United States v. Google: Antitrust Trial of Search Titan Showcases Two Potential Turning Points

Background

Plaintiffs’ Pre-Trial Brief, United States v. Google, No. 1:20-cv-3010-APM (Dist. Ct. S.D.N.Y, Sep. 8, 2023), brief hosted by Department of Justice

Defendant Google LLC’s Pre-Trial Brief, United States v. Google, Nos. 1:20-cv-3010-APM, 1:20-cv-3715-APM (Dist. Ct. S.D.N.Y, Sep. 8, 2023), brief hosted by Courtlistener.

Memorandum Opinion (Summary Judgment), United States v. Google, Nos. 1:20-cv-3010-APM, 1:20-cv-03715-APM (Dist. Ct. S.D.N.Y, Aug. 4, 2023), opinion hosted by Courtlistener.

Introduction

On September 12, a ten-week trial in the Department of Justice’s (DOJ) antitrust case against Google, United States v. Google, began in Judge Mehta’s courtroom in the United States District Court for the District of Columbia. The case has been noted as a landmark moment in technology and antitrust, likened to the 1990s Microsoft antitrust trial. Google and antitrust enforcement both find themselves at crucial turning points. While search has long been internet users’ primary mode of navigation and information retrieval, the rise of social media content (in apps such as TikTok and Instagram) and of large language model-based chatbots (such as OpenAI’s ChatGPT) poses a dual threat to Google’s search-based business model. These services don’t just challenge Google’s dominance, but rather the dominance of search itself, presenting alternative means of interacting with the internet.

Simultaneously, the Biden administration’s trio of Jonathan Kanter (Assistant Attorney General, Head of the DOJ Antitrust Division), Lina Khan (Chair of the Federal Trade Commission), and Timothy Wu (former Special Assistant to the President for Technology and Competition Policy) hope to usher in a new paradigm of antitrust enforcement, especially as relates to “big tech.” Stakes are high. The DOJ’s Google case presents a crucial test of this paradigm following recent government losses in cases by the Federal Trade Commission (FTC) against Microsoft and Meta. A victory could vindicate their mission, and a loss could cast further doubt on their approach.

Market Definition

To prevail, as stated in pre-trial briefs for both Google and the DOJ, the DOJ must show that Google possesses monopoly power in a relevant market. Thus, defining the relevant market is crucial, and it is a challenging question in this case. The DOJ points to three relevant markets: general search services, general search text ads, and search ads. General search services, the DOJ argues, is a relevant product market because only general search provides consumers with a “one-stop-shop.” In 2020, Google’s share of general search queries was nearly 90 percent, as noted by Judge Mehta in an earlier ruling on motions for summary judgment. Courts have typically found market share of at least 60 to 70 percent necessary to deem a company a monopolist. Google does not contest its 90 percent share in this market, but Google argues it is the wrong market because it improperly excludes services that users frequently substitute for general search services—particularly, specialized vertical providers such as Amazon, Yelp!, and Expedia, and social media apps such as TikTok and Instagram.

The DOJ also alleges Google is a monopolist in two ad-side markets—“general search text ads” and “search ads.” Both involve ads shown on search engine results pages. “General search text ads” appear in line with search results; “search ads” is a broader definition, including all ads shown on search engine results pages. The DOJ claims Google’s market share is 88 percent and 74 percent, respectively, in these two markets. Search ads, the DOJ argues, serve a fundamentally different purpose than other digital ads because they are directly responsive to users’ commercial intent as revealed in search queries. Other ads, such as social media ads, cannot be targeted based on direct manifestation of intent but instead must rely on inferences based on characteristics and past behavior. As they did with regard to the user-side market definition, Google argues that the DOJ’s ad-side market definitions improperly exclude substitutes. Advertisers, Google argues, seek to purchase the attention of particular sets of users, and thus the question is whether this attention is reasonably substitutable across different contexts. This attention, Google argues, is more readily substituted across, for example, Google and Instagram, than across Google and Bing, as a user is more likely to visit the former pair of websites within the same hour than the latter. An advertiser’s next-closest substitute for Google search ads is thus not other non-Google search ads, but rather non-search ads on other major digital platforms. Google argues a properly defined market must also include these substitutes. In this broader market, Professor Richard J. Pierce Jr. suggests Google may have only a 29 percent share, a lower share than the Supreme Court has ever accepted as evidence of monopolization.

