Competition Policy in the Digital Era: US v Google Saga
As we discussed in our previous article, The European Union (EU) is leading the way in the action against competition law abuses by tech giants. The EU has already fined Google in claims exceeding 7billion pounds, and it seems that the US Department of Justice (DoJ) is following suit. The US government has filed charges against Google, accusing them of breaching antitrust law to preserve its monopoly power in the internet search engine and online advertising sector. This article will explore the reasons behind such claims, Google’s counter-arguments and the effect of this pursuit in the area of competition law.
Competition law enforcement agencies have long been concerned with Google’s immense market power. From “scrappy Silicon Valley start-up” to the “gatekeeper of the internet”, Google has revolutionised the modern world and how millions of people access information every second. With 80% of the market share for internet search engines and its closest rival Bing, having only 7% of the relevant market share, these concerns from competition authorities are not unfounded. The current suit concerns the billions of dollars that Google pays to ensure that its search engine is installed as the default option on browsers and mobile phones. This action has arguably solidified Google’s gatekeeper role as new entrants are prevented from joining the market, as they cannot keep up with the billion-dollar entry fee required to keep up with Google. The search engine giant further perpetuates barriers to entry through the massive scale of user data that Google has safely locked up with exclusive distribution agreements. Automated learning and search pricing algorithms work because of the constant harnessing of consumer data over a significant period of time. Rivals, who are denied access to this data, are barred from competing in this area.
The official claim brought against Google is for abuse of its dominant position in the market which, under US Antitrust Law is covered by §2 of the Sherman Act (The EU equivalent being Article 102 TFEU). Prosecutors have to prove that Google holds not just a monopoly, but a harmful monopoly in a clearly defined market. Consumer welfare is reduced when they are forced to accept Google’s policies, privacy practices and use of personal data. Google’s practices ensure that they have sole control over the internet economy, relied on by advertisers, consumers and companies and innovation is stifled as new businesses are unable to emerge from Google’s “shadow”. These are the reasons that the DoJ have put forth in their claim against Google; calling for the end to these anticompetitive practices.
Google has since responded to this claim publicly on their own blog. They characterised the lawsuit as ‘deeply flawed’ and that it ‘would do nothing to help consumers’. They invoked the argument that their platform is free to use at the point of entry and is being constantly fine-tuned. Moreover, they point out that their customers are free to use alternative search engines should they so choose. They argue that customers choose Google because they are satisfied with it – not because they are forced to. To further reinforce their argument, Google reminds the DoJ that this is not the ‘Dial-Up internet of the ’90s and that it is easy to switch from one product to another. Google also argues that its agreement with Apple to be the default search provider is something that rivals can also do and that it is how the market works. The DoJ acknowledges this but also points out that Google’s increased resources and ability to outbid all of its rivals minimises the ability of firms who have fewer resources to compete on the market. Overall, Google has made very clear and direct counterarguments to the DoJ’s claims; it has powerful justifications for its dominant position.
What does this case mean for antitrust law?
Platforms like Google that are free at the point of entry and able to perfect their algorithms through the processing of vast amounts of data have challenged competition law enforcers because they aim to achieve the best possible user experience. With a competition law system underpinned by the consumer welfare standard, it becomes difficult to enforce the rules where real consumer benefit is generated. Google is a winner in this new internet market because its continuous improvement to its algorithmic search engine enhances user experience, which earns them more users, attracts more suppliers and all this data creates a virtuous cycle. That is why the DoJ is taking a narrow approach to its claim. Instead of arguing against the benefits to consumers that Google generates, it argues that Google should have to win on the merits of its product rather than the inevitably larger size of its revenue.
It’s the first in what’s widely expected to be a set of historic antitrust cases against the tech giants, which may threaten the dominance of these businesses as we know them today. However, antitrust cases are notorious for taking years to be resolved. With the rapid development of digital platforms, the Google of 5 to 10 years from now will certainly not look like the Google of today, which will be interesting to see as the case develops. Moreover, even during the current proceedings, the DoJ may change strategy come January, should a change in administration arise from the US presidential election.