Why Should You Care About the Antitrust Case Against Google?

30/10/2020

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In the past few weeks, the Department of Justice (DOJ) filed a lawsuit against Google for antitrust violations. The DOJ is concerned that the Mountain View-based tech giant operates in a way that discourages competition, issuing barriers to entry that are too high to be overcome by any possible competitors. In fact, the U.S. Attorney General’s office argues that Google has effectively killed the competition in three key areas: search, digital advertising, and mobile phone operating systems.

This is important because advertisers need to start thinking hard about their future online strategies in order to not be caught off guard if it turns out that the judgment goes against Google. In addition, manufacturers should be made aware that a changing online landscape has implications for their business interests.

As far as search is concerned, Google has essentially imposed its presence on any and all web browsers. If you are a Mozilla Firefox user, you’ll notice that you are shown results from Google every time you type a search term on the address bar. That’s because Google has a paid partnership with Mozilla, effectively preventing you from using alternatives like Microsoft-owned Bing or privacy-oriented DuckDuckGo. 

Moreover, the scale of Google (with its multiple data centers around the world) prevents competitors from establishing a search engine business of their own. Google's history has been one of sudden and exponential growth. The company operates in three phases: First, it crawls webpages, collecting data on them, secondly, it collects user data, thirdly it sells that data in return for extremely targeted ads.

Google sells advertising straight into the search page (SERP). On the SERP, users find advertisements mixed with search results, making it difficult to distinguish between the two. These ads on the search page have made Google's advertising revenue grow so much that very little remains for competitors. 

Given that most users go on Google to search for things they need, the SERP advertisements are a useful tool for marketers to funnel potential customers to their websites. That’s what e-commerce giants like Amazon and eBay are doing - buying millions of dollars of advertising on Google, so as to lead customers to their pages. 

The last part of the DOJ’s lawsuit accuses Google of preventing competition on mobile operating systems. According to the Attorney General’s office, Google has revenue-sharing agreements with U.S. carriers and hardware manufacturers on Android and Google’s proprietary apps. In particular, the peculiar way Google distributes Android is one of the main points of the lawsuit. 

Android is Google’s open-source operating system. Theoretically, anyone could ‘fork’ its source code, customize it, and install it on any hardware. In reality, Google openly prevents this from happening, by forging agreements with hardware manufacturers to pre-install Google apps on their mobile devices and paying a premium for it.

In short, if your mobile phone has a search bar in the middle of its own screen, Google likely paid for it, sharing with your hardware’s manufacturer a slice of the advertising revenue. 

This highly technical lawsuit has received widespread support from both sides of the aisle in Congress, with both Democrats and Republicans praising it. The upcoming election is unlikely to change anything in the case against Google. Eleven states have expressed support, most of them Republicans. It’s an open question as to whether this lawsuit is politically driven.

It is hard to determine whether this lawsuit will impact trade relations between the U.S. and Europe. The EU has had its own set of Antitrust litigation against Google since 2010, and, in 2019, it issued a €1.49 billion fine against the search giant. Now, Washington has taken up the initiative. The outcome will likely arrive sometime in the next few years. 

 



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