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The New Google Suits

Just before the holidays, 44 states filed two separate lawsuits alleging that Google violated the Sherman Act and 16 separate state statutes. The lawsuits, totaling 245 pages, seek to dismember the company and force it to pay perhaps hundreds of billions of dollars in treble damages. In a nutshell, the suits focus on two main themes:  Google has attempted to monopolize the online search engine market (“the search lawsuit”), and Google has attempted to monopolize the online advertising market (“the ad tech lawsuit”). 

The search lawsuit, led by Colorado, largely tracks an earlier lawsuit filed by the Department of Justice. It alleges that Google unlawfully maintains monopolies through exclusionary contracts that require computer and mobile device manufacturers to set Google as the default search engine and to preinstall Google applications. Like DOJ, the states charge that Google is using exclusive contracts to monopolize the search components of the Internet of Things, such as automobiles and voice assistants, and that Google’s algorithms disadvantage specialized search competitors, like Yelp and Expedia.

The ad tech lawsuit, led by Texas, alleges that Google improperly monopolizes online advertising by manipulating auctions in its favor, colluding with Facebook, and pressuring advertisers to use its full suite of ad tools. At its core, the lawsuit alleges that Google uses its size to give it unfair competitive advantages in placing ads. For instance, the suit claims that Google promised advertisers that its tools would let them place ads on competing engines and exchanges, but actually tilted the playing field in its own favor. According to the complaint, Google gave Facebook preferential treatment and more data, in exchange for Facebook’s agreement to limit competition for advertising auctions. Similarly, the states allege that Google “uses its market power to withhold YouTube inventory from competing buyside ad buying tools, forcing advertisers to use Google’s tools in order to purchase ad space from the leading provider of video inventory in the United States.”

The lawsuits raise numerous complex factual and legal issues that likely will take years to sort out. Even at this early stage, however, a few points become clear.

These lawsuits, along with two suits against Facebook, firmly move the antitrust debate from Congress to the courts. Many reformers, particularly on the left but also on the right, are seeking to expand the scope of antitrust law. Some proposals would force companies to separate into single lines of business, hamper certain firms’ ability to acquire other companies, and even have antitrust law take into account amorphous values like “fairness” and “democratic ideals.” With these lawsuits pending, Congress is less likely to enact major antitrust legislation. Many reformers, such as House Judiciary Chairman Jerrold Nadler, praised the lawsuits as an “important step” in preserving competition online. Given that the existing laws, as written, may well allow the courts to address any competitive concerns, antitrust reformers will have a harder time persuading their colleagues that Congress must overhaul the antitrust laws now. At the very least, given that the most significant antitrust cases in two decades are now in the courts, Congress should take a deep breath before trying to rewrite a century of antitrust law.

The lawsuits challenge the idea that vertical integration benefits consumers. Google both places ads for advertisers and sells advertising space for most of the world’s ad-supported websites. Google operates the most popular general search engine and many properties, such as YouTube and map apps, that attract millions of eyeballs. Google’s popularity gives it an upper hand in the ad search market; Google offers tools to assist advertisers in evaluating consumer interactions and serves as an intermediary between the ad exchanges for publishers and its own online ad servers. In the states’ telling, Google abuses its breadth by “tying” together these offerings, which “coerces” advertisers and publishers into accepting all of its offerings and paying higher prices in order to reach, or have better chances of reaching, the millions of eyeballs otherwise not accessible to those looking for more direct deals with other networks. At least in theory, this conduct could violate the antitrust laws: in this narrative, Google’s use of its search market power qualifies as a tying violation when Google (allegedly) restricts customers’ ability to advertise on Google’s most popular offerings, like YouTube, unless those customers also use Google’s full suite of products. Google likely will counter that its integrated offerings benefit its customers through lower prices and efficient services, and in any case, that Google has every right to give preferential treatment to customers who use more of its services. While the facts will come to light over time, in general, tying claims are notoriously difficult to prove in court, and economic research suggests that vertical integration benefits consumers. The antitrust agencies agree with this principle.

