The US Department of Justice on Tuesday filed a landmark lawsuit against Google that accuses the tech giant of in search and search advertising, the culmination of a more than yearlong investigation into alleged anticompetitive practices at the company, and the first such antitrust case in the tech world in decades.
The federal government alleges that Google violated antitrust laws to act as a “gatekeeper” to the internet. The complaint says the company unlawfully blocked out competitors by reaching deals with phone makers including Apple and Samsung to be the preset, default search engine on devices. Google also abused the dominance of its Android operating system to strong-arm manufacturers to preload Google’s apps onto phones, the lawsuit alleges.
“As the antitrust complaint filed today explains, [Google] has maintained its monopoly power through exclusionary practices that are harmful to competition,” Jeff Rosen, US deputy attorney general, told reporters on a conference call. “If the government does not enforce the antitrust laws to enable competition, we could lose the next wave of innovation. If that happens, Americans may never get to see the next Google.”
Eleven states, all with Republican attorneys general, are joining the lawsuit as plaintiffs: Arkansas, Florida, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Montana, South Carolina and Texas.
The lawsuit marks the latest in a series of moves by the US government to put big tech under a more intense microscope. It also represents a reversal from the attitude of Silicon Valley companies from just a few years ago, when the likes of Google and Facebook were hailed as American success stories and darlings on Wall Street. Now, that dominance has turned against these companies.
Google’s power stems from its massive digital ad business, a juggernaut that brings in about 85% of the company’s roughly $160 billion in annual sales. That operation is fueled by the namesake search engine, which processes around 90% of searches done online around the world and is considered some of the most prime real estate on the internet.
The tech giant denied it has engaged in anticompetitive behavior. “Today’s lawsuit by the Department of Justice is deeply flawed,” Kent Walker, Google’s senior vice president of global affairs, said in a blog post. “People use Google because they choose to, not because they’re forced to, or because they can’t find alternatives.”
The DOJ said it’s exploring several different remedies. “Nothing is off the table,” Ryan Shores, an associate deputy attorney general, said on the conference call.
Google’s antitrust legal woes may be just beginning. Separate from the DOJ announcement, seven states including New York and Colorado said they plan to conclude parts of their own investigations into Google in the “coming weeks.” If they file a complaint, they’ll file a motion to consolidate it with the Justice Department case, they said.
A ‘Code Red’ scenario
Tuesday’s suit against Google is the highest-profile case the US has brought against a tech company since the 1990s, when the Justice Department and a collection of states accused Microsoft of a monopoly in the PC software market. The two sides settled in 2001.
The DOJ lawsuit comes as tech giants face a reckoning over their size and influence. Legislators and regulators are concerned over how that power might ultimately harm consumers, especially by choking off competition from smaller players in Silicon Valley. Aside from Google, rivals Apple, Amazon and Facebook are also under investigation by federal regulators and lawmakers. In July, Google CEO Sundar Pichai appeared virtually at a before the House Judiciary Antitrust Subcommittee, alongside Facebook CEO Mark Zuckerberg, Amazon CEO Jeff Bezos and Apple CEO Tim Cook.
The subcommittee released its findings in aearlier this month, accusing the tech giants of “abuses of monopoly power.” For Google, much of the scrutiny was directed at the company’s alleged promotion of its own products over those of rivals. “Evidence shows that once Google built out its vertical offerings, it introduced various changes that had the effect of privileging Google’s own inferior services while demoting competitors’ offerings,” the report says.
Google has faced scrutiny from federal regulators in the past. In 2013, the Federal Trade Commission wrapped up a two-year investigation into Google after allegations of biased search results. The agency, however, decided unanimously that Google wasn’t violating antitrust laws.
Tuesday’s lawsuit, though, heavily criticizes Google’s business contracts with outside partners. The complaint says the tech giant “locks up” search distribution on Android, which powers almost nine out of every 10 smartphones shipped globally.
The lucrative contracts have even spurred Google and Apple, two bitter rivals, to work in harmony. Google’s biggest smartphone deal is with Apple, paying the iPhone maker $8 billion to $12 billion in ad revenue a year to make Google search the default on Apple devices. In 2018, Pichai and Cook met to discuss how they could work together to drive revenue, the lawsuit said. After the meeting, an Apple employee wrote to a Google employee, “Our vision is that we work as if we are one company.”
The deal extremely is beneficial to both companies: The lawsuit says the agreement accounts for 15% to 20% of Apple’s annual profits. The suit also says almost half of Google’s search traffic last year came from Apple devices. The deal is so important that Google views losing it as a “Code Red” scenario, according to the DOJ’s complaint.
In a lengthy blog post, Google’s Walker denied any wrongdoing when it comes to the search deals it makes with other companies. Google, which spends billions of dollars a year on those deals, compared the practice to a cereal brand paying for “eye level” placement on a grocery store shelf, instead of having the product stocked on a lower shelf.
“On mobile, that shelf is controlled by Apple, as well as companies like AT&T, Verizon, Samsung and LG,” Walker wrote. “On desktop computers, that shelf space is overwhelmingly controlled by Microsoft.”
A ‘nonpartisan’ fight
Inside the DOJ, the timing of Tuesday’s lawsuit had reportedly become the source of in-fighting. Most of the lawyers on the probe argued they needed more time to build a strong case against Google, but Attorney General William Barr is said to have overruled their guidance, according to The New York Times. Some of the attorneys were concerned the aggressive timeline, with work completed before the election, was to ensure the Trump administration gets credit for taking on a big tech company.
Lawmakers on both sides of the aisle applauded the DOJ complaint, though Sen. Amy Klobuchar, a Democrat from Minnesota, scrutinized its timing. “For years we have heard complaints that Google has used its dominance in online search markets to undermine rivals and limit competition,” Klobuchar said in a statement. “I am pleased that the Justice Department is finally taking action, but I hope the questionable timing of the suit so close to the election doesn’t undercut the work that must be done for American consumers in the weeks and months ahead.”
Sen. Josh Hawley, a Republican from Missouri, also praised the case. “Today’s lawsuit is the most important antitrust case in a generation,” he said in a statement. “Google and its fellow Big Tech monopolists exercise unprecedented power over the lives of ordinary Americans, controlling everything from the news we read to the security of our most personal information.”
The DOJ’s Rosen said the lawsuit is “nonpartisan” and strictly about antitrust — not about the “skew” or “bias” of social media platforms. Alleged anti-conservative censorship has been a familiar refrain among Republicans. Pichai, as well as Zuckerberg and Dorsey, arelater this month about Section 230 of the Communications Decency Act, a rule that shields tech companies from legal liability for content on their platforms.
Google’s antitrust issues aren’t limited to the US. Last March, the search giant was hit with a $1.7 billion fine from the European Commission for “abusive” online ad practices. The Commission said Google exploited its dominance by restricting its rivals from placing their search ads on third-party websites.
Two years ago, the EU’s executive arm fined Google a record $5 billion for unfair business practices around Android, its mobile operating system. Like the DOJ’s complaint on Tuesday, the investigation zeroed in on Google’s deals with phone manufacturers, requiring them to preload specific Google apps and services onto Android phones.
CNET’s Carrie Mihalcik contributed to this report.