Competitive Effects

Further, the DOJ must show that Google engaged in anticompetitive conduct to maintain monopoly power and that their conduct’s anticompetitive effects outweigh any procompetitive justifications. The Court’s analysis here will be guided by a burden-shifting framework established in United States v. Microsoft Corp. (“Microsoft”). Antitrust plaintiffs must establish a prima facie case that defendants’ conduct has anticompetitive effects. Defendants then may rebut with a procompetitive justification. Conduct is deemed to be procompetitive if it “is indeed a form of competition on the merits.” The plaintiff, then, must show that the anticompetitive effects of the conduct outweigh any procompetitive benefit.

Here, the DOJ principally points to Google’s payments to other companies—mobile device manufacturers and web browser developers—to ensure their search engine would be the default in those companies’ products, as well as to Google’s role in the Android ecosystem, which causes Google to be the default search engine on the overwhelming majority of Android devices. Press coverage has focused on Google’s large payments to Apple to be the default search engine on iOS. In 2021, Google paid $26 billion to Apple. In that year, Google’s total search revenue was $146 billion. Google also engages in Revenue Share Agreements with Android device manufacturers, which offer them shares of search revenue in exchange for making Google the default search engine on their devices.

Google argues that its browser default arrangements have procompetitive benefits and are consistent with competition: search engines compete for default status, and the fact Google prevails merely reflects that it won the “competition on the merits.” Further, Google contends that its payments to device manufacturers provide “pass-through” benefits to consumers, by allowing such devices to be sold more cheaply. The DOJ counters that the anticompetitive effects outweigh these justifications. First, the DOJ alleges that “competition on the merits” in the market for default placement is illusory, and thus provides only a minimal procompetitive justification, if any at all. Second, the DOJ disputes the existence of “pass-through” benefits. In addition to disputing the procompetitive justifications, the DOJ reiterates the anticompetitive effect: default placement, which Google pays for, fuels a scale advantage that hinders rivals’ ability to compete in the future.

Remedies

The trial has now passed its halfway point. The DOJ has rested, and Google is now making its defense. The Court will continue to hear from fact and expert witnesses—mostly economists—over the next several weeks. If Google is found liable for violations of antitrust laws, an additional trial will be held to determine the appropriate remedy. Possible remedies range from enforced conduct, such as forbidding Google from entering exclusive default contracts or requiring it to share its data-stream with rivals, to more invasive structural remedies, such as break-up or divestiture. Politico reported in 2020 that the DOJ may seek the forced sale of the Google Chrome browser. In response to a ruling by the European Commission, Google has instituted a paradigm in the EU where, in lieu of a default search engine, Android users are presented with a selection screen to choose their search engine. Placement on the selection screen is auctioned off to competitors; however, even in this non-default paradigm, 97% of users choose Google. Minimally invasive remedies such as this thus may not be sufficient to dent Google’s share of search queries.

The Court may be reticent to impose a structural remedy. The District Court’s original remedy in Microsoft involved splitting the company into one company for the Windows operating system and another for Microsoft’s other products, but this remedy was rejected on appeal and omitted from the eventual settlement. It is thus unlikely the government will again seek to dismantle a durable monopoly in this way. Instead, as the Brookings Institution suggests, industry-specific regulatory bodies may be more effective at managing the effects of monopolies. However, as emerging generative AI technologies continue to develop, Google’s powerful positions in information retrieval and digital advertising may both be challenged independent of any governmental remedy.

Conclusion

The ten-week trial is expected to conclude by the end of November 2023. However, Bloomberg reports that Judge Mehta is not expected to issue a decision until next year, and that a decision in either direction will likely spend several years in appeals. Google simultaneously faces a separate DOJ antitrust suit, filed in January 2023, alleging that Google has monopolized digital advertising technology generally, even outside of search. The suit survived Google’s motion to dismiss in April 2023, indicating Google will continue to face antitrust scrutiny at least through summary judgment in early 2024 and perhaps another trial. In addition, Google is also at trial as of Monday, November 6, 2023, in a private antitrust suit brought by Epic Games that alleges Google monopolized app distribution with its Play Store for Android devices.