On the 12th of September, 2023, a landmark event of great significance unfolded in a Washington, D.C. federal district court. This event marked the commencement of what can aptly be described as the most substantial U.S. technology antitrust trial in several decades. In the case of U.S. v. Google, a legal clash of monumental proportions is taking place. The plaintiffs, comprising the U.S. Department of Justice (DOJ) and 38 state and territory attorneys general, have levied allegations against Google. These allegations revolve around the purported violation of Section 2 of the Sherman Act, a venerable piece of antitrust legislation originally enacted in the year 1890.
Now, the Sherman Act, in its wisdom, stands as a guardian against exclusionary practices that aim to uphold monopolistic dominance. The crux of the matter put forth by the DOJ and the state attorneys general is that Google, in its operations related to certain internet search services, has indeed engaged in such exclusionary practices. As is often the case in legal proceedings of this magnitude, the scope of the case had been meticulously narrowed in the months leading up to the commencement of the trial. It is incumbent upon us to provide a comprehensive overview of the pivotal questions that are currently under scrutiny in this trial, a proceeding anticipated to extend over several months.
First and foremost, a question of paramount importance revolves around the nature of Google’s browser agreements. Google has entered into these agreements with tech giants like Apple and Mozilla, wherein Google assumes the role of the default search engine for the web browsers provided by these esteemed companies. To illustrate, in the context of Apple, this arrangement translates to a scenario where an individual who acquires a new iPhone, launches the Safari web browser, and enters a query into the search bar will, by default, receive search results from Google. In return for this privilege of being the default search engine, the web browser providers receive a share of the advertising revenue generated from these searches.
The pivotal inquiry here is whether these agreements can be deemed as truly exclusive. Google ardently contends that they are not, putting forth the argument that consumers can easily alter the default settings should they desire to employ a non-Google search engine. The DOJ, on the other hand, rebuts this stance, asserting that the effort and knowledge required to effect such a change serve to bias users toward adhering to the default option.
A crucial juncture in this legal saga was reached in August 2023 when Judge Amit Mehta rendered a ruling pertaining to summary judgment motions. In his wisdom, Judge Mehta observed, “It is best to await a trial to determine whether, as a matter of actual market reality, Google’s position as the default search engine across multiple browsers is a form of exclusionary conduct.” This investigation will encompass not only the question of whether these browser agreements are inherently exclusive but also whether they function in a de facto exclusive manner, a phenomenon driven by contextual factors such as market dynamics and incentives.
Concurrently, there exists a related quandary: To what extent can any exclusivity associated with these browser agreements be attributed to the forces of market competition? Google posits that its position as the default search engine for browsers offered by Apple and Mozilla was secured through fair competition and the preference of consumers, asserting that it was not achieved through anticompetitive or exclusionary means. The DOJ counters this by contending that the mere presence of multiple bidders does not transform an anticompetitive agreement into a permissible one.
Moving on, another critical area of inquiry pertains to Google’s agreements concerning Android devices. Android, as of December 2022, stands as the world’s most widely adopted mobile operating system, commanding a global market share of approximately 72%, in stark contrast to iOS, which accounts for about 27%. In the United States, the Android market share as of December 2022 was approximately 44%, while iOS held around 56%. Google has forged agreements with prominent mobile device manufacturers that produce Android-based phones, making Google the default search engine on these devices. Similar agreements are in place with cellular wireless network providers who distribute Android phones.
In the realm of Android antitrust matters, Google enters into two distinct types of agreements: Mobile Application Distribution Agreements (MADAs) and Revenue Share Agreements (RSAs). A MADA is essentially a nonexclusive arrangement that permits an Android device manufacturer to preinstall a suite of Google apps, including the Google search engine and the Chrome browser. Notably, since MADAs are nonexclusive, they allow device makers to also preinstall non-Google search apps. RSAs introduce an additional layer of complexity to the equation. When a device maker or wireless carrier enters into an RSA, they are obliged to make Google the exclusive, preinstalled search app on the device. In essence, they are prohibited from preinstalling any competing search app.
