How the Google Antitrust Ruling may influence tech competition
A federal judge ruled that Microsoft had abused its monopoly power over its Windows operating system at the time and ordered the company to be split up. The breakup was reversed by the appeals court, but key legal conclusions were upheld. And Microsoft was prohibited from forcing restrictive contracts on its industry partners and ordered to open some of its technology to outsiders — preventing the company from single-handedly controlling the internet.
More than two decades later, a ruling in a Google antitrust case similarly promises to shape new rules for the tech industry. Judge Amit P. Mehta of U.S. District Court for the District of Columbia found on Monday that Google had violated antitrust laws by stifling rivals in internet search to protect its monopoly.
Google’s loss could have major ripple effects for competition today. Apple, Amazon, and Meta have also been accused of violating antitrust law by promoting their own products and acquiring smaller competitors on the platforms that they run. Judge Mehta’s ruling is “a prediction of what other courts may do,” said Rebecca Haw Allensworth a Vanderbilt University professor who studies antitrust. You can expect that other judges will read this opinion and take it into consideration. In Judge Mehta’s 277-page judgment, Microsoft appeared on 104 pages, both as an aspiring rival to Google and as a legal precedent.
Google has said it will appeal the ruling. The court asked Google on Monday to meet with the government to discuss a possible remedy for the case before a meeting on Sept. 6.1001010After many years of little enforcement of antitrust laws, antitrust activism has exploded in recent years, first with the Trump administration, and then with President Biden. Jonathan Kanter and Lina Kanter, the heads of antitrust enforcement for the Justice Department and Federal Trade Commission have sued other tech giants on allegations that they are monopolies engaging in illegal corporate behaviour. The Sherman Antitrust Act, originally designed for Standard Oil, is still being challenged to be applied in the modern industrial environment with the new technology. And both agencies have sought to test the old law by applying new legal arguments when it comes to the tech giants.
Without major cases, “the law will stagnate,” Mr. Kanter said in a speech in 2022. “Congress designed the antitrust law so that it would play out in court.”
In 1990, Microsoft was the dominant digital platform. Its Windows software controlled the experience of users of more than 90% of personal computers. Google has a similar grip on internet searches today. Regulators brought the suit against Microsoft after it waged a campaign in order to crush Netscape, a pioneering commercial browser company. Microsoft used contracts to intimidate PC makers into not offering Netscape. Some antitrust experts say that the time, money, management attention, as well as adverse public scrutiny, had a deterrent effect, moderating Microsoft’s behavior. The time, money and management attention spent, as well as the adverse public scrutiny, some antitrust experts say, did have a deterrent effect, moderating the company’s behavior.
That prevented Microsoft from controlling the development of the internet, said Fiona Scott Morton, an economics professor at the Yale University School of Management.
“The goal is to open a path for future innovation,” she said.
On Monday, Judge Mehta found that Google had broken the law through its exclusive deals with Apple, other device makers and browser companies to make Google’s search engine the automatic selection.
Judge Mehta praised the company for its engineering skill and investment in search. “But Google,” he wrote, “has a major, largely unseen advantage over its rivals: default distribution.”
The Google ruling is significant because “it applies to big tech platforms the notion that while you can be dominant, you can’t abuse that dominance,” said Bill Baer, a former top antitrust official in the Justice Department.
Unlike Microsoft, Google is a pure internet company with a very different business model, relying mainly on advertising rather than software licensing.
In the Google case, as in Microsoft’s, the court found that contracts illegally excluded rivals. Google’s contracts were more carrot-than-stick, with generous payments instead of threats. In the Google case, it was said that data is a vital asset. The more user queries that flow through a search engine, the more data that is collected and then harnessed to improve search results, attracting still more users and generating more data.
“At every stage of the search process,” Judge Mehta wrote, “user data is a critical input that directly improves quality.”
Google’s multibillion-dollar default deals ensured that the company had a huge data advantage in search, the government claimed. The government also presented behavioral economics studies that concluded that people rarely changed the default settings, even though it was not a difficult technical task. Google was unable to explain why it paid such a high amount to gain preferred distribution when its search software is clearly the best. Those payments made sense, the government insisted, to ensure that Google was the winner, with its monopoly entrenched.
“That’s how the government told the story, and it’s a pretty convincing story,” said Herbert Hovenkamp, an antitrust expert at the University of Pennsylvania’s Carey Law School.
Judge Mehta will now decide what remedial steps he should order to open the search market to greater competition and new innovators.
Even before his ruling, antitrust experts offered a flurry of recommendations. They run the gamut from prohibiting Google from striking exclusive deals for search distribution and sharing its search data with competitors to splitting off Google’s Chrome browser or its Android mobile operating system.
“This is the first significant monopolization case against one of the dominant digital companies — it’s super-important in that sense,” said Nancy Rose, an economist at the Massachusetts Institute of Technology.
David McCabe contributed reporting.
