When the global Internet search engine—with a market share of 83.49%–goes to trial against the U.S. Justice Department on antitrust violations, the stakes are higher than ever. The gravity of the 10-week trial has the power to fundamentally shift how people use the Internet and financially impact the company behind the world’s most-used search engine. Notably, this trial marks a significant moment in the U.S. government’s broader campaign against Big Tech corporations. However, this lawsuit is not exclusive to the U.S. Justice Department as the government is joined by 11 other states in its allegations of Google’s illegal monopoly over search engine services, “spending billions” to make it the go-to company to receive attention from advertisers and website publishers. Eleanor Fox, a professor at NYU Law, summarized the case as “whether [Google] is entrenching its monopoly and closing off avenues for competitors to try to develop a competitive search engine.” The trial’s verdict, thus, holds the potential to significantly impact the future dynamics of the digital ecosystem.
The U.S. Justice Department argued that Google has resorted to various measures like having “contracts with numerous cell phone providers to ensure that it is the default search engine on devices,” preventing competitors like Microsoft’s Bing and DuckDuckGo from making any impact on the search engine industry. Google denied such allegations, stating that Google is the most used among Internet users because “it performs the best.” The tech giant also claimed that despite its payments to be the default search engine, it is not definitive that Google is the go-to search competitor. However, Fox said that “statistics show that when a company gets to be a default, users very rarely change.”
The Harvard Gazette spoke with economist Shane Greenstein, a professor at Harvard Business School, regarding the trial and how antitrust laws operate within the U.S. Calling this trial “the most significant antitrust case brought by the DOJ since the late ‘90s,” Greenstein pinpointed 2 aspects in play: “Has a firm achieved a certain level of success that can be characterized as a monopoly? Has the the monopoly used its leading position in ways that abused the competitive process?” According to Greenstein, the Justice Department “must meet a legal standard for showing the firm has achieved a leading position” by showing Google’s creation and maintenance of a monopoly in the search engine market. As easy as it may sound, Greenstein said that this question of an existing monopoly is “where a lot of the legal fight [between the Justice Department and Google] is.” And so, it is on Google to “define the market in such a way that they convince the judge that they’re in a very competitive setting and could lose market share at any time, a judge could say, ‘Well then, they don’t have a monopoly.’” Meanwhile, if the DOJ prosecutors could convince Judge Mehta that Google is powerful enough to not “be seriously worried about losing much market share to a competitor, then the monopoly can be sustained.”
In January 2023, the U.S. Department of Justice stated in its lawsuit against Google (and Google’s parent company, Alphabet Inc.) that the company had violated the Sherman Act, a federal law aimed at increasing competition and prevented businesses from “colluding or merging to form a monopoly.” In United States vs. Google, the Justice Department alleged that Google has a monopoly of the “ad tech stack,” cost-effective tools used to optimize ad revenue and distribute such ads. The Department of Justice further claimed that Google “paid billions to cellular device manufacturers and browser developers” to maintain its dominance over the search engine industry for all electronic devices. For example, Google has a contract with Apple where they pay Apple an annual $15 to 20 billion to ensure itself as the default search engine and companies to not work with Google’s rivals. By doing so, Google has “nearly 95% of all search queries on mobile devices,” while controlling an estimated 90% of the search engine market in America. Through such practices deemed by the Justice Department as monopolistic, the filing complaint continued to discuss Google’s dominance: “Google is so dominant that ‘Google’ is not only a noun to identify the company and the Google search engine but also a verb that means to search the Internet.”
According to Greenstein, the rationale why Google was selected among Big Tech companies was because of Google’s “actions that damaged the competitive process.” After having the lead in the search engine market, Google’s contracts with “the vast majority of device makers and distributors” made it difficult or nearly impossible for other search engine companies to gain traction. Google’s contracts range from AT&T to Android, even Apple which had caught the most publicity and eyebrows.
In the past 6 weeks, the Justice Department and other top prosecutors tried to demonstrate Google’s efforts to ensure its dominance over the search engine market. From the trial, many were shocked to find out that Apple played a vital role in securing Google’s monopoly over the search engine as the “industry-defining” deal cost Google more than $10 billion annually to remain the default search engine for all Apple products. Since Apple launched Safari—Apple’s very own web browser—in 2003, Google persisted in being the default search engine and signified an ongoing revenue-sharing relationship between the two tech giants. Apple’s annual $10 billion fee and Google’s recognition as the go-to search engine shattered any hopes of Apple creating its search engine or even going to a Google rival. Even other tech companies dreamt of such a lucrative deal with Microsoft’s CEO admitting that “[Apple] basically king-make” in an early testimony. The CEO of a Google rival, DuckDuckGo, even stated that “switching even Apple’s private-browsing default to his engine would have increased DuckDuckGo’s market share ‘multiple times over.’”
