Friday, December 04, 2020

Justice Department sues Google, alleging multiple violations of federal antitrust law

Oct 21. 2020
Facebook Twitter

By The Washington Post · Tony Romm · NATIONAL, BUSINESS, TECHNOLOGY, COURTSLAW, US-GLOBAL-MARKETS 

WASHINGTON - The Justice Department on Tuesday sued Google over allegations that its search and advertising empire violated federal antitrust laws, launching what is likely to be a lengthy, bruising legal fight between Washington and Silicon Valley that could have vast implications for the entire tech industry.

The federal government's landmark lawsuit caps off a roughly year-long investigation that concluded Google wielded its digital dominance to the detriment of corporate rivals and consumers. The complaint contends that Google relied on a mix of special agreements and other problematic business practices to secure an insurmountable lead in online search, capturing the market for nearly 90 percent of all queries in the United States.

Google gained its "grip on distribution," the Justice Department said, by paying billions of dollars to become the default search application in Web browsers, on smartphones and across a wide array of other devices and services, including those offered by some of its competitors, such as Apple. This vast, unparalleled reach allowed Google to enrich itself through lucrative ads, maintain its online foothold and render it impossible for other search engines to compete, the federal lawsuit alleges.

In bringing its case, the Justice Department did not explicitly ask a judge to break apart Google. Instead, it urged the court to consider "structural relief," which theoretically could include a requirement that the company sell a portion of its business and cease other practices that federal regulators see as harmful and unlawful.

"Absent a court order, Google will continue executing its anticompetitive strategy, crippling the competitive process, reducing consumer choice, and stifling innovation," the Justice Department alleged in its complaint. "For the sake of American consumers, advertisers, and all companies now reliant on the internet economy, the time has come to stop Google's anticompetitive conduct and restore competition."

Google on Tuesday rejected the government's claims as "deeply flawed." Kent Walker, the company's chief legal officer, defended Google's business practices, arguing that consumers nationwide still have the choice to use its rivals' online offerings.

"American antitrust law is designed to promote innovation and help consumers, not tilt the playing field in favor of particular competitors or make it harder for people to get the services they want," Walker wrote in a blog post. "We're confident that a court will conclude that this suit doesn't square with either the facts or the law."

An antitrust lawsuit marks the start, not the end, of the government's antitrust fight with Google. It could take years for the courts to resolve whether the company violated the Sherman Act, a roughly century-old law that federal competition cops have previously put to use to combat tobacco, oil and telecommunications giants seen as threats to competition and consumers.

Eleven Republican attorneys general - from states including Louisiana, Florida and Texas - signed onto the Justice Department's lawsuit. Other states are still probing Google on antitrust grounds and may choose later to join the federal case or opt to bring their own, threatening to widen the legal territory Google must cover to defend its business from serious, potentially far-reaching changes.

But the Justice Department's filing alone still serves as a stunning turn of events for Google, marking the first major salvo in decades to challenge Silicon Valley's size. It also follows roughly seven years after the government last probed the company for potential antitrust violations - and opted against suing Google or seeking significant penalties. The inaction in Washington for years had stood in stark contrast with the antitrust scrutiny Google has faced in Europe, where competition regulators over the past decade have slapped the Mountain View, Calif.-based technology behemoth with $9 billion in fines.

Since then, Democrats and Republicans have found rare accord in reexamining Google and looking anew at other Silicon Valley tech titans, fearing that they have become too big and powerful - and that the U.S. government had fallen far short in its responsibility to police them. The heightened concern has prompted a wave of probes targeting Apple, Amazon and Facebook, as well as a fresh effort to toughen federal antitrust laws in anticipation of future fights.

"Antitrust enforcement against Google is long overdue," said Rep. David Cicilline, D-R.I., the chairman of the House's top competition-focused panel.

The Justice Department began scrutinizing Google as part of a broad review of Big Tech announced last summer, with federal officials seeking to respond to what they described then as "widespread concerns that consumers, businesses, and entrepreneurs have expressed about search, social media, and some retail services online." That September, Google started turning over key, sensitive documents to the Justice Department for its investigation, the company acknowledged in a securities filing at the time.

Initially, agency officials signaled an interest in probing the company's advertising business, which contributed the lion's share of the company's $162 billion in 2019 revenue. Quickly, though, the probe expanded to touch on a wider array of issues in response to a flurry of complaints from rival companies - from news publishers to travel review websites - that say Google wields its powerful search engine in myriad ways to entrench its dominance.

The federal case filed Tuesday ultimately hinges on several allegedly "pernicious" agreements brokered between Google with some of its rivals aimed at expanding the reach of its search engine. With its Android smartphone operating system, for instance, Google relies on formal arrangements with device manufacturers including Samsung and LG that force them to set the tech giant's search as the default - or perhaps risk losing access to its other suite of coveted smartphone apps and services.

In other cases, Google shares some of its lucrative advertising revenue - totaling billions of dollars - with its rivals to secure the primacy of its search engine. Google provides similar payments to Apple, which then sets Google as the default search service on its iPhones as well as its voice-enabled assistant, Siri, the Justice Department alleges. The Apple arrangement is especially valuable: The iPhone giant reaps up to 20 percent of worldwide net income from Google revenue, the lawsuit contends, and Google at one point in 2019 attributed almost half of its search traffic as having originated on Apple devices.

In response, Google sharply rebuked the government's characterization, stressing that users could easily change the search service they use on a wide array of devices and services, including Apple's iPhone. In the eyes of the government, however, the tech giant "aggressively uses its monopoly positions, and the money that flows from them, to continuously foreclose rivals and protect its monopolies."

Apple, Samsung and other tech giants did not immediately respond to requests for comment.

Months before the government filed its lawsuit, the federal probe had been shrouded in acrimony. The Justice Department and Google warred over the company's apparent unwillingness to turn over documents that federal investigators described as critical to their work.

Within the agency, meanwhile, government lawyers have sparred among themselves over the timeline for bringing a case, particularly in the weeks before the 2020 presidential election. Dozens of agency staffers signaled this summer that they did not think they were ready to bring charges against Google, but Attorney General William P. Barr ultimately overruled them - and set the Justice Department on a course to file this month. President Donald Trump, meanwhile, has attacked Google and other tech companies with claims that they are politically biased, leaving some critics fearful that political considerations fueled the government's timing.

The federal investigation has proceeded in parallel with state probes commenced in September 2019 by nearly every Democratic and Republican attorney general. Some of the investigations have broadened to encompass more than advertising - touching on search and the extent to which Google further enhances its dominance through its Android operating system.

A handful of states including Colorado, Iowa, Nebraska and New York issued a joint public statement Tuesday indicating they are still scrutinizing a wide array of Google's business practices and may opt to join any federal case later.

"This is a historic time for both federal and state antitrust authorities, as we work to protect competition and innovation in our technology markets," the statement said. "We plan to conclude parts of our investigation of Google in the coming weeks. If we decide to file a complaint, we would file a motion to consolidate our case with the DOJ's. We would then litigate the consolidated case cooperatively, much as we did in the Microsoft case."

 

Tags:
Facebook Twitter
More in Ed & Tech
Editor’s Picks
wmg-logo
Top News
wmg-logo