As every tech watcher knows, the 21st century’s biggest federal antitrust trial is currently underway, targeting Google’s search business. A second trial involving the company, focused on display advertising, is in the pipeline for next year.
Google is in the hot seat, but so far it has managed to mostly elude efforts to curb its power.
At the crux of the two cases is Google’s dominance in the world of internet search and digital advertising, which shapes how just about everybody consumes and engages with content online. The U.S. government alleges that the company deploys unlawful strategies to stay on top, elbowing competitors out of the market and giving consumers a raw deal in the process.
In the Google search complaint, the federal government and a group of state attorneys general charge that Google has built a monopoly deal by deal, paying for exclusive agreements with device manufacturers and software providers like Apple, Samsung, and Mozilla that enable it to automatically pop up as the default search engine when users want to search the web. This is a big advantage because most consumers will accept the default setting. Additionally, the complaint contends that it’s complicated for users to change the default. And because the quality of the search engine depends on scale, these agreements ensure that Google cannot be challenged by an entrant, even one that offers privacy benefits like DuckDuckGo. The result, according to the complaint, is that customers get locked in and competition gets locked out. Google faces fines and even possible restructuring if the government prevails.
A win is by no means a given.
Back in 1998, Microsoft was found guilty of violating competition laws by bundling its operating system with its browser so that consumers were forced to buy its whole software package. The government won that time. Nonetheless, Microsoft was not forced to provide a choice of default settings for the browser, except in Europe. In the current antitrust atmosphere, will it really be possible to rein Google in and get real consumer choice?
Experts have their doubts.
Antitrust expert Mark Glick of the University of Utah has discussed his view that if we want a prosperous and fair economy, we can’t do without robust antitrust. As he sees it, the U.S. went astray during the 1980s when public policy made a sharp turn towards the interests of big business. Antitrust economists who adopted the Consumer Welfare Standard as part of the attack on New Deal regulation and progressive Supreme Court treatment of rising concentration in the U.S. played a role in this shift. According to Glick, it remains to be seen whether current antitrust policy is really up to the task of restoring balance between big business and everybody else. (See: “Why Economists Should Support Populist Antitrust Goals” and “An Economic Defense of Multiple Antitrust Goals.”
For its part, Google claims that people use its search engine because it is the best. In a conversation with the Institute for New Economic Thinking (INET), Glick scoffed at this suggestion, pointing out that Google improves its product by buying eyeballs other companies have worked hard to attain: “Google started out by buying the audiences of other companies, like AOL,” he says. “The more people you have using the search, the more valuable the advertising and the higher the prices Google can demand.” He adds, “If Google were really the best search engine, why would it need to pay billions for these audiences and companies? It wouldn’t have to pay for the default position, it would be adopted in a competitive market.”
If the government loses the search case, Google still has to face next year’s challenge to its display advertising practices. In January 2023, the Justice Department, along with several state attorneys general, filed a civil antitrust suit against Google for monopolizing the way ads get served online and pushing out competitors. According to the suit, Google uses its advertising technology (adtech) tools to dominate the programmatic ad market that uses automated technology and algorithmic tools for media buying. The complaint alleges that Google pursued profits at the expense of online publishers who receive less and advertisers, who have to pay more to advertise, as well as consumers, to whom the costs often get transferred. Google is further also accused of unfairly directing consumers to its own products.
Adtech expert Dina Srinivasan, a longtime critic of Big Tech’s unchecked power, voiced her support of the case. In 2020, Srinivasan published an influential paper[1] detailing how Google dominates advertising markets by engaging in conduct that is actually prohibited in financial markets. Srinivasan told INET, “I’m glad that the case is going forward. It’s the right thing to do.”
Glick explains that Google gained power over online advertising mostly by gobbling up other companies rather than through its own innovation. “They started by acquiring DoubleClick, which had the ad server, and then they bought a whole series of companies that gave them increasing control,” Glick told INET. He was among the many voices warning the FTC about the dangers inherent in the DoubleClick merger during the original merger review in 2007, but those warnings were dismissed, he says: “At the time the FTC thought that there would be plenty of competitors out there, so they let all these adtech incremental acquisitions happen and now Google controls every step of the process.“
Glick believes that all these steps in the online advertising process should be opened up to competitors. “Hopefully the government will be able to open up these markets to competition which will benefit publishers and advertisers.”
A big hurdle is the lack of clarity in the law, observes Glick: “It has language that pertains to acquisitions that ‘substantially lessen competition.’ Well, what exactly does that mean? If you keep letting these companies make acquisitions, nobody can ever catch up. So far, whenever there’s a threat to their dominance, Google just acquires the company. Or destroys it. If you’re a little company, you can either get destroyed or sell for a big profit. Which are you going to choose?”
When it comes to a company like Google, monopolization of search engines and advertising is all not the public has to worry about. The emerging technologies of AI and, especially, so-called large language models (LLMs) have many concerned that Big Tech will strongarm its way into dominating their future. Google has already announced plans to further enhance its search engine with AI. Glick worries about a situation in which there are only a few players in AI that have complete control, thus eliminating competition.
Google CEO Sundar Pichai has been vocal about the profound need for regulation of AI (in contrast to former CEO Eric Schmidt, who told the government to stay out of it). However, critics are asking just what kind of regulation he wants. “Google says it wants to be regulated, but you have to be cautious about the motives,” notes Glick. “They don’t want the end of humanity, okay, but you can be sure they also want to preserve their dominance.”
So far, it appears that anyone attempting to challenge that dominance is up for a David v. Goliath battle.
Nevertheless, Glick sees hopeful signs in an increased willingness to fight powerful interests on the part of the DOJ and the FTC. “They have been very courageous in the face of massive opposition from antitrust conservatives in law firms and universities as well as big company lobbyists and Republican lawmakers. But they also have their fans.” Glick hopes there will be new antitrust legislation. But so far, he warns, “the antitrust bills aren’t getting through, and too many judges are willing to accept the arguments of the Big Tech companies.”
Indeed, constraints on big business have been so lacking in recent decades that some have come to accept Big Tech monopolies as normal. Yet Glick emphasizes that American history shows that change can happen quickly and monopolistic companies can be taken on successfully – think of the Progressive era and the New Deal.
Glick thinks that people are getting fed up with a few monopolists that dominate many markets and make huge profits: “There seems to be a shift happening.” As he sees it, people are realizing that Google makes it hard for other companies to do business and for customers to get the best service and products. “Hopefully a new consensus will emerge that will support the efforts of the FTC and DOJ to open up these markets,” says Glick. “They may lose some cases but their continued persistence can make major inroads in the long run.”
Glick holds that the model for antitrust policy should be Roosevelt’s New Deal policy consensus, which lasted from approximately 1933 to the middle 1970s. “After this period of relative balance, along came a movement to undo the consensus. You had the Chicago School and conservative think tanks like the Heritage Foundation. Conservative professors at law schools started to get funding.” Glick sees another movement taking shape to challenge the free market ideology of recent years. “It’s good to see people like FTC chair Lina Kahn and Jonathan Kanter at the DOJ. President Biden really did put in the right people.”
Losing cases might not be the outcome many hope for in the current challenges against Google, but if Glick is right, each case moves the ball forward in restoring balance to the American economy. New cases come along, keeping the company’s activities in the public eye. Even if Google wins the search engine case, the company’s monopoly status could still be the loser in the long run. And that’s good for everyone – even Google.
Note
[1] Srinivasan’s research, as her paper records, was partially supported by INET.