Google is fully aware of the implications regarding its deal with Apple, going as far as admitting that it had found its alliance with Apple uncomfortable. When CEO Sundar Pichai oversaw Google Chrome (Google’s flagship web browser) in 2007, Pichai wrote to Google founders Larry Page and Sergey Brin about the deal’s “optics”: “I know we are insisting on default, but at the same time I think we should encourage them to have Yahoo as a choice in the pull down or some other easy options… I don’t think it is a good user experience nor the optics is great for us to be the only provider in the browser.”
Microsoft CEO Satya Nadella said that he had tried just about anything for “a decade to make Bing the Apple default,” going as far as “offering Apple all of the economic upside… to increase the ‘query stream.’” In terms of how search engines work, having traffic and traction is crucial to its survival and refinement—allowing search engine companies to understand and learn what people are searching for. Even Google executive Marissa Mayer wrote in an email that “you do get better as you have more users—that’s why we have the best spell check, the best personalized search, the best refinement, etc.” As companies vied for the position of Apple’s default search engine throughout the years, Google “resisted anything Apple did that might lead to users doing fewer Google searches”—including going against some of Apple’s new features. One new feature was “Spotlight Suggestions” where users could type something and redirect them to “websites, App Store results, and even Maps locations.” An internal Google presentation regarding Apple’s Spotlight Suggestions concluded that it would negatively impact Google searches and revenues, characterizing it as “Bottom Line: It’s bad.”
According to a former Google executive and current head of machine learning/AI at Apple, John Giannandrea, CEO Tim Cook was given 4 options when looking at Google alternatives: “build Siri into a more full search product; collaborate on a Knowledge Graph-based platform with Microsoft; invest directly in Bing and turn it into a native search product; or acquire Bing from Microsoft.” These decisions all came with two concerns: competing with Google’s search engine and ending the long-term financially beneficial relationship. In 2016, the two companies revised the terms of the deal as Apple “could not expand farther than what they were doing in Sept 2016 (as we did not wish for them to bleed off traffic).” Google argued that Apple’s search suggestions were inferior to Google, ensuring that the deal continued. According to the Verge, there is “practically no price not worth paying to be Apple’s default search provider” with Microsoft’s offer of paying “up to $15 billion” annually for Bing to gain traction.
However, Google countered by stating that this monopoly they had was not true and its popularity was from “getting the benefit of a bargain.” Google’s attorneys claimed that Google is the go-to search engine due to its accumulation of data from current users, having full knowledge of users’ preferences and whatnot. Google’s argument positions itself as innately “pro-competitive and pro-efficiency and pro-innovation, pro-giving a better product to consumers,” Fox said.
According to the U.S. government, Google’s monopoly in the search engine industry ultimately made it less efficient and resulted in a “worse-quality product” for consumer use. For example, if Google was competing with other search engines, consumers would recognize certain features from competing search engines that would make Google improve such as being mindful of user privacy. As Google promoted itself on its ability to accurately find what its users are looking for, this has been one of the key attractive features for advertisers to invest in. Google rival DuckDuckGo says that it “collects less information from users than Google does,” but failed in attempts to work with various companies like Apple and Mozilla to be the default search engine in these browsers’ private modes. Furthermore, Gabriel Weinberg, DuckDuckGo’s chief executive, said that these companies’ contracts with Google were “the key thing preventing [them] from getting a deal done.”
Another crucial aspect of how Google came to dominate the search engine industry was the sheer scale of its search engine, making it nearly impossible to disrupt the industry in any capacity. Google had resorted to monopolistic strategies such as “block[ing] consumers from having access to choices” and using its “search dominance to wield power over online ads” which in turn granted its increases in ad pricing. The magnitude of Google’s hold as the leading search engine made Microsoft CEO Nadella characterize the Internet as the “Google web,” barring any competition to stand a chance against the company. Judge Mehta asked a former Google executive who later founded a competing search engine, Sridhar Ramaswamy, on why Google had contracts and payments to various companies. Ramaswamy replied with a stunning omission: “The payments effectively make the ecosystem exceptionally resistant to change.”
Google’s domineering presence led the way for Google to charge steeper prices via a formula that includes ad quality, “Long Term Value,” to finalize which advertiser would have the privilege of getting “the quarter-second auction to place an ad in front of a user.” According to Reuters, advertisers are not given their LTV and Google “tunes” to adjust ad pricing. UM Worldwide’s global chief media officer, Joshua Lowcock, testified in court and discussed at length Google’s dominance over the ad space and ability to demand high prices for the past 10 years. This was further elaborated when Google’s vice president and general manager for ads, Jerry Dischler, admitted that Google’s earnings from search ads was “more than $100 billion.”
