On August 6, a federal judge ruled that Google is a monopolist in the search and advertising markets in a case initiated by the US Department of Justice. This is a key win for the DOJ: while Google’s status as a monopolist might seem self-evident, courts do not always acknowledge obvious truths- especially when the case involves tech giants with cohorts of well-funded lawyers.
Let’s see what this case is about, why it matters, and what it could mean for the Internet in the long run.
- The case
- How will Google be punished?
- What impact will the ruling have?
- What does this mean for privacy?
The case
The ruling stems from a 2020 investigation by the US Department of Justice over Google’s position in the search engine and online advertising markets. The Court thoroughly investigated the nature and the dynamics of the search and ad tech markets by analyzing enormous amounts of data, acquiring many expert opinions, and hearing executives from Google and other tech giants.
This complex procedure resulted in a long, fact-intensive ruling that cannot be described in detail. In the end, most of the DOJ’s claims were upheld.
First of all, the company was found to be a monopolist in the search engine market and the general search text advertising market (read: for the sponsored search results that search engines display after a query).
The judge ruled that Google is not a monopoly on the rest of the ad tech market. This is a subtle but important distinction, as the outcome of antitrust cases often hinges on the definition of the relevant market. And to be clear, this does not mean that Google is not a monopolist- just that the DOJ failed in proving so.
Being a monopolist is not, in and of itself, a violation of US antitrust law. However, the judge also found that Google abused its market dominance by concluding anticompetitive deals with Apple, the Mozilla Foundation, and several phone makers.
Let’s break this down. Google has long been paying companies to make Google Search and Chrome default on devices and browsers. This is no mystery. The news here is that the judge considered these agreements exclusive deals.
Google’s deals with Apple and others do not preclude the end user from using a different search engine. If you buy an Apple device, Google will be your default search engine. You can (and should) change that with a few clicks- but most users don’t. The power of defaults is why default settings are so important, to the point that companies are willing to shell out a lot of money to ensure their services are the default ones.
Google predictably protested that its deals were not exclusive and did not violate antitrust regulations. But the judge wasn’t happy with that defense: he dug deep into the deals, looked closely at their effects on the market, and decided that their effects are anticompetitive enough to punish the company.
This makes perfect sense given how insanely expensive the deals are. Up-to-date information on the deals is not available, but we do know that in 2020, Google spent a total of 26 billion dollars on its default deals, 20 of them on Apple alone. Yup, that’s billion with a b. Would Google burn that much money on contracts that do not radically rig the market in its favor?
How will Google be punished?
We don’t yet know how Google will be sanctioned because the remedies will be issued in a different ruling.
The judge will at the very least terminate Google’s exclusive deals but he could go much further than that and possibly even break up some of Google’s companies. This is the solution the DOJ will likely push for and something the European Commission is also attempting to achieve with its antitrust enforcement.
What impact will the ruling have?
Needless to say, breaking up Google would be an earthquake for the Internet. But even the termination of Google’s exclusivity deals would make a big impact, as the search engine market will be more contestable.
The barriers to entry in the search market are very high but there are at least two realistic competitors. Microsoft already has a foot in the search engine market with Bing and will surely try to increase its share of the pie. And with the Google deals out of the way, Apple might be tempted to develop a search engine of its own to capitalize on Safari’s significant share of the browser market.
I, for one, would welcome some competition on the search engine market, even if it’s just between three big services. In 2024 Google Search is barely usable and a shadow of the revolutionary service it used to be. Some healthy competition may very well force Google to make its flagship service suck a little less.
But the impact of the ruling will surely extend past the search engine market. Contracts over default settings are quite common in the tech sector. Many companies will be scared of the precedent and may review some of their strategies.
It will also be interesting to see what will happen to the Mozilla Foundation. The Foundation is a non-profit and doesn’t really generate much revenue. Only time will tell whether it will be able to stay afloat without the Google deal.
What does this mean for privacy?
We do not typically discuss competition issues here but we made an exception here. Antitrust developments are absolutely crucial for privacy because the worst privacy offenders are the Big Tech monopolists.
This is no coincidence. Over more than a decade, a handful of powerful companies have enclosed the Internet and the entire tech world into user-hostile walled gardens where precious first-party data can be harvested with little or no limitation.
And we cannot leave their gardens. By definition, users on a monopolized market have no choice. We hate surveillance but still “consent” to it in clickwraps agreements because no realistic alternative exists.
If you despise Facebook’s privacy practices (which you should), where will you go? Instagram was bought by Facebook as soon as it became a threat. X and TikTok don’t treat your data any better.
The current situation is not the inevitable consequence of the best and most innovative companies getting ahead of the competition. The big players might have started out as innovators at first but they grew into trillion-dollar businesses through competition buyouts, vertical integration, anticompetitive agreements, and all the century-old tricks from the monopolist’s playbook.
As Mark Zuckerberg wrote in a now-public email, “it is better to buy than compete”. That about sums it up.
Antitrust enforcers should have stopped all of this but barely moved a finger- partly due to a laissez-faire approach, and partly due to outdated antitrust doctrines. Lacking enforcement landed us in today’s mess: a world where giving up control over your data is a non-negotiable requirement for participating in digital society.
(If you have time to kill, this influential paper explores some of the limitations of outdated antitrust doctrines- specifically, the consumer welfare doctrine. The young scholar who wrote this is now the chair of the Federal Trade Commission. Not everyone is happy with this development but we surely are.)
But the winds might be changing soon. The Google Search case is the first major federal antitrust case against Big Tech since the 90s cases involving Microsoft. The Department of Justice and the Federal Trade Commission have been unafraid to go after the big fish lately and the victory against Google will only embolden them.
There are important developments in the EU as well. The Digital Markets Act limits some of the most abusive conducts of “gatekeepers” (read: “Internet monopolists"). This is not as good as breaking up monopolies, but still an important step and a sign that the legislator considers them problematic. At the same time, the European Commission is looking to break up Google because of its abuse of dominant position in the ad tech environment.
All in all, there is hope that governments will finally take steps to break up Big Tech monopolists or at least keep them in line. If they do, we will be one step closer to a user-friendly and privacy-friendly Internet.
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