By Brent Kendall and Rob Copeland
The Justice Department filed a long-expected antitrust lawsuit
alleging that Google uses anticompetitive tactics to preserve a
monopoly for its flagship search engine and related advertising
business, the most aggressive U.S. legal challenge to a company's
dominance in the tech sector in more than two decades.
The case, filed Tuesday in federal court in Washington, D.C.,
alleged that the Alphabet Inc. unit maintains its status as
gatekeeper to the internet through an unlawful web of exclusionary
and interlocking business agreements that shut out competitors.
The government alleged that Google uses billions of dollars
collected from advertisements on its platform to pay for
mobile-phone manufacturers, carriers and browsers, like Apple
Inc.'s Safari, to maintain Google as their preset, default search
engine, creating a self-reinforcing cycle of dominance.
The upshot is that Google has pole position in search on
hundreds of millions of devices in the U.S., with little
opportunity for any other company to make inroads, the government
"Google achieved some success in its early years, and no one
begrudges that," Deputy U.S. Attorney General Jeffrey Rosen said.
"If the government does not enforce its antitrust laws to enable
competition, we could lose the next wave of innovation. If that
happens, Americans may never get to see the next Google."
Kent Walker, Google's chief legal officer, said in a statement
that the lawsuit was deeply flawed. "People use Google because they
choose to -- not because they're forced to or because they can't
find alternatives," he said. "Like countless other businesses, we
pay to promote our services, just like a cereal brand might pay a
supermarket to stock its products at the end of a row or on a shelf
at eye level."
Mr. Walker said that, if successful, the lawsuit would result in
higher prices for consumers because Google would have to raise the
cost of its mobile software and hardware. Google's defense against
critics of all stripes has long been rooted in the fact that its
services are largely offered to consumers at little or no cost,
undercutting the traditional antitrust argument centered on
potential price harms to those who use a product.
The challenge marks a new chapter in the history of Google, a
company formed in a garage in a San Francisco suburb in 1998 -- the
same year Microsoft Corp. was hit with a blockbuster government
antitrust case accusing the software giant of unlawful
monopolization. That case, which eventually resulted in a
settlement, was the last similar government antitrust case against
a major U.S. tech firm.
The lawsuit follows a Justice Department investigation that has
stretched more than a year, and it comes amid a broader examination
of the handful of technology companies that play an outsize role in
the U.S. economy and the daily lives of most people.
A loss for Google could mean court-ordered changes to how it
operates parts of its business, potentially creating new openings
for rivals. The Justice Department's lawsuit didn't propose
particular remedies, though one Justice Department official said
nothing is off the table.
The Mountain View, Calif., company, sitting on a $120 billion
cash hoard, is unlikely to shrink from a legal fight. A victory for
it could deal a huge blow to Washington's overall scrutiny of big
tech companies, potentially hobbling other investigations and
enshrining Google's business model after lawmakers and others
challenged its market power. Such an outcome, however, might spur
Congress to take legislative action against the company.
Alphabet's shares rose 1.4% in Nasdaq trading Tuesday.
The case could take years to resolve, and the responsibility for
managing the suit will fall to appointees of the winner of the Nov.
3 presidential election.
Democratic presidential nominee Joe Biden
Biden declined to comment on the Google suit specifically, but
said that "growing economic concentration and monopoly power in our
nation today threatens our American values of competition, choice,
and shared prosperity."
"Our commitment to these values must compel us to do far more to
ensure that excessive market power anywhere -- across industries,
from health care to agriculture to tech to banking and finance --
is not hurting America's families and workers," Mr. Biden said
Nearly all U.S. state attorneys general are separately
investigating Google, while three other tech giants -- Facebook
Inc., Apple and Amazon.com Inc. -- likewise face close antitrust
scrutiny. In Washington, a bipartisan belief is emerging that the
government should do more to police the behavior of top digital
platforms that control widely used tools of communication and
A group of 11 state attorneys general, all Republicans, have
joined the Justice Department's case. More could join later. Other
states are still considering their own cases related to Google's
search practices, and a large group of states is considering a case
challenging Google's power in the digital advertising market.
The Justice Department also continues to investigate Google's
Democrats on a House antitrust subcommittee in a report this
month said the four tech giants wield monopoly power and
recommended congressional action. The companies' chief executives
testified before the panel in July.
In Europe, regulators have targeted the company with three
antitrust complaints and fined it about $9 billion. The cases
haven't left a big imprint on Google's businesses there.
Google owns or controls search-distribution channels accounting
for about 80% of search queries in the U.S., according to the
lawsuit and third-party researchers. The government says that
effectively leaves no room for competition, resulting in less
choice and innovation for consumers, and less competitive prices
The wide-ranging suit included details on alleged deliberations
within Google aimed at avoiding antitrust scrutiny. The government
quoted Google's chief economist as telling employees, "We should be
careful about what we say in both public and private."
