September 12, 2023, the most important American technology antitrust lawsuit for decades in a federal district court in Washington, DC. In United States against GoogleThe U.S. Department of Justice (DOJ) and 38 state and territorial attorneys general allege that Google violated Section 2 of the Sherman Actan antitrust law originally enacted in 1890.
The Sherman Act prohibits the use of exclusionary practices to maintain a monopoly. The DOJ and state attorneys general say that’s exactly what Google has done with respect to certain Internet search services. As often happens, the case was whittled down in the months before the trial began. Here’s a look at some of the key issues discussed during the trial, which is expected to last several months.
Are Google’s browser agreements exclusive?
Google has browser agreements with Apple and Mozilla under which Google is the default search engine for web browsers provided by these companies. For example, as far as Apple is concerned, this means that a person who buys a new iPhone, launches the Safari web browser, and enters a query into the search bar will, by default, receive search results from Google. In exchange for making Google the default search engine, web browser providers receive a portion of the advertising revenue generated by these searches.
A key question is whether these agreements are exclusive. Google says this is not the case, arguing that default settings can easily be changed by consumers who want to use a search engine other than Google. The DOJ responds: “Even when search users want to change the defaults, the effort and knowledge required to make that change incentivizes them to stick with the default option. »
In August 2023 decision Regarding the motions for summary judgment, Judge Amit Mehta wrote: “It is best to wait for a trial to determine whether, based on actual market reality, Google’s position as the default search engine on several browsers is a form of exclusionary behavior. » In carrying out this investigation, the court will examine not only whether the navigation agreements are truly exclusive, but also whether they are de facto exclusive. An agreement without a formal exclusivity provision can nevertheless function in a manner de facto exclusively due to contextual factors, such as market dynamics and incentives.
A related question is whether any exclusivity associated with shipping agreements is simply the result of market competition. Google says it won the competition to become the default search engine for Apple and Mozilla browsers “on the merits established and judged by its customers, and not by anti-competitive or exclusionary behavior.” The DOJ counters this by stating that “the existence of multiple bidders does not convert an anticompetitive agreement into a qualifying agreement.”
Are Google’s deals for Android devices exclusive?
Android is the most widely used mobile operating system in the world, with a global market share in December 2022, by around 72%, compared to 27% for iOS. In the UNITED STATES, Android’s market share in December 2022 was around 44%, compared to around 56% for iOS. Google has made deals with Samsung and other makers of Android-based mobile devices to make Google the default search engine on those devices. Google also has similar deals with wireless cellular network providers that sell Android phones.
When it comes to the Android antitrust issue, Google enters into two types of agreements: mobile application distribution agreements (MADAs) and revenue sharing agreements (RSAs). A MADA is a non-exclusive agreement allowing an Android device manufacturer to pre-install a set of Google apps, including Google Search and the Chrome browser. Since a MADA is not exclusive, it allows a device manufacturer to also pre-install non-Google search apps. RSAs introduce an additional problem: device manufacturers and mobile carriers entering into an RSA must make Google the exclusive, pre-installed search application on the device, and are therefore prohibited from pre-installing any search application. concurrent research.
The share of income that accompanies an RSA creates a strong economic incentive. And because an RSA is only available to device manufacturers who have also signed a MADA, the plaintiffs argue that this link has the effect of turning the MADA into an exclusive contract. Google responds by emphasizing that MADAs are not exclusive and that device manufacturers and mobile carriers are free to choose (or decline) to enter into the exclusive relationship that comes with signing an RSA.
If the agreements are exclusive, how much of the market are they blocking?
A finding that the Google and/or Android browser agreements are effectively or de facto exclusive would not necessarily mean that Google is violating antitrust laws. Like the D.C. Circuit (which sets precedent for the district court hearing United States against Google) explained in a 2001 decision“Allowing antitrust action every time a company enters into an exclusive agreement would both discourage a presumptively legitimate business practice and encourage costly antitrust actions.” Since an exclusive agreement affecting a small fraction of a market clearly cannot have the required detrimental effect on competition, the requirement for a significant degree of foreclosure serves a useful screening function.
A key question that the United States against Google The essay will therefore explore the following question: to the extent that the browser and/or Android agreements are exclusive, is the resulting market foreclosure “substantial”? Unsurprisingly, the parties disagree, with the DOJ saying the answer is yes and Google saying the opposite. The parties also disagree on the methodology to be used to obtain the answer.
What is the relevant market?
The examination of alleged anticompetitive behavior requires the identification of the relevant market. With respect to Internet users (as opposed to advertisers), the DOJ argues that “general search services” constitute the relevant market and that offerings in this market include Google Search and Bing. Notably, the DOJ specifically excludes of this category “specialized search services or other websites limited to specific topics, such as discount hotels or airfares”, writing that “Yelp can find you a pizza place but is of no help in this regard.” regarding the symptoms of strep throat.
Google says the relevant market for search is broader, argue that “by defining the relevant market to include only general search engines, Plaintiffs distort the commercial reality that users routinely substitute search engines for other search providers – such as Amazon when shopping or Expedia when they travel – and thus unduly exclude many search engines. Google’s strongest competitors in the relevant market. Thus, the essay will explore competing narratives regarding the definition of the relevant market for Internet search and, separately, for search advertising.
A historic antitrust trial
In addition to the above, the court will also consider an allegation by state and territorial attorneys general (but not the United States) that a Google marketing tool called Search Ads 360 is used in an anti-competitive manner in advertising. But aside from the details of the issues to be addressed at trial, United States against Google has huge implications for the technology sector. This is the first major US trial examining antitrust laws in the context of the contemporary big tech landscape.
The decision in the current district court lawsuit will not be the final word, as the non-prevailing party will almost certainly appeal to the D.C. Circuit. And whatever the end result, calls for change will be heard. A victory for Google would lead to claims that the technology ecosystem has moved beyond antitrust law. And a DOJ victory would lead to claims that antitrust law is applied and interpreted far too broadly.