The Google Search Decision: Antitrust Enforcement for What Purpose?

The U.S. District Court for the District of Columbia has found partially in favor of the U.S. Department of Justice (DOJ) in one of its antitrust cases against Google. In the opinion of the Court, Google holds monopoly power in the general online search and search text ads markets and has engaged in illegal, exclusionary conduct to maintain its monopoly positions.

Google has already stated its intent to appeal the decision, and if the appeal fails (which we probably will not know for many months) the courts must still decide on the appropriate remedy, which will take even more time. Nevertheless, we can draw some interesting conclusions about this case’s likely impact on tech industry competition and innovation.

First, the District Court acknowledged that Google faces a highly competitive market for search advertising. While the Court deemed the company to have a monopoly in the narrow market of search text ads, it rejected the DOJ’s claim that Google monopolizes the “general search ad” market. District Court Judge Amit Mehta also rejected the premise that Google has a duty to adapt its advertising platform features to accommodate Microsoft or other rivals.

Additionally, while the DOJ tried to avert the restrictions of the “no duty to deal” principle established under Verizon v. Trinko, Judge Mehta soundly rejected that argument by noting that “[t]o allow a continued course of dealing between rivals to circumvent Trinko’s strict limits also would invite uncertainty as to when antitrust liability attaches to otherwise rational business conduct.” This conclusion is good news not only for Google, but also for all companies’ freedom of choice in product and platform design.

On the other hand, the Court ruled that Google’s deals in which they pay billions of dollars to be featured as the default search engine on web browsers like Mozilla Firefox, Opera, and Safari—as well as on Samsung and Apple mobile devices—are an illegal business tactic intended to protect its monopoly in the online search market. If this ruling stands, it would set a troubling precedent for all large technology companies and their ability to make voluntary transactions that boost their products. Ironically, while the most logical remedy would be to force Google to sever these search default arrangements, this approach would potentially harm the companies receiving the payments more than Google itself.

For instance, Apple receives a portion of the ad revenue from Google searches conducted on iOS devices. This constitutes a sizable percentage of Apple’s overall operating profit (17.5 percent as of 2020), amounting to billions of dollars. Mozilla could be particularly devastated, as much of its total revenue reportedly comes from its deal to make Google the default search engine on its popular Firefox browser.

While the companies could potentially recoup some of these proceeds by reaching a similar deal with a second-best alternative like Microsoft’s Bing search engine, it is highly questionable how this changeover would benefit consumers. Bing is already the default search engine on all Windows devices, and yet, as of a few years ago, the top search term on Bing was “Google.” Moreover, Google’s default search engine status on platforms or devices hardly presents a barrier to consumer choice—those who find Google’s search engine inadequate can change to a rival product with just a few clicks or taps.

In declaring these arrangements an illegal restraint of competition, the Court relied on the hypothetical assumption that, but for Google’s paying browsers and mobile phone makers to be the default search engine, other search-engine competitors (the Court named Microsoft’s Bing in particular) might have become more competitive in the search market. However, this imagined scenario ignores direct evidence that Google’s market dominance in search would remain even if these deals had never been in place. For instance, the European Commission forced Google to offer a choice screen on all Android devices that asks the owner to select their default search engine upon activation. Reason Foundation looked at the data on search-engine adoption and discovered that, despite being offered this choice, European consumers continued to use Google for internet search at the same rate they had prior to the ruling.

Finally, the “general search” market the court claims Google monopolizes is itself a questionable standard. General search engines like Google’s increasingly compete with other products for consumers’ information needs, such as product searches on Amazon and social media searches. Further, revolutionary generative artificial intelligence products like ChatGPT are increasingly encroaching upon general internet search—a technological transformation many investors view as an existential threat to Google’s search-ad revenue base.

Indeed, as the ChatGPT phenomenon demonstrates, disruption of a popular, dominant technology product like Google’s search engine tends to arise from innovation taking place outside of its direct market. Sadly, history shows that antitrust enforcers often fail to see emerging competitive threats to dominant technology firms and that government actions to attack perceived monopolies frequently arrive at a point at which innovation has already begun to dislodge market incumbents.

In any case, the DOJ and Judge Mehta’s hypothetical assertion that more robust competition would have occurred if not for these search default deals seems to defy consumer preference and reality. Prohibiting Google from entering into mutually beneficial business relationships in order to benefit well-heeled competitors (including fellow trillion-dollar companies like Microsoft) would represent a step toward a European-style competitor-welfare antitrust framework and away from the consumer welfare focus that has guided U.S. antitrust policy for the past half-century. Unfortunately, it remains to be seen whether higher courts will agree with this conclusion.