Much is at stake for Google in lawsuit that could take years

Google parent company Alphabet has been officially served with an antitrust complaint by the US justice department claiming that Google operates as an illegal monopoly with its internet searches.

This lawsuit is expected to be merely the beginning of what is likely to be a yearslong legal saga that will continue long after US president-elect Joe Biden has taken office and could transform the world’s preeminent internet search company.

Google has been accused of harming competition in the internet search and search advertising markets through the conclusion of distribution agreements with other companies to prioritise the Google search engine in their products and place the Google search tool front and centre whenever consumers browse the web.

The justice department must prove that the markets that are the subject of the complaint are the correct markets. Thereafter it must prove Google has monopoly power (in SA this would be called dominance) in these markets.

The markets in which the department alleges Google has monopoly power are:

General search services: the market for search queries through search engines, which includes competitors such as Microsoft’s Bing;

Search text advertising: the market for ads sold by search engines that are designed to resemble organic search results and typically appear above or below search results;

Search advertising: the market for all types of ads generated in response to search queries, including search text advertising and specialised search ads that contain text and additional material such as product images.

The department must then demonstrate the crux of its complaint: that Google unlawfully controls these markets by using a wide array of exclusionary agreements to block rival search engines from competing. The basis of this allegation stems from the revenue-sharing agreements in terms of which device manufacturers such as Apple and Android can get a share of Google’s advertising revenues in exchange for making Google the default search engine on the devices.

In addition, Google uses pre-installation agreements that require Android manufacturers to predownload Google’s bundle of apps, such as Chrome and YouTube, on consumer devices. Google also subjects Android manufacturers to antiforking agreements,

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which forbid manufacturers from developing and distributing versions of Android that do not comply with Google standards.

The department must furthermore prove that this impugned conduct has harmed competition. In this regard it has alleged that competing search engines such as Bing and Duck Duck Go lack access to the same distribution channels on mobile devices because of Google’s exclusive agreements with manufacturers.

The allegation is that the harm experienced by these rival search engines hurts consumers, who lack access to other search engines that could offer different and possibly better services. This has reduced choice, quality and innovation.

Subsequent to the filing of the complaint Google has denied the allegations, releasing an extensive rebuttal on its company blog saying the allegations are “deeply flawed”. People use Google because they “choose to, not because they’re forced to, or because they can’t find alternatives”, it says.

It maintains the suit will do nothing to help consumers and might even 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.

Google intends to argue that other search engines such as Bing do compete with it in the provision for search services, and consequently the degree of potential substitutability with Google is high. However, this will be undermined by the fact that Google dominates the general search market — it performs as much as 90% of web searches.

Furthermore, according to a 2019 EMarketer report Google earned 73% of US search advertising revenue, compared with Amazon, its closest competitor, with a revenue share of just 13%.

It is expected that Google will seek to prove that its various agreements with device manufacturers serve a wide array of business purposes as opposed to excluding competing search engines.

The last major US monopoly case was brought against Microsoft in 1998, when the US justice department successfully argued that the multinational technology company illegally operated a monopoly in computer operating systems by requiring computer makers to set its web browser as default on their machines.

Microsoft has recovered from this setback and is now worth more than $1.5-trillion.