How the Google litigation may play out in US court
The government says Google has monopoly power in three markets: general search services, search text advertising, and search advertising.Updated: Oct 31, 2020, 05:07 IST
Alphabet Inc’s Google and the US Justice Department are set to face each other in court on Friday for the first time since the government sued the company for illegally monopolising internet search.
The hearing marks the first time attorneys for Google and the government will come together to start mapping out the litigation process.
“We’re at the top of the first inning of a very long game,” said Mark McCareins, a professor at Northwestern University’s Kellogg School of Management.
The government’s first task is to convince the court that the markets laid out in the complaint are the right markets to assess the case. It then must demonstrate that Google has monopoly power in one or more of them.
The government says Google has monopoly power in three markets: general search services, search text advertising, and search advertising.
General search services is the market for search queries through search engines, which includes competitors like Microsoft Corp.’s Bing. Search text advertising consists of ads sold by search engines that are designed to resemble organic search results. Search advertising is made up all types of ads generated in response to search queries.
“If the government can’t prove monopoly power in any of those markets, then the case is over,” said Sam Weinstein, a former Justice Department antitrust official.
Google likely will counter by pushing to expand the scope of what’s included in the three markets.
Google, which controls some 90% of web search, will have a tough time rebutting claims that it dominates the general search services market because it would have to show that there are venues other than search engines where consumers can perform an internet search, said Jennifer Rie, a litigation analyst for Bloomberg Intelligence.
Google is likely to say that a large percentage of product searches begin on online retail giant Amazon.com Inc. Google earned 73% of US search advertising revenue, according to a 2019 report by EMarketer, but Amazon’s share has been rising steadily.
If the Justice Department can prove Google is a monopoly in at least one market, it will then have to show that Google illegally keeps control of the markets by using a web of exclusionary agreements to block rival search engines from competing.
Google uses agreements, under which device makers can get a cut of Google’s advertising revenues in exchange for making Google the default search engine.
Google is expected to show that its agreements with device makers serve a variety of business purposes other than squashing competing search engines.
Federal district court judge Amit Mehta will have to weigh the two sides’ arguments in what’s called a “rule-of-reason” analysis, in which he will balance the pro-competitive and anti-competitive effects that each side demonstrates, said Peter Mucchetti, an antitrust lawyer at Clifford Chance.
To prove that Google’s agreements are illegal, the Justice Department must show that they have harmed competition.
Competing search engines don’t have access to the same distribution channels on mobile devices because of Google’s exclusive partnerships, according to the government. The harms to rival search engines have in turn hurt consumers, the US says. The search engine’s conduct also harms advertisers, which must “pay a toll” in the form of higher prices, the US says.
“What the government has to do is say that consumers are injured, but not in price,” said John Lopatka, an antitrust professor at Penn State Law.
In this scenario, Google will probably argue that its distribution agreements aren’t the reason rival search engines have failed to win market share. Instead, Google is expected to say its product is superior.
The Google complaint mirrors arguments the government made against Microsoft in 1998, the last major monopoly case brought in the US.
In that case, the Justice Department successfully argued that Microsoft illegally maintained its monopoly in computer-operating systems by requiring computer makers to set its web browser as the default on their machines.
Google will try distinguish itself from Microsoft. For one, consumers can switch to another search engine more easily than they could switch browsers on their PCs two decades ago, said Cardozo Law’s Weinstein.