The lawsuit in particular targeted arrangements under which
Google's search application is preloaded, and can't be deleted, on
mobile phones running its popular Android operating system. Google
has expanded such agreements over the past year since the Justice
Department probe began, the government said, but its complaint
didn't provide hard data about such tie-ups.
Alphabet publicly discloses that it pays other companies to
funnel in search traffic; analysts estimate that it pays Apple
alone around $10 billion a year, another deal the government cited
as one that has suppressed competition.
Google started as a simple search engine aiming "to organize the
world's information." But over time it has developed into a far
broader conglomerate. Its flagship search engine handles more than
90% of global search requests, some billions a day, providing
fodder for what has become a vast brokerage of digital advertising.
Its YouTube unit is the world's largest video platform, used by
nearly three-quarters of U.S. adults.
In 2012, the last time Google faced close antitrust scrutiny in
the U.S., the search giant was already one of the largest publicly
traded companies in the nation. Since then, its market value has
roughly tripled to almost $1 trillion.
The company enters this legal showdown under new leadership.
Co-founders Larry Page and Sergey Brin, both billionaires, gave up
their management roles last year, handing the reins solely to
Sundar Pichai, a soft-spoken, India-born engineer.
Google's growth across a range of business lines over the years
has expanded its pool of critics, with competitors and some
customers complaining about its tactics. Specialized search
providers like Yelp Inc. and Tripadvisor Inc. have long voiced such
concerns to U.S. antitrust authorities, and newer upstarts like
search-engine provider DuckDuckGo have spent time talking to the
News Corp, owner of The Wall Street Journal, has complained to
antitrust authorities at home and abroad about both Google's search
practices and its dominance in digital ads.
Some Big Tech detractors have called to break up Google and
other dominant companies. Courts have indicated such broad action
should be a last resort.
The outcome could have a considerable impact on the direction of
U.S. antitrust law.
The Sherman Act, which prohibits restraints of trade and
attempted monopolization, is broadly worded, leaving courts wide
latitude to interpret its parameters. Because litigated antitrust
cases are rare, any one ruling could affect governing precedent for
The tech sector has been a particular challenge for antitrust
enforcers and the courts because the industry evolves so rapidly.
Also, many products and services are offered free to consumers, who
in a sense pay with the valuable personal data companies such as
The search company outmaneuvered the Federal Trade Commission
nearly a decade ago.
The FTC, which shares antitrust authority with the Justice
Department, spent more than a year investigating Google but decided
in early 2013 not to bring a case in response to complaints that
the company engaged in "search bias" by favoring its own services
and demoting rivals. Competition staff at the agency deemed the
matter a close call, but said a case challenging Google's search
practices could be tough to win because of what they described as
mixed motives within the company: a desire to both hobble rivals
and advance quality products and services for consumers.
The Justice Department's case doesn't focus on a search-bias
Google made a handful of voluntary commitments to address other
FTC concerns. The resolution was widely panned by advocates of
stronger antitrust enforcement and continues to be cited as a top
failure. Google's supporters say the FTC's light touch was
appropriate and didn't burden the company as it continued to
The Justice Department's current antitrust chief, Makan
Delrahim, spent months negotiating with the FTC last year for
jurisdiction to investigate Google this time around. He later
recused himself in the case -- Google was briefly a client years
before while he was in private practice -- as the department's top
brass moved to take charge.
The lawsuit comes after internal tensions, with some department
staffers questioning Attorney General William Barr's push to bring
a case as quickly as possible, the Journal has reported. They
worried the department hadn't yet built an airtight case and feared
a rush to litigation could lead to a loss in court. They also
worried Mr. Barr was driven by an interest in filing a case before
the election. Other staff members were more comfortable moving
Mr. Barr has pushed the Justice Department to move ahead on the
belief that antitrust enforcers have been too slow and hesitant to
take action, according to a person familiar with his thinking. He
has taken an unusually hands-on role in several areas of the
department's work and repeatedly voiced interest in investigating
If the Microsoft case from 20 years ago is any guide, Mr. Barr's
concern with speed could run up against the often slow pace of
After a circuitous route through the court system, including one
initial trial-court ruling that ordered a breakup, Microsoft
reached a 2002 settlement with the government and changed some
aspects of its commercial behavior but stayed intact. It remained
under court supervision and subject to terms of its consent decree
with the government until 2011.
Antitrust experts have long debated whether the settlement was
tough enough on Microsoft, though most observers believe the
agreement opened up space for a new generation of competitors.
--Ryan Tracy and Sabrina Siddiqui contributed to this
Write to Brent Kendall at firstname.lastname@example.org and Rob Copeland
(END) Dow Jones Newswires
October 20, 2020 20:23 ET (00:23 GMT)
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