The US Department of Justice has won a major victory in its fight against Big Tech. A US federal court ruled that Google spent millions of dollars on exclusive agreements to maintain a monopoly in search.
Amit Mehta was the judge in Washington who presided over a four-year old case. He called Google “monopolists” in his 286-page ruling on Monday, which found that the company violated US antitrust laws.
This ruling comes after a trial lasting several weeks, during which the DoJ claimed that the search giant had paid out tens or hundreds of millions of dollars per year to wireless carriers, device manufacturers and browser developers — including Apple. According to the ruling, these payments cemented Google’s position as the default search provider and totaled more than $26bn by 2021.
Google, which is responsible for more than 90% of all online searches and has become synonymous with the word “search”, argues that the fierce competition it faces in this sector drives its success.
US Attorney-General Merrick Garland described the ruling as a “historic victory for the American people.” No company, no matter how big or influential, is above the laws.
Jonathan Kanter, the head of the DoJ antitrust division said that the “landmark ruling holds Google accountable”. It “paves the way for innovation in the future and protects the access to information and all Americans”.
Kent Walker, Alphabet’s president of global affairs, confirmed that the company will appeal the ruling. The ruling “recognises Google as the best search engine but concludes we shouldn’t allow it to be easily accessible”.
In the second phase, the court will decide what Google must do. The DoJ is yet to announce what penalties they will seek. However, it could focus on limiting Google’s ability in this case to make the deals that are at issue.
This is the largest victory against Big Tech in US antitrust enforcement for decades. In recent years, they have brought a number of cases that strike at the heart of their power. The DoJ’s Antitrust Division, headed by Kanter has sued Apple, and has another case against Google pending, accusing the company of exercising monopolistic controls over the digital advertising industry. Next month, the second Google trial will begin.
Amazon and Meta have also been sued by the Federal Trade Commission (FTC), which is chaired Lina Khan.
Google’s long-standing agreement with Apple, which has made it the default search provider on the iPhone Safari browser for years, has been a subject of scrutiny. Court documents that were not sealed showed that Google had paid Apple 20bn dollars in 2022. This is a significant portion of Apple’s annual services revenue of $85bn, which includes the App Store and Apple Pay. Apple, who is not a party to the lawsuit, did not respond immediately to a comment request.
The case also involves contracts that the tech giant has made over the years, including with Mozilla, Android phone makers Samsung, Motorola, and Sony, as well as wireless carriers AT&T and Verizon.
Mehta referred to the “sheer volume of Google’s queries”. . . “Compared to rivals, is shocking”.
Google’s core business is at stake in this ruling. Last year, Google generated $175bn from search-based ads. This is more than half of its total revenue of $307bn. Microsoft’s Bing, on the other hand, makes around $12bn in search ads and has a market share of less than 5%.
Mehta stated in his ruling that Google’s “distribution contracts” prevent rivals from competing and close a large portion of the market for general search services. Google has not provided valid pro-competitive reasons for these agreements.
He said that the deals robbed competitors of “scale”, which he described as “the essential raw materials for building, improving and maintaining” a general-purpose search engine. Mehta said that Google is able to benefit from a feedback loop in which parties “routinely” renew exclusive distribution agreements with the company. “That’s the antithesis of an open market.”
Yelp, the company that competes against Google in certain content areas, applauded the decision and called on the court to stop its “exclusionary conduct”.
It added that “Google must seriously consider requiring it to spin-off services that were artificially boosted because of its illegal search monopoly.”
Mehta found that Google does not hold a monopoly on the market for search advertising, as plaintiffs claimed.
The judge faulted Google for its “lengths to which it goes in order to avoid creating a trail of evidence for regulators and litigation”, but did not penalise it, reasoning that finding Google guilty was unnecessary. Mehta stated that his decision should not be interpreted as condoning Google’s failure to preserve evidence from chats.
Alphabet shares closed 4.6% lower on Monday, amid a general sell-off of US stocks.
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