The presence of revenue-sharing arrangements in RSAs introduces a potent economic incentive, and due to the linkage between MADAs and RSAs, the plaintiffs argue that MADAs, despite being nonexclusive on paper, effectively transform into exclusive contracts. Google counters this argument by emphasizing that MADAs retain their nonexclusive nature, and it is entirely within the discretion of device makers and wireless carriers to choose, or opt out of, the exclusive relationship mandated by RSAs.
Now, if it were determined that these agreements are indeed exclusive in nature, the next critical query emerges: To what extent do they foreclose upon the market? It is important to note that a finding of exclusivity does not ipso facto constitute a violation of antitrust laws. As elucidated by the D.C. Circuit in a 2001 decision, “Permitting an antitrust action to proceed any time a firm enters into an exclusive deal would both discourage a presumptively legitimate business practice and encourage costly antitrust actions. Because an exclusive deal affecting a small fraction of a market clearly cannot have the requisite harmful effect upon competition, the requirement of a significant degree of foreclosure serves a useful screening function.”
Hence, one of the core questions before the U.S. v. Google trial revolves around the magnitude of market foreclosure, should these browser and/or Android agreements be adjudged as exclusive. As expected, the parties in contention hold divergent positions on this matter. The DOJ contends that the foreclosure is indeed substantial, while Google vehemently disputes this, presenting its own perspective on the issue. Additionally, the parties are at odds regarding the methodology that should be employed to ascertain the answer to this pivotal question.
Beyond these substantive inquiries, it is imperative to consider the delineation of the relevant market. In the realm of antitrust examination, identifying the relevant market is a prerequisite. The DOJ, when addressing the perspective of internet users (as distinct from advertisers), asserts that “general search services” constitutes the relevant market. In their view, this market encompasses offerings such as Google search and Bing. Significantly, the DOJ deliberately excludes “specialized search services or other websites that are limited to specific topics, such as discounted hotels or airline fares,” on the grounds that they do not fall within the purview of this category. To elucidate, while Yelp might be an adept guide for locating a pizzeria, it is not equipped to provide assistance when it comes to medical symptoms, such as those of strep throat.
Contrarily, Google contends that the relevant market for search extends beyond the confines of “general search engines.” Google argues that by defining the relevant market solely in terms of general search engines, the plaintiffs distort the commercial reality. Users
, Google posits, routinely substitute other search providers for general search engines depending on their specific needs, citing examples such as Amazon for shopping queries or Expedia for travel-related searches. This disagreement sets the stage for an exploration of the competing narratives regarding the definition of the relevant market for internet search and, separately, for search advertising.
In addition to the abovementioned facets, the court will also delve into allegations made by state and territory attorneys general (though not the United States itself) concerning a Google marketing tool known as Search Ads 360. These allegations revolve around its alleged anticompetitive utilization in the realm of advertising. Regardless of the specifics of the questions to be addressed at trial, U.S. v. Google holds monumental implications for the technology sector. This trial stands as a pioneering endeavor, being the first major U.S. trial to scrutinize antitrust issues in the context of the contemporary Big Tech landscape.
It is imperative to recognize that the ruling rendered by the current district court trial will not mark the culmination of this legal saga. Almost inevitably, the non-prevailing party will seek recourse through the appellate process, specifically the D.C. Circuit. Irrespective of the ultimate outcome, it is certain that there will be impassioned calls for change. A victory for Google may trigger claims that the pace of technological evolution has outstripped the reach of antitrust law. Conversely, a triumph for the DOJ would give rise to assertions that antitrust law is being applied and interpreted in an unduly expansive manner. Thus, the ramifications of U.S. v. Google resonate far beyond the confines of the courtroom, influencing the contours of the modern technological landscape and the principles that govern it.