Google loses landmark US antitrust case over search dominance

By Stefania Palma in Washington, Stephen Morris and Michael Acton in San Francisco

A US federal judge has ruled that Google spent billions of dollars on exclusive deals to maintain an illegal monopoly on search, in a landmark win for the Department of Justice as it seeks to rein in Big Tech’s market power.

Amit Mehta, the judge who presided over the four-year-old case in the Washington, called Google a “monopolist” in a 286-page decision on Monday that found the company had violated US antitrust law.

The ruling follows a weeks-long trial in which the DoJ argued the search giant paid tens of billions of dollars a year for anti-competitive deals with wireless carriers, browser developers and device manufacturers — and in particular Apple. These payments, which cemented Google as the default search engine, totalled more than $26bn in 2021, according to the decision.

Google — which handles more than 90 per cent of online queries and whose name has become synonymous with search — argued that it did face fierce competition in the sector and its success was driven by the quality of its products.

US attorney-general Merrick Garland called the ruling a “historic win for the American people. No company — no matter how large or influential — is above the law.”

Jonathan Kanter, head of the DoJ’s antitrust division, said the “landmark decision holds Google accountable” and “paves the path for innovation for generations to come and protects access to information for all Americans”.

Kent Walker, president of global affairs at Google parent Alphabet, said the company would appeal against the ruling. The decision “recognises that Google offers the best search engine, but concludes that we shouldn’t be allowed to make it easily available”.

The proceedings will now enter a second phase in which the court will determine what remedies Google needs to take. The DoJ has not yet indicated what penalties it would seek, but it may focus on curbing Google’s ability to strike the deals at issue in the case.

The decision is the biggest win against Big Tech by US antitrust enforcers in decades. They have filed a series of big cases striking at the core of their power in recent years — the DoJ’s antitrust division, led by Kanter, has sued Apple and has a second case pending against Google, accusing it of allegedly exercising monopolistic control of the digital advertising market. The second Google trial is set to begin next month.

The Federal Trade Commission, chaired by Big Tech critic Lina Khan, has also filed lawsuits against Amazon and Meta.

Google’s years-long agreement with Apple to make it the default search engine on the iPhone’s Safari browser has long drawn scrutiny. Unsealed court documents showed that Google paid Apple $20bn in 2022 alone. This would amount to a substantial portion of Apple’s $85bn-a-year services business, which includes its App Store and Apple Pay. Apple, which is not a defendant in the case, did not immediately respond to a request for comment.

Also at issue in the case were contracts the tech giant reached over the years with browser developer Mozilla, Android smartphone makers Samsung, Motorola and Sony, and wireless carriers AT&T, Verizon and T-Mobile.

Mehta said the “sheer magnitude of Google’s query volume . . . compared to rivals is startling”.

The ruling strikes at the heart of Google’s most prominent business. The company made $175bn in revenue from its search-based advertising last year, more than half its $307bn of total revenue. By comparison, Microsoft’s Bing makes about $12bn from search ads with a less than 5 per cent market shares

Google’s “distribution agreements foreclose a substantial portion of the general search services market and impair rivals’ opportunities to compete”, Mehta said in the ruling. “Google has not offered valid pro-competitive justifications for those agreements.”

The deals deny competitors “scale”, he argued, which is “the essential raw material for building, improving, and sustaining a” general search engine. Google benefits from a “feedback loop” in which parties “routinely renew” exclusive distribution deals with the company, Mehta added. “That is the antithesis of a competitive market”.

However, Mehta also found that Google did not have monopoly power in the search advertising market as plaintiffs had alleged.

The judge separately faulted the company for “the lengths to which Google goes to avoid creating a paper trail for regulators and litigants”, but stopped short of penalising it for the behaviour, reasoning that it was not necessary to find Google guilty. Mehta noted that his decision “should not be understood as condoning Google’s failure to preserve chat evidence”.

Shares of Alphabet closed 4.6 per cent lower on Monday amid a broad sell-off in US markets.

Source: The Financial Times