The lawsuits attempt to define away the broader competitive landscape. Most antitrust lawsuits hinge on the definition of the market: the narrower the market, the easier it is to argue that a company has the market power to charge higher prices. In these cases, the states define the relevant markets as narrowly as an election margin in Wisconsin. For instance, the states define the advertising market to exclude TV, radio, print, and outdoor advertising, and the search market to exclude specialized search engines and social media advertising. Indeed, the ad tech lawsuit alleges that YouTube dominates the market for “online instream video advertising,” which comes close to alleging that YouTube dominates the market for YouTube. In reality, advertisers can reach consumers at many other websites that stream videos, including Facebook, Flickr, TikTok, Twitch, Twitter, Dailymotion, Snapchat, and even MySpace, which still receives fifteen million views monthly.

The lawsuits attempt to fix an industry that, by many metrics, is already very competitive. Online ad fees are falling, overall ad prices are declining, and output is rising. From 2010 to 2019, domestic spending for online digital advertising quintupled, from $26 billion to nearly $130 billion. Over the same period, Internet advertising costs declined by nearly 40%. In general, these characteristics epitomize a competitive marketplace, not one dominated by a monopolist (monopolists tend to reduce output and raise prices in order to maximize their revenue).

The courts will have to sort through many hotly contested facts. In perhaps the most tantalizing charge, the states accuse Google of colluding with Facebook to limit competition for advertising auctions, to the benefit of both companies. Google counters that Facebook receives no preferential treatment, that dozens of other companies bid in the same auctions, and that Google has made no secret of its agreement with Facebook. As much of the states’ complaints are redacted, time will tell whether the states have identified facts that support a viable antitrust theory.

In another contentious charge, the states allege that Google intentionally limits competition from specialized vertical providers in certain market segments like travel, home improvement, and entertainment, by “limiting those firms’ ability to acquire customers.” So, for instance, the charge is that Google downgrades the search visibility of companies like Expedia and TripAdvisor in order to benefit its own properties. Google counters that its search results preference the businesses themselves, rather than middlemen, thereby allowing businesses to connect directly with their customers. On this point, Google may receive some support from … the Federal Trade Commission. In 2013, the FTC looked into the alleged search bias and concluded that Google’s search tools “likely benefited consumers,” finding that Google designed its search tools to provide quality results, not to stifle competitors. The courts will have to sort through whether the FTC got it right then, whether anything material has changed, and whether Google designed its search algorithms to harm competition or simply to provide individuals with the results that Google thinks they want.

Before the lawsuits conclude, real-world events likely will bring more competition to the marketplace. Including appeals, the state lawsuits likely will take two or three years to play out. Maybe longer. By that time, the competitive landscape could look very different. Reports suggest that Apple is planning to turn Siri into an independent search engine, instead of a voice for Google searches; if so, three of the world’s largest tech companies will compete vigorously in the general search market. A fourth company, Amazon, already has surpassed Google in product searches, where search engines earn almost all their money. Walmart, no competitive slouch, recently launched its own self-serve ad platform. Beyond existing competitors, smart TVs soon could offer personal advertising, European regulators are actively seeking to boost their tech companies by hobbling their American rivals, and Chinese companies continue to invest strategically in nascent technologies. 

As has happened so often throughout the last century, the marketplace likely will move much faster than the court system, particularly in as dynamic an industry as technology. Today’s competitive landscape may seem quaint by the standards of, say, 2025, much as 2008’s landscape, dominated by MySpace and AOL, seems quaint today.  Thus, while the lawsuits certainly bear watching, the real guarantor of competition is likely happening outside the courtroom.

Reader Discussion

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on January 13, 2021 at 09:20:11 am

This article is merely more political apologetics couched as Agarwal's legal explanations of the intricacies of antitrust litigation. In Agarwal's prior article for L&L his apologetic deflection was, in effect, "Leave Big Tech to the courts and the legal process of antitrust." As Agerwal said then, "The review of Big Tech’s business practices will do better in deliberate judicial proceedings rather than frenzied, politicized congressional hearings.''

