a separate lawsuit next month to combine its case with the DOJ. The states are New York, Colorado, Iowa, Nebraska, North Carolina, Tennessee and Utah.
The suit is the culmination of a more than yearlong investigation into the search giant’s practices, a landmark antitrust case in the tech world. Google has denied engaging in anticompetitive behavior and called the case “deeply flawed.”
The complaint focuses mainly on Google’s search and search advertising businesses. It says Google harms rivals by cutting “exclusionary” deals with phone makers including Apple and Samsung to be the default search engine on devices. It’s a part of a strategy to “lock up” search distribution, the DOJ alleges.
The suit also gives new details about Google’s contracts with other companies. For example, Google pays Apple $8 billion to $12 billion in ad revenue a year to make Google search the default on Apple devices. In 2018, Pichai and Cook met to discuss how they could work together to drive revenue, the lawsuit said. After the meeting, an Apple employee wrote to a Google employee, “Our vision is that we work as if we are one company.”
Last year, almost half of Google’s search traffic came from Apple devices, according to the DOJ’s complaint. The agreement is so important that Google views losing it as a “Code Red” scenario, the lawsuit says.
Is partisan politics a factor?
It could be. Most of the DOJ lawyers on the probe argued they needed more time to build a strong case against Google, though US Attorney General William Barr is said to have overruled their guidance, according to The New York Times. Some of the attorneys were concerned the aggressive timeline, with work completed before the election, was meant to ensure the Trump administration got credit for taking on a big tech company. The lawyers viewed the September deadline as arbitrary and laid out their argument for a longer timeline in a memo that spanned hundreds of pages, the Times said.
The 11 states that joined the federal lawsuit — Arkansas, Florida, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Montana, South Carolina and Texas — have Republican attorneys general.
Bipartisan support exists for antitrust scrutiny of Google. But some Republicans have cheered the investigation alongside accusations the tech giant censors conservative voices. President Donald Trump has repeatedly accused Google of foul play, without evidence.
Two years ago, the president claimed that Google’s search results were “rigged” to promote negative news stories on Trump. At the time, he told reporters, “I think Google has really taken advantage of a lot of people.” He added, “Google and Twitter and Facebook, they’re really treading on very, very troubled territory, and they have to be careful.”
Would you tell me more about the state-level investigation?
Last September, Texas Attorney General Ken Paxton announced an antitrust probe into Google’s massive digital-advertising business. The investigation has the participation of AGs from 48 states, the District of Columbia and Puerto Rico. As part of the probe, Paxton’s office sent Google a civil investigative demand that asked for key information about its ad operation and data collection policies.
The probe led by Paxton is separate from the anticipated lawsuit from New York and other states, which is expected to be consolidated with the DOJ’s case.
Congress is also scrutinizing Google?
Google — along with Apple, Amazon and Facebook — is the target of a broader probe by the House Judiciary’s antitrust subcommittee into Silicon Valley’s market dominance. One of the goals of the investigation is to explore whether the US needs new competition laws to govern the tech giants in the digital age.
The subcommittee, led by Rhode Island Democrat David Cicilline, gathered more than 1.3 million documents from the tech giants, competitors and antitrust enforcement agencies during the more than yearlong investigation. The culmination of the probe was a historic hearing in July during which the CEOs from the four companies appeared via video chat.
The subcommittee released its findings in a 449-page report in October, accusing the tech giants of “abuses of monopoly power.” The report calls for restructuring and other changes to rein in the companies. One recommendation, for example, would make it tougher for tech giants to buy up smaller companies, a practice that consolidates the industry.
For Google, much of the scrutiny was directed at the company’s alleged promotion of its own products over those of rivals. “Evidence shows that once Google built out its vertical offerings, it introduced various changes that had the effect of privileging Google’s own inferior services while demoting competitors’ offerings,” the report says.
The Senate has also targeted Google. In September, Don Harrison, Google’s president of global partnerships and corporate development, testified before the Senate Judiciary antitrust subcommittee. Lawmakers on both sides of the aisle grilled the executive on Google’s massive ad business.
“We are not having this hearing because Google is successful,” said Sen. Amy Klobuchar, the subcommittee’s ranking Democrat. “We are having it because even successful companies, even popular companies and even innovative companies are subject to the laws of this country, including our antitrust laws.”
Later in the hearing, Harrison argued that Google isn’t dominant in digital advertising, citing competitors like Facebook and Snapchat. Klobuchar responded, “I disagree.”
What about outside the US? What has the European Union done?
Google’s antitrust woes aren’t limited to the United States. Last year, the search giant was hit with a $1.7 billion fine by the European Commission for “abusive” online ad practices. The commission said Google exploited its dominance by restricting its rivals from placing their search ads on third-party websites.
Two years ago, the EU’s executive arm fined Google a record $5 billion for unfair business practices around Android, its mobile operating system. The investigation focused on Google’s deals with phone manufacturers, requiring them to preload specific Google apps and services onto Android phones.