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The U.S. Justice Department and 11 states filed suit against Google on Tuesday, the opening legal salvo in what looks set to be a barrage of antitrust actions against the firm and its tech-giant peers. Here’s what you need to know.
The opening two and a half sentences: “Two decades ago, Google became the darling of Silicon Valley as a scrappy startup with an innovative way to search the emerging internet. That Google is long gone. The Google of today is a monopoly gatekeeper for the internet.”
The claim: The DoJ and the states allege Google uses “exclusionary agreements” worth billions of dollars annually with device makers like Apple, Samsung, LG and Motorola, as well as wireless carriers and browser developers, to make itself the default search engine and, in some cases, require the use of its apps. It monetizes that position by selling advertising, to the tune of US$40 billion annually in the U.S. The deals, plus the popularity of Google’s own properties like its Chrome browser, add up to about 80 per cent of the market for U.S. search queries, the suit claims; overall, the company has a 90 per cent share. The company has “foreclosed competition for internet search,” the suit states. “General search engine competitors are denied vital distribution, scale, and product recognition—ensuring they have no real chance to challenge Google.” It says the Alphabet subsidiary’s distribution control is bad for innovation, citing alternative models like DuckDuckGo, the privacy-focused web crawler for which OMERS Ventures led a US$10-million fundraising round in August 2018.
Google blogs back: “Today’s lawsuit by the Department of Justice is deeply flawed” and “would do nothing to help consumers” wrote Kent Walker, senior vice-president of global affairs, in a Tuesday blog post. Google acknowledged that it pays to promote its services, likening itself to a cereal brand incentivizing supermarkets to stock its boxes in prime shelf space. But it said internet browsers pick Google for search voluntarily, not by coercion.
What the market said: Meh. GOOG closed up 1.39 per cent on the Nasdaq.
What’s next for this suit: The blog post suggests Google intends to contest the DoJ and co.’s claims. The plaintiffs are calling for an imminent court order, claiming that even as the company was under investigation for anti-competitive acts, it signed new distribution agreements that are “even more exclusionary” (emphasis theirs).
What’s next in antitrust: State attorneys general are reportedly preparing a separate ad-related suit against Google. The U.S. Federal Trade Commission is investigating previously undisclosed acquisitions by Alphabet, Amazon, Apple, Facebook and Microsoft; economists and policymakers have argued tech giants do these deals to eliminate nascent competitors. Each of those firms is also the subject of antitrust complaints or investigations in the U.S., EU and/or Canada over some part of their business.