However, Google’s list of competition is not exclusive to simply search engines as other “vertical” platforms like Expedia or Yelp search for dining and travel. Vertical search describes “niche or specialty search engines that focus on a single industry vertical, type of content,” pinpointing within a particular industry or market. Examples of vertical searches beyond Expedia and Yelp include Airbnb and Indeed, but what Google does disrupts vertical searches by simply showcasing the results on its search pages—instead of sending them to the actual websites with the links.
On the other hand, Google focuses on the superior quality of its search engine against competitors, neglecting the exclusive binding contracts with device manufacturers. According to Google’s lead lawyer, John Schmidtlein, Microsoft’s Bing simply does not compare to Google in his opening statement: “Microsoft has failed to invest, failed to innovate in a manner comparable to Google, in many areas that have nothing to do with scale.” Google is currently defending itself against the U.S. government with CEO Sundar Pichai taking the stand as its star witness. In Pichai’s opening statement on Google’s behalf, Pichai stated that Google streamlined the Internet experience by “offering users a minimalist design that created more room for search results and web content within a browser window.” Pichai’s statement was backed by Schmidtlein displaying an internal email that showed users who had switched from Microsoft’s Internet Explorer to Chrome making 48% more searches on Google. The trial also revealed Google’s annual $26.3 billion payment to ensure itself as the default search engine to various device manufacturers with Apple taking a larger fee than all Android devices. However, Pichai reasoned that it is because “Google has separate deals with Android smartphone manufacturers and telecom carriers,” while Apple is deemed “both the [original equipment manufacturer] and they have control over their telecom channels”—hence the larger payment. However, the question that remains is Google’s decision to give such large sums of money to Apple and other device manufacturers to be the default search engine if users can simply switch search engines that easily. Pichai admitted that making Google the default search engine “would lead to increased usage of our products and services” as there is “clearly value to that, and that’s what [they] were looking to do” with Google’s contracts.
Pichai’s testimony also revealed Google’s tense and opaque discussions with Apple, going as far as devising strategies to curb Apple’s search features. Worried about competition, Google even sent Microsoft a long letter detailing “concerns about possible competition issues raised by Microsoft’s practice” by having Bing as Internet Explorer’s default search engine. When a DOJ attorney tried to have Pichai assert how such a letter and other strategies signified Google’s desire to remain the default search engine for device manufacturers, Pichai deftly described these deals made as “standard promotional agreements.” He claimed that Microsoft’s decision to make Bing the default search engine was concerning due to how it had failed to alert users of alternatives. Despite having a strong deal with Apple, Google still had a watchful eye on any of the company’s movements towards the search engine space. An example of this can be seen in Pichai’s request to an employee to “email him anytime an employee from Google’s search business left to work for Apple.” This particular request was from John Giannandrea’s efforts to recruit people from his old post to come join him in Apple. However, Apple has repeatedly stated in its testimony that Google was the “best search engine for its users” despite numerous courting efforts by Microsoft and other search engine companies.
The trial is currently ongoing where U.S. District Judge Amit Mehta will deliver the verdict, but there is no definitive conclusion as to whether the U.S. government can break the monopoly Google has over search engines. However, this is not to say that the U.S. government does not have a strong case, considering its track record with Big Tech in the 1990s. The most recent major case against Big Tech was the U.S. Justice Department’s battle against Microsoft in 1998 where the agency alleged that Microsoft was “illegally monopolizing their role in the computer industry” to which Microsoft was found to violate antitrust laws. Should Judge Mehta rule in favor of the U.S. Justice Department, Mehta can find the contracts Google entered with various tech companies to make itself the default search engine to be illegal. This ruling would mean that users may have the capacity of “picking their own default search engine” or “manufacturers could decide to work with other competitors.” Another law professor, David Olson of Boston College Law School, said that this solution can raise prices of devices to compensate for the “loss of contracts with Google.” Olson also added that “Google could still have an advantage over competitors if users still choose to use it.”
At the same time, Google still has a strong case given the previous lawsuits against other Big Tech companies favoring them rather than the government agency. Fox stated, “The Supreme Court has ruled on a number of antitrust cases in the last 2 decades and has indicated that it has a lot of trust in the market and sympathy with monopoly firms to act responsibly to consumers… This has made it very hard for plaintiffs to win and that’s why this is a complicated case.”