Google Search Decision: What is the Purpose of Antitrust Enforcement?

The U.S. District Court for the District of Columbia has ruled partially in favor of the U.S. Department of Justice (DOJ) in one of its antitrust cases against Google. The court found that Google has a monopoly on general online search and search engine text advertising and has engaged in illegal, exclusionary conduct to maintain its monopoly position.

Google has already said it intends to appeal the decision, and if the appeal fails (which we likely won’t find out for months), the courts still have to decide on the appropriate remedy, which will take even longer. Nevertheless, we can draw some interesting conclusions about the likely impact of this case on competition and innovation in the tech industry.

First, the District Court found that Google faces a highly competitive search advertising market. While the Court found that the company has a monopoly in the narrow text search advertising market, it rejected the DOJ’s contention that Google monopolized the market for “general search advertising.” District Court Judge Amit Mehta also rejected the premise that Google has an obligation to tailor its advertising platform features to meet the needs of Microsoft or other rivals.

Moreover, while the Department of Justice has attempted to avoid the limitations of the “no obligation to deal” rule established under Verizon vs TrinkoJudge Mehta flatly rejected that argument, noting that “(a)llowing continued conduct among rivals to circumvent Trinko’s strict limitations would also create uncertainty about when antitrust liability involves rational business conduct.” That 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 it pays billions of dollars to be 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 designed to protect its monopoly on online search. If upheld, the ruling would set a troubling precedent for all major tech companies and their ability to make voluntary deals that promote their products. Ironically, while the most logical solution would be to force Google to end these default search arrangements, such an approach would potentially hurt the companies receiving the payments more than Google itself.

For example, Apple gets a cut of ad revenue from Google searches conducted on iOS devices. This is a significant percentage of Apple’s total operating profit (17.5 percent in 2020), amounting to billions of dollars. Mozilla could be particularly damaged, as the majority of its total revenue reportedly comes from a deal to make Google the default search engine in its popular Firefox browser.

While companies could potentially recoup some of that revenue by striking a similar deal with a second-best alternative like Microsoft’s Bing search engine, it’s highly questionable how this change would benefit consumers. Bing is already the default search engine on all Windows devices, and yet a few years ago, the most popular search term on Bing was “Google.” What’s more, Google’s status as the default search engine on platforms or devices isn’t a barrier to consumer choice—those who find Google search insufficient can switch to a competing product with a few clicks or taps.

In finding these arrangements to be an illegal restriction of competition, the Court relied on the hypothetical assumption that if Google’s browsers and handset manufacturers were not the default search engine, other search engine competitors (the Court cited Microsoft’s Bing in particular) might have become more competitive in the search engine market. But this imaginary scenario ignores direct evidence that Google’s dominant market position in search would have remained even if these agreements had never been concluded. For example, the European Commission forced Google to offer a choice screen on all Android devices that asked the owner to choose a default search engine upon activation. The Reason Foundation looked at search engine adoption data and found that, despite offering them this choice, European consumers continued to use Google to search the Internet at the same rate as before the ruling.

Finally, the “general search” market that the court claims Google monopolizes is itself a questionable standard. General search engines like Google are increasingly competing with other products for consumer information needs, such as Amazon product searches and social media searches. In addition, revolutionary generative AI products like ChatGPT are increasingly encroaching on the territory of general web search—a technological transformation that many investors see as an existential threat to Google’s search advertising revenue base.

Indeed, as the ChatGPT phenomenon demonstrates, disruption of a popular, dominant technology product like Google’s search engine typically results from innovations that occur outside its immediate market. Unfortunately, history shows that antitrust enforcers often fail to recognize emerging competitive threats to dominant technology firms, and government actions to attack perceived monopolies often reach a point where innovation has already begun to displace incumbents.

In any case, the hypothetical claim by the DOJ and Judge Mehta that there would have been more competition without these default search agreements seems to fly in the face of consumer preferences and reality. A ban on Google entering into mutually beneficial business relationships to benefit wealthy competitors (including other trillion-dollar companies like Microsoft) would be a step toward a European antitrust framework focused on competitor welfare and away from the consumer welfare focus that has guided U.S. antitrust policy for the past half-century. Unfortunately, the question remains whether higher courts will agree with this conclusion.