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A Washington D.C. judge has recently ruled that Google is guilty of violating U.S. antitrust laws by maintaining an illegal monopoly over the search engine market.
During the nearly year-long trial, which was extensively covered by Stewart Dunlop for PPC Hero, the Justice Department uncovered various methods Google used to establish and sustain its dominant position as the world’s default search engine.
One significant finding was that Google paid companies to set its search engine as the default option within their products. This included an agreement with Apple, where Google Search became the pre-set choice in the Safari browser. In 2021 alone, the value of these agreements exceeded $26 billion.
Google’s market share fluctuates across different countries, but it holds about 81.95% of the global market. In the United States, this share increases to approximately 90% of the overall online search market and 95% on smartphones.
In his ruling, U.S. District Judge Amit Mehta was critical, and his decision is well worth reviewing in full if time allows.
“Google is a monopolist, and it has acted to maintain its monopoly,” Mehta wrote.
“While users technically have the option to switch the default search engine or download a rival search app or browser, the reality is that most do not.”
“The default setting is highly valuable. Many users simply continue to use the default, leading to billions of queries directed to Google through these access points every day.”
“Google is fully aware that losing these default settings would significantly affect its bottom line. For instance, Google projected that losing the Safari default would lead to a substantial decrease in queries and billions in lost revenue.”
“These distribution agreements have led to a major anticompetitive effect by discouraging investment and innovation in the search industry.”
“There is no real ‘competition for the contract.’ Google does not have a true rival in this space.”
Judge Mehta also criticized the company’s efforts to avoid leaving a paper trail, remarking, “The court is struck by the extent to which Google has gone to avoid creating evidence that could be used by regulators and litigants… It effectively trained its employees not to generate ‘bad’ evidence. However, this does not ultimately matter. Section 2 liability does not hinge on whether there is ‘smoking gun’ evidence of anticompetitive intent.”
In summary, the court found:
1. There are relevant product markets for general search services and general search text ads;
2. Google holds monopoly power in these markets;
3. Google’s distribution agreements are exclusive and have anticompetitive effects;
4. Google has not provided valid procompetitive justifications for these agreements. Additionally, the court determined that Google has used its monopoly power to charge supracompetitive prices for general search text ads, allowing it to earn monopoly profits.
While the court did not recommend any specific sanctions, the Justice Department is reportedly considering requesting the breakup of Google’s parent company.
This case is likely to lead to a second trial, where potential remedies will be discussed.
Neil Chilson, a former chief technologist for the FTC, referred to the idea of the government ordering a breakup of Google as “total wishful thinking.”
“There is nothing in Judge Mehta’s fairly standard antitrust approach that suggests a breakup is a plausible solution,” Chilson told the Guardian. “A breakup would not address the core issue identified by the court: the exclusive contracts for default placements.”