Google is one of the most powerful and influential companies in the world — its name is literally a verb. Google has positioned itself as the primary curator of the internet, the world’s greatest information distribution machine since the printing press. This is not an overstatement. Every search. Every click. Every article you read. All are managed or monitored by Google.
Between Google Search and Maps and Gmail and Chrome and Ads and Android, the company owns a huge chunk of the internet’s digital infrastructure.
In short, Google has centralized control over the internet ecosystem. But did they get that way by having a superior product? Or did they game the system by buying up the companies that actually created most of Google’s products — and burying their competitors?
The Department of Justice and several states have sued Google, claiming it wasn’t ingenuity but a buy-or-bury strategy that let the company monopolize the search market. The trial started last week.
How will the case fare? It all comes down to how the court applies the consumer welfare standard.
Since the 1980s, courts have used the consumer welfare standard to evaluate whether the actions of a firm with market power violate federal law. The standard takes into account prices, of course, but also considers other factors that are harder to measure. As the D.C. Circuit in the AT&T/Time Warner case put it, the standard extends “beyond higher prices for consumers, including decreased product quality and reduced innovation.” Or, as former FTC Commissioner Christine Wilson explained, the standard considers the effect of “competition on quality … in the analysis of vertical restraints” and requires an evaluation of the “effects on innovation.”
But there have been twin assaults on the consumer welfare standard in recent years. On the one hand, some progressives have argued for the neo-Brandeisian approach that focuses almost exclusively on helping the “little guy.” On the other hand, Big Tech has repeatedly argued that price is the only factor that matters — meaning that “free to the consumer” services are effectively immune from antitrust scrutiny. How convenient for them.
Luckily, courts have been reluctant to adopt either approach. The Supreme Court, for example, has rejected the neo-Brandeisian approach and made clear that “antitrust laws … were enacted for ‘the protection of competition, not competitors.’” And the Court of Appeals for the D.C. Circuit rejected Big Tech’s narrow view in a direct precedent for this latest challenge, Microsoft v. U.S.
Let’s take a closer look at that case: When the government sued in the 1990s, Microsoft enjoyed a roughly 90 percent market share over personal computer operating systems and distributed Internet Explorer, its web browser, to consumers for free.
The result according to the court? Microsoft had market power; it leveraged that market power to deny consumers the ability to choose a competitor, and the resulting lack of competition reduced innovation in the browser market. In other words, Microsoft had violated the antitrust laws with its “free” browser.
Google’s tactics mirror Microsoft’s. Google has arranged for service providers, browsers and device manufacturers to make its Search the default engine. For example, Google pays Apple over $15 billion per year to make Search the default search engine for Safari — a direct competitor to Google’s browser, Chrome. Google requires device manufacturers that use its Android operating system to preinstall certain apps that use Google Search as their default search engine.
The parallels are uncanny. The court, like in the case of Microsoft, must evaluate whether Google’s restrictive contracts have increased the quality of Search or have enhanced innovation in the space.
Has Search’s quality materially changed since the introduction of these restrictive contracts? Most consumers would agree that the quality of Search is much worse today than it was a decade ago. And there is no empirical evidence that Google needs to cannibalize its entire stack to enhance the quality of Search.
As to innovation, Google has an even weaker case. Google has used its extraordinary market power to kill or substantially slow the development of more efficient search technologies, like vertical search, that compete directly with Google’s tech. When the vertical search company Foundem gained more users, Google changed its Search algorithm to digitally bury Foundem.com by placing it as far as 170 pages down, irrespective of how many people directly searched for their product — even if users searched for the company’s exact name.
Google knows it has a facts problem, so watch out for its dodges. It’ll claim the government is trying to help competitors and not competition. It’ll point out that Search is free. In other words, it’ll try and twist the consumer welfare standard into something it’s not, while claiming the other side is doing the same thing.
The court has a real opportunity to show that antitrust law seeks to enhance consumer welfare, not tech exceptionalism. Let’s hope that it does. But if Google’s rhetoric somehow prevails, then maybe it’s time for Congress to provide some guidance on applying the consumer welfare standard in the digital age.
Joel Thayer is the president of the Digital Progress Institute.
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