The Government's Antitrust Action Against Google
On Oct. 20, 2020, the Department of Justice (DOJ) and 11 state attorneys general filed a significant civil antitrust lawsuit against Google LLC in the District of Columbia District Court, accusing the $1 trillion company of illegally maintaining monopolies in the internet search and search advertising markets in violation of Section 2 of the Sherman Act.1 The lawsuit follows a 16-month investigation of Google by the DOJ's Antitrust Division. The complaint seeks broad declaratory and injunctive relief to cure and cease the alleged anticompetitive conduct, as well as the costs incurred in bringing the action.2
The complaint alleges that Google uses exclusionary and tying agreements and other anticompetitive business practices to lock up key distribution channels and shut out search competition on mobile phones, web browsers and next-generation devices.3 The alleged anticompetitive conduct includes agreements that secure default status for Google's search engine on both Apple and Android devices, require a suite of non-deletable Google apps preinstalled and displayed in prime positions on mobile devices, and prohibit Google's counterparties from dealings with Google competitors.
The DOJ alleges search rivals such as Bing and Yahoo are denied "vital distribution, scale, and product recognition—ensuring they have no real chance to challenge Google."4