Do good things come in threes? Not if you’re Google. Heading into the holidays, the company finds itself facing a trio of antitrust cases brought by an overlapping network of state and federal enforcers. That’s a lot to keep track of. Let’s try to sort through some of the biggest questions.
Why are there all these separate cases against Google, instead of just one?
The simplest answer is that Google has a dominant position in multiple markets. This opens it up to different lines of attack that don’t all fit in the same lawsuit. Two of the cases focus on Google’s monopoly in search and search advertising; the third focuses on its control over what you might call non-search advertising.
OK, so what are the cases?
The US Department of Justice filed the first case in October, joined initially by eleven Republican state attorneys general. This is the narrowest of the three lawsuits. It claims that Google has used anti-competitive tactics to protect its monopoly over general search and prevent rival search engines from getting a foothold. Most notably, the complaint describes the lengths Google has gone to to make sure it’s the default search engine on browsers and smartphones—like paying Apple as much as $12 billion each year to make Google the default on Safari and iPhones. With its control over the search market secure, the suit says, Google can rake in more search advertising revenue, which in turn allows it to keep the payouts flowing. The DOJ argues that this amounts to an illegal scheme to maintain Google’s monopoly over search.
What does Google say about that?
In response to the DOJ’s suit, Google says that there’s nothing wrong with the arrangements it has struck, because it’s easy for users to change the default if they want. As the company’s chief counsel put it in a blog post, “people don’t use Google because they have to, they use it because they choose to.”
But why would Google spend billions of dollars each year to be the default if everyone would freely choose to use it anyway?
OK, you said there were two cases about Google search. What’s the other one?
The second case about Google search, and the third to be filed overall, comes from a coalition of more than 30 states, led by the attorneys general of Colorado and Nebraska. It essentially makes the same argument as the DOJ lawsuit, plus a few more accusations. (In fact, the states have requested that their suit be combined with the DOJ’s.) The most important new piece is the allegation that Google has used its monopoly over general search—the activity commonly known as Googling—to discriminate against companies in what’s known as the vertical search business, like Yelp or Kayak. The idea is that Google wants people to begin all their searches on Google, rather than going straight to a vertical search site or app. The states argue that Google has accordingly made changes over the years to how search results appear in order to keep more traffic flowing to Google’s own properties rather than vertical search. That puts those vertical companies in a tight spot, since if users don’t easily find them through Google, they may not find them at all. This is illegal, the states claim, because the goal and effect is to entrench Google’s share of the search market, rather than to steer users to the best results.
What does Google say to that?
Google’s public response so far is simple: The changes it has made are simply about making Google search more useful and relevant to users. If that’s true, there’s nothing problematic about what the company has done. The case may ultimately turn on whether the antitrust enforcers can prove that Google had other goals in mind besides customer satisfaction.
So how about the third case?
Just one day before the Colorado/Nebraska coalition filed its case, a smaller group of states, led by Texas, filed their own suit. This one is focused on Google’s control over digital advertising, apart from its core search-advertising business. According to several studies, Google controls upwards of 90 percent of multiple parts of the digital advertising supply chain. Whenever you open a website (or an app) and see an ad, chances are the advertiser used Google to buy the ad placement; the publisher used Google to make the ad space available; and the two parties made the deal in an automated auction on Google’s advertising exchange. This setup, where one company represents both the buyer and seller while running the marketplace itself, creates obvious conflicts of interest. According to the states’ complaint, Google exploits its control over the advertising pipeline to impose unfair conditions on advertisers and publishers, discriminate against rival ad tech firms, and rake in a bigger cut of online ad spending than it would earn if there were more middlemen competing for the business.
The Texas lawsuit also includes a surprising allegation: that Google struck an unlawful deal to get Facebook to ease up on competing with its ad business in exchange for preferential treatment in Google-run ad auctions. If that’s true, it would be a straightforward case of conspiring to restrain trade in violation of Section 1 of the Sherman Act, which outlaws such deals between companies. (Facebook isn’t named as a defendant in the suit, but it could also face legal problems stemming from the deal.)
Sounds bad. What’s Google’s response?
On the broader claim about Google’s advertising monopoly, the company insists that the sector remains robustly competitive. On the Facebook allegation, it says that there was nothing special or shady about the deal between the two companies, and that Facebook is merely one of dozens of companies that participate in Google’s Open Bidding program. So who’s telling the truth: Google or Texas? We might not know for a while. Almost all of the evidence presented in the complaint was redacted, meaning we outside observers have no idea how strong, or weak, the evidence of an illegal conspiracy really is.
Is Google just getting punished for being too big?
No. The key distinction to keep in mind is between being competitive and being anti-competitive. Being competitive means trying to be the best—offering the highest quality, most affordable prices, and so on—to attract the most business. Being anti-competitive means using your power in a market to exclude potential rivals so that you don’t have to try as hard to be the best. The common thread in all three lawsuits is the accusation that Google has engaged in anti-competitive conduct designed to entrench its monopoly position, instead of purely trying to win on the merits.
So, why exactly did different groups of states sign onto the different suits?
It may have something to do with politics. The DOJ’s decision to file its case in October was controversial; some people, including lawyers in the department, thought US attorney general William Barr (who just announced his resignation; eventful week!) was rushing the case, perhaps to score political points before the election. That might explain why only Republican states signed onto the complaint at first. (Three Democratic attorneys general have since asked to join.) Similarly, Texas attorney general Ken Paxton is not exactly the kind of guy Democratic officials are dying to get in bed with. He has been dogged by allegations of illegal and unethical behavior, and has even been indicted for securities fraud. Most recently, he led a bad-faith effort by Republican states to overturn the results of the presidential election, fueling speculation in Texas that he might be angling for a presidential pardon.
What comes next?
If the past is any guide, the cases could take years to be resolved. But, whatever happens, Google is about to have to spend a lot of time and attention fending off three (or perhaps two) major lawsuits—just as Microsoft did more than two decades ago, distracting its management enough to create room for internet upstarts like Google to blossom. A replay of that dynamic could dramatically reshape the tech industry, no matter who ultimately wins in court.