Now Agerawl's apologetic deflection is different. He says that the judicial challenges will be very slow, unavoidably complicated, and unlikely to produce a useful outcome. Thus, he now argues that, not fruitless litigation, but rather, market competition is all that's really needed and that through the ongoing process of "Competition Among the Titans" the problems of Big Tech (which Agerwal fails to note are America's problems) will take care of themselves. Just allow the unbridled power of competition to work its magic, and all will be well.

Balderdash to both apologias!

What's missing in articles that seek to deflect attention from Big Tech's crimes (and, alas, what's also missing in everything which L&L has published on the matter of Big Tech) is any recognition of the existential threat of Big Tech (not just Google) 1) to the natural right to know and to speak of 331 million Americans who are information consumers and purveyors and 2) to the survival of liberty in our constitutional republic. These existential threats have at least these components: 1) consumers' access to information, 2) consumers' property rights in their personal information, 3) consumers' freedom to communicate, and 4) consumers' freedom to exercise the right to vote without unknowing influence, interference and obstruction.

If antitrust law does not address each component of Big Tech's existential threats to America's information consumers and to the republic in which they live, communicate, work and vote, then antitrust law must be amended and updated. If the pending antitrust litigation against Big Tech cannot bludgeon Big Tech into submission (it can't), then through federal legislation we must must draw and quarter this mortal enemy of America, and through federal legislation we must then seek restitution of the people, so as to right the grievous political wrongs which Big Tech has committed against the citizenry.

The constitutionally-protected liberties of the people, their rights to speak, assemble, petition, socialize and work free of government intrusion, mean little if those liberties can be curtailed by private corporate entities. America must rid itself of specially-privileged, specially-shielded, supra-legal, corporate powers which are empowered to control elections, decide public policy, silence their critics and destroy their opposition, undermine the republic and hurt the people, while obscenely enriching their private owners.

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paladin
on January 13, 2021 at 13:41:08 pm

“Balderdash to both apologias!”

True, for censorship is, what censorship does.

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N.D.
on January 13, 2021 at 12:11:09 pm

Agree wholeheartedly with Paladin. I would only add this small edit:
"... mean little if those liberties can be curtailed by private corporate entities"
ARE they truly private entities? As we have observed in the last several days. the Titans of Tech have responded quite readily and expeditiously to the demands of the Democrat party that all voices opposing the Democrat Party position be silenced / cancelled - "disappeared". Rather what we observe is open and "brazen" collusion between the now dominant political party and the dominant media organs with a number of Tech titan executives soon to assume roles in the Democrat administration.
Thus, we should ask if the previous exemption for "private corporate entities" ought to obtain.

Also, given the events of the past few days, cancelling conservative voices, the "disappearing" of Parler and other alternative sites IN competition with the Titans of Tech, what does Argawal think of his rather apologetic dispensations for the Titans of Tech NOW?

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gabe
on January 13, 2021 at 12:45:21 pm

Re Gabe's rhetorical question, is Big Tech really private.
In other comment on other articles I have raised the matter of DOJ investigation/litigation against Big Tech, using "color of law" and "Bevins suit arguments. That is a stretch, but that is now impossible with Biden. But the point is to sue the bastards often and everywhere. There are theories of private tort that can also be brought to bear, as well as Parler's breach of contract suit against Amazon. The point is to investigate the Hell out of them, to sue the bastards often and everywhere, to wage political, legal and cultural war against them, to demean their reputations and disparage the character of their owners and executives, so as to put the corporations and their leaders constantly on the defensive. That will draw more political attention and provide a kick in the ass for Congress to slay the beast, which is the only solution.

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paladin
on January 13, 2021 at 13:43:16 pm

We all have standing when it comes to censorship.

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N.D.
on January 14, 2021 at 00:06:31 am

Why does this site title itself "Law & Liberty"? A better title would be "Law, Apologetics, Casuistry and Sophistry with an Occasional Interest in the Abstract Principles of Liberty As Long As It Doesn't Require Too Much Regard for Truth or Unpleasant Realities On the Ground or Overly Much Moral and Political Backbone"?

Or simply title it "Law and More Law Still," which might amount to the same thing.

This present piece is certainly an apologetic and, given realities on the ground, it elides a great deal. I enjoyed the line about "... amorphous values like “fairness” and “democratic ideals.”" Well, yes, such a discussion can be amorphous and abstract, but in the current, pressing environment, it is all rather concrete, to indulge a great amount of understatement.

Recent opinion pieces here by Shanon Fitzgerald, Patrick Lynch and John Grove elide much as well and are essentially fantasist based pieces. Then there's other tell-tale elisions, omissions. A site purportedly devoted to liberty, and not merely in the abstract, should be willing to take persons such as Randall Lane, Editor and Chief Content Officer at Forbes, head on - concerning his Orwellian piece "A Truth Reckoning: Why We’re Holding Those Who Lied For Trump Accountable". The lines of attack against such a piece are many. And this is an Orwellian theme taken up by others, Tapper at CNN for example. Further and with notable irony, it's of a piece with the often sophisticated forms of disinformation, gaslighting, Kafkatrapping, etc. strategies used against Trump by the media-tech-political complex, since his inauguration and before.

Elisions, denials, evasions, misdirection, obfuscations and lack of clarity - in our current, highly problematic times, this stuff has become rather prominent here at the misnamed L&L.

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Michael Bond
on January 14, 2021 at 08:19:54 am

It is important to note:

https://techpinions.com/its-not-just-the-internet-how-government-built-the-computer-industry/8104

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N.D.
on January 14, 2021 at 08:33:10 am

Not since the late nineteenth century’s Robber Barons of JD Rockefeller, JP Morgan, Cornelius Vanderbilt, Jay Gould and Andrew Carnegie has America seen so much unregulated power and money amalgamated among so few. As they operate today, the likes of multi-billionaires Mark Zuckerberg, Jeff Bezos, Tim Cook, Jack Dorsey, Bill Gates and a few select others are our own modern day oligarchs. They are gods who currently answer to no mortal man or political body. This should worry all of us.

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Packard
on January 14, 2021 at 08:43:43 am

And also important to note that sometimes what is censored is not information itself, but the commentary on said information, as we try to make sense of it all, for example:
https://articles.mercola.com/sites/articles/archive/2021/01/14/where-did-coronavirus-originate.aspx
And from the comment section comes this reference:
https://breggin.com/coronavirus/Final-Fauci-Treachery-Report-10.19.2020.pdf

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N.D.
on January 14, 2021 at 14:18:59 pm

And here is something else on the Venerated, but not yet Canonized (it appears that Francis, the heretic Pope has other things to do right now) Blessed Dr Anthony Fauci. A concise list of his failures dating back to the AiDS epidemic:

https://thefederalist.com/2021/01/13/a-short-history-of-how-anthony-fauci-has-kept-failing-up-since-1984/

But we all are supposed to "stifle" ourselves.

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gabe
on January 14, 2021 at 12:14:46 pm

I hope this article turns out to be true, but not pointed out how Google, Twitter, Apple, and Facebook all appeared to collude in massive political repression in the last week to limit free speech/civil rights to control national discussions and opinions in ways that it favors, and to destroy a competitor to their massive powerful monopoly Parler. If these giants are conspiring together in political repression why wouldn't they conspire with each other to protect their current very powerful monopolies. Also given 2 or 3 years with this level of monopoly power and the ability to repress speech/thought how might they collude together to manipulate the Courts, Congress, Society. The level of power they've achieved has never been so concentrated in all our history, and now they've demonstrated their willingness to use that power in a coordinated manner to destroy any potential competitor and control speech and thought?

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John Brown

Law & Liberty welcomes civil and lively discussion of its articles. Abusive comments will not be tolerated. We reserve the right to delete comments - or ban users - without notification or explanation.