The U.S. v. Google: A preliminary analysis in ten points

Like many antitrust lawyers, yesterday I spent most of my evening reading the DoJ complaint against Google. Although I need to read again several parts, here is my preliminary analysis summarized in ten points:

1. This is not a political case of the type some predicted. It has nothing to do with Google search being allegedly biased against conservative views. This is a real antitrust case dealing with traditional issues, such as exclusionary contracts and tying.
2. This is not a new or novel case. Many of the issues at stake in this case were concerns already looked at by the European Commission a decade ago. See, for instance, the Commission’s press release opening proceedings against Google in November 2010, which already the following: “The Commission’s probe will additionally focus on allegations that Google imposes exclusivity obligations on advertising partners, preventing them from placing certain types of competing ads on their web sites, as well as on computer and software vendors, with the aim of shutting out competing search tools.” (emphasis added) The Commission’s case then morphed into what became the Google Shopping case, which focused on self-preferencing.
3. The European Commission, however, focused on the type of exclusionary agreements, including contractual tying that are at the very core of the DoJ complaint (see §§ 52 et seq.) in its Google Android case, which was decided in 2018. Note that I had already discussed these issues in a 2016 paper co-authored with my friend B. Edelman (then at Harvard Business School). In that paper, we described in painstaking details the various anticompetitive agreements concluded by Google with its Android licensees (i.e., the Anti-Fragmentation Agreement, the Mobile Application Distribution Agreements and other revenue-sharing agreements) and concluded they were anticompetitive. I feel vindicated that after the European Commission, the DoJ now agrees.
4. Besides the Android-related agreements, the DoJ complaint discusses at length Google’s revenue-sharing agreement with Apple, whereby Google pays Apple $8-12 billion per year (!) to make its search engine the default on Safari, and use Google for Siri and Spotlight. If this agreement was to be found in breach of U.S. law, Apple could take a major hit as the DoJ estimates that the revenues Google shares with Apple make up approximately 15-20 percent of Apple’s worlwide net income.
5. Interestingly, and this is something new, the complaint also looks at Google’s efforts to control the next generation of search distribution channels, including smart watches, smart speakers, smart TVs, and connected automobiles (see §§160 et seq.). The European Commission might also be looking at these issues in the context of its sector inquiry on IoT.
6. Unless I missed something, it seems that the one precedent cited by the complaint is U.S. v. Microsoft. The complaint also says that Google claimed that “Microsoft’s practices were anticompetitive, and yet, now, Google deploys the same playbook to sustain its own monopolies.” This led some observers to say that this case is a copycat of the Microsoft case. There are certainly similarities, but also important differences. For instance, Microsoft was a case of technical tying, where the present case deals with contractual ties.
7. Some say that this complaint comes too late as the search market has tipped. True and the FTC should be ashamed of having dropped its investigation in 2012 as it would have made a difference. Now, in its request for relief the DoJ request the Court inter alia to “enter structural relief as needed to cure any anticompetitive harm“. Structural relief means divestment(s), not the sort of weak (and largely unimplemented) remedies adopted by the European Commission. Competition will not be restored by merely prohibiting the anticompetitive agreements in question. That may have been sufficient if the FTC had intervened in 2012. At this stage, structural remedies are needed.
8. The DoJ complaint does not deal with ad tech where there again Google has monopolised several markets (ad serving for publishers, ad intermediation, etc.) through a combination of anticompetitive conducts as Dimitrios Katsifis and I have demonstrated here, here, and again here. But this does not mean that Google will escape scrutiny as its conduct in ad tech may be subject to a further complaint by the DoJ, perhaps with some States. States may also decide to go alone.
9. Google’s response was immediate. In a blog Post, Kent Walker, Google’s SVP of Global Affairs, declared that the DoJ action was a “deeply flawed lawsuit that would do nothing to help consumers“. Walker inter alia claims that “people don’t use Google because they have to, they use it because they choose to“. Perhaps, but there is a tension between this argument and the fact that Google is willing to pay $8-12 billion to to make Google’s search engine the default on Safari, and use Google for Siri and Spotlight. That seems a lot of money to promote a product that Apple users would in any event select.
10. Of course, Google will keep kicking the can down the road, by denying every claim, appeal any adverse decision, etc. as it has done over the years. But a DoJ lawsuit is serious business, for once exposing Google to drastic remedies.