Google has been found to have violated antitrust laws by building a moat around its monopoly over search.
In a ruling that could have sweeping impact in the digital ad market, a federal judge sided with the government in a landmark antitrust case over allegations that competitors were sidelined and customers got a lower-quality experience on the internet due to the tech giant’s dominance in search. The court pointed to exclusive deals with other companies, like Apple and Samsung, to have Google as the default search engine on their phones and browsers.
“Google is a monopolist, and it has acted as one to maintain its monopoly,” wrote U.S. District Judge Amit Mehta.
In the following months, the court is expected to decide on structural relief, which could mean divestitures or changes to the way the company is allowed to run its business.
The ruling marks the government’s first win in an antitrust case against a tech giant since it sued Microsoft more than 20 years ago.
The order is the culmination of a lawsuit, filed in 2020, by the Justice Department. In the complaint filed in D.C. federal court, the DOJ and 11 states alleged that Google abused its market power to protect a 90 percent share of internet search and 95 percent share of mobile search. The government claimed that the company violated Section 2 of the Sherman Act.
According to the government, Google protected its search monopoly through exclusionary agreements and also “engaged in anticompetitive conduct to lock up distribution channels and block rivals.” It pointed to Google’s deals with phone manufacturers that made it the default search engine, some of which required distributors to take a bundle of its other apps, prominently feature them and not engage with its rivals.
Those deals, the court found, had “anticompetitive effects in the general search services market.” On this issue, the key question was whether exclusive distribution contracts Google reached with other companies significantly contributed to maintaining its monopoly power.
“The answer is ‘yes,’” Mehta wrote. He reasoned that the agreements essentially ensure that half of all users of search engines in the U.S. use Google since it’s the default service on all Apple and Android devices. This has the effect of preventing rivals from getting big enough to compete with Google and diminishing competitors’ incentives to invest and innovate in general search, among other things, the court said.
“For more than a decade, the challenged distribution agreements have given Google access to scale that its rivals cannot match,” the order stated.
For years, Google has understood the value of exclusive deals with phone manufacturers and browsers. In 2021, it spent roughly $26 billion in traffic acquisition costs, or the revenue share paid to its partners. This figure represents four times more than the company’s other search-related costs combined, including research and development.
Google projected that losing its status as the default search engine would result in a significant drop in queries and billions of dollars in lost revenue. In the trial, it was uncovered that the Alphabet-owned company estimated that default placements drove over half of its overall search revenue. In 2016, it accounted for 80 percent of search revenue on Samsung devices. Without its exclusive deal with Apple, Google estimated that it’d lose between 60 to 80 percent of its query volume on iPhones, resulting in revenue losses of up to a roughly $33 billion.
“The defaults are more than just ‘incremental promotion,’” Mehta wrote. “They supply Google with unequalled query volume that is effectively unavailable to rivals.”
In a 10-week trial last year, Google defended its monopoly by arguing that its product and services are simply better.
The arguments mirrored those advanced by Apple in its high-profile antitrust dispute with Epic Games. In that case, a federal judge sided with Apple on most claims but found that some of its policies violated California competition laws.
The Justice Department and Google didn’t immediately offer comment on the order.
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