How Google will fight off the DOJ’s claims of monopoly in search

The U.S. government is taking its best shot against Google’s ubiquitous search and advertising businesses in what will be the biggest U.S. antitrust case in more than two decades. But Google is likely to prevail, partly because the Department of Justice will be trying a 21st-century business model within a 20th-century legal framework.

The DOJ filed its long-awaited antitrust case against Google in federal district court Tuesday after a two-year investigation. The DOJ narrowed its case focus on Google’s search and search advertising businesses—possibly as a result of U.S. Attorney General William Barr’s demand that the complaint be filed before the election.

The Department of Justice was working with a large group of state attorneys general on the case, but in the end only attorneys general from 11 Republican-led states signed on. A group of Democratic state AGs may file their own lawsuit later on. One source says Democrat-led state AGs wanted to bring a suit that was broader than the one filed today—one that focused on anti-competitive practices in Google’s non-search businesses, its harvesting of personal data, and its acquisition of Fitbit.

The government’s case is about Google’s core search business, and the search advertising business that monetizes it. Google accounts for almost 90% of all general-search-engine queries in the U.S., the complaint states, and almost 95% of queries on mobile devices. The suit describes in colorful language how Google was once a scrappy company born in a garage, and how—with a great idea, great founders, and very rich and patient backers—it began passing up other search engines to emerge as the internet’s biggest and best librarian. Advertisers naturally flocked to Google soon after because it had the most users and biggest reach. With the billions it raked in through advertising, the company continued to invest in its search engine.

Google left would-be competitors behind, and they’ve never caught up. The DOJ doesn’t fault Google for its rise, but rather asserts that the company has maintained its market dominance in ways that harm consumer choice and shut down competition.

De facto search

That unlawful maintenance, the DOJ states, consists of Google’s practice of paying exorbitant sums to smartphone makers like Apple, wireless providers like AT&T, and browser makers like Mozilla to effectively make Google the default search engine people encounter on their various screens. Analysts estimate that Google pays Apple as much as $9 billion per year to power the main search bar on iOS.

The DOJ says these agreements cover 60% of all searches in the U.S. Then, it claims that Google captures more than half of the remaining searches through the default search in its own Android mobile platform and through its Chrome browser on the desktop and mobile.

The DOJ is suing Google under Title II of the Sherman Act, a law dating back to 1890 and updated in 1914. Title II of the act prohibits businesses from unreasonably restraining trade through “monopolization, attempted monopolization, or conspiracy or combination to monopolize.”

But Google’s agreements are entered into by the free will of the parties, and it’s at least theoretically possible that some other search engine could outbid Google to win default status on some device or browser.

“They’re going to have to convince the court that these agreements are somehow illegitimate, and somehow beyond normal competition, and that could be something of an uphill battle for them,” says Washington D.C.-based antitrust attorney Jonathan Rubin of MoginRubin LLP.

Who is hurt?

There’s also a question of who is actually being harmed by Google’s monopoly, Rubin says.

The lawsuit seems to frame the primary victims of Google’s dominance as a small group of competing browser makers including Microsoft (Bing), DuckDuckGo, and a few others, which may be prevented from growing to a large enough scale to compete. Marketers bound by Google’s restrictions in desktop and mobile search advertising are also primary victims. Consumers, Rubin says, are cast as secondary tertiary victims.

But U.S. courts tend to look at antitrust through the lens of its effect on consumers first, and businesses second. That means the DOJ will also have to prove that because of Google’s default status on devices or browsers, consumers are being deprived of choice or quality in search.

“Certainly you can’t say that they’re being charged more money, because search is free for them,” Rubin says. “So you’ve got a kind of attenuated connection to consumer welfare here, which is . . . a weakness of the case.” It’s also hard to argue that consumers are being stuck with a substandard search engine, since they’re not (though some argue that changes to Google’s homepage that reduce the number of organic search results have reduce its quality).

The DOJ will also have to convince the court that Google is depriving consumers of choice. Here’s how:

“Even where users can change the default, they rarely do,” the DOJ’s complaint reads. “This leaves the preset default general search engine with de facto exclusivity. As Google itself has recognized, this is particularly true on mobile devices, where defaults are especially sticky.” In other words, people are more than likely to just stick with the default search engine on their device, and Google knows that. That’s part of the reason it pays so much money to be the default.

Google published a blog post Tuesday calling the DOJ’s case “deeply flawed,” and pointing out how easy it is for consumers to choose alternative search engines on both the desktop and mobile, a point its lawyers will make repeatedly in court.

The DOJ’s problem is that many people stick with the default search not because they don’t know how to change it or it’s too hard to change, but because they like the default search engine.

“There’s gonna have to be evidence on whether people by and large are not switching because people don’t typically switch from whatever the default is, or because people are choosing to stay with Google,” says Joel Mitnick, a former FTC trial lawyer and partner in Cadwalader, Wickersham & Taft’s antitrust group.

Mitnick said the DOJ might bring consumer survey research to court showing that consumers’ main reason for using Google’s search is that they don’t know they have an option to use something else.

Or, the DOJ might rely on the Google’s own words to show that the company meant to shut out competition by means of its largesse, not by the merits of its search product.

According to William Kovacic, a George Washington University antitrust law professor, this sort of evidence was critical in the last major antitrust case the U.S. government filed against a big tech company. In 1998, in U.S. v. Microsoft, the DOJ attorneys brought to court internal Microsoft communications showing that the company meant to kill off Netscape’s browser by tying its own Internet Explorer browser to its ubiquitous Windows operating system.

“They had some very damning internal documents,” says Kovacic, who formerly served as the chair of the Federal Trade Commission. “Some of them used very colorful language: One referred to ‘cutting off Netscape’s air supply’ (a phrase attributed to Microsoft executive Paul Maritz).”

The results of antitrust cases can turn on such documents, a fact Google is well aware of. It’s no surprise that the company has regularly reminded employees against using colorful language like “crush” or “kill” or “block” in internal communications. Those communications are discoverable by opposing counsel and cannot by law be destroyed while an investigation is ongoing.

End games

The Google case, experts say, could take three years to play out. Mitnick tells me that antitrust cases usually end up settling out of court, the landmark U.S. v. Microsoft being a notable exception. While the arguments are made over weeks and months in the courtroom, the two sides continually consider “off ramps,” or opportunities to come to the bargaining table. These negotiations often happen on a parallel track to the court proceedings for extended periods of time.

This same thing will likely happen with the DOJ and Google attorneys. In fact, Mitnick says, it’s likely that settlement negotiations between the two parties were going on well before the suit was filed. If so, it’s obvious no agreement was reached.

The fundamental disagreement may be over whether the eventual legal remedy is a structural one or a behavioral one. A behavioral approach might involve Google changing some of its practices in its search and search advertising businesses. “Google might think of some things it could live without,” Rubin says. It might decide to make it easier to use an alternative browser on Android devices, for example. It might loosen some of its restrictions on how Android device makers preinstall popular Google mobile apps on the home screen, and how Google Search is featured.

But the DOJ is asking for more—far more. “Enter structural relief as needed to cure any anticompetitive harm,” reads a key bullet point under the suit’s “remedies” section. A structural remedy means Google dismantling parts of its search and search advertising businesses. But given Google’s business model, decoupling search and advertising doesn’t make much sense.

“I don’t see what they can separate from what: You can’t separate search from advertising because that’s the business model,” Rubin says. “No court is going to approve a remedy that fundamentally strikes at the very heart of the company’s business model because it’ll just put them out of business or it’ll cripple them . . . which is not how antitrust is supposed to work.”

Echos of Microsoft

The DOJ’s complaint contains multiple references and nods to the Microsoft case from 22 years ago. But there’s a key difference in that case and the Google case.

Microsoft had an inferior product that it was trying to lift up by tying it to Windows and forcing Windows computer makers to install it. Consumers felt harmed and complained loudly about being stuck with Microsoft’s Explorer and cut off from Netscape. Most people don’t hate Google’s search engine, and it’s hard to argue that it’s something less than best in class.

The DOJ’s case against Google isn’t driven by consumer anger over a specific product. It may be driven by a growing popular distrust of Big Tech, and by a growing bipartisan desire among lawmakers to put a check on the growing political power of tech companies.

With that in mind, I asked Kovacic how he’d be feeling if he were in the Google attorneys’ shoes right now.

“You’re telling yourself the courts have generally been sympathetic to your point of view,” he says. “And then certainly if you make your way up to the Supreme Court at some later date, you’ll probably have a receptive audience—an audience strengthened by the addition of another judge who’s a regulation skeptic,” referring to Supreme Court nominee Amy Coney Barrett.

“On the other hand, you’re telling yourself, ‘Microsoft probably thought that too, and they lost in the district court and they lost in the court of appeals, and never went for the Supreme Court,'” Kovacic says.

The case against Google will be tried in the same federal court, or courts, that heard the Microsoft case, and will be seen through the same antitrust framework. But the similarities probably don’t go much further than that. The world around the Google case couldn’t be more different than the world in 1998, both technologically and politically. If Google is a monopoly like Microsoft was, it seems like a friendlier monopoly. Its product is free, and it lives on the public internet where you’re free to jump over to DuckDuckGo or Yahoo search any time you want (though the fact remains that it’s much harder to do so on mobile).

“Indeed, what makes Google’s contention that ‘the competition is only a click away’ so infuriating is the fact it is true,” technology and business analyst Ben Thompson recently wrote in his (subscription) blog.

Internet companies like Facebook and Google, Thompson writes, may present a special problem for existing U.S. antitrust law, which was written to control people or companies that sought to control supply chains or corner markets for finite commodities. Facebook and Google are aggregators, and the value of their services increase as the number of people using them increase. They protect their monopolies by maintaining products that people generally like.

Both Thompson and ex-FCC chair Tom Wheeler at the Heritage Foundation have discussed the idea that the U.S. may need to update its antitrust laws for the digital age. Wheeler proposes the establishment of a new federal agency built from the ground up to regulate the digital economy.

These changes might give the government a new framework for understanding and regulating companies like Google. Because while internet giants have created new kinds of value, they also exact new kinds of costs—like their insatiable hunger for our personal data—that the government is currently ill-equipped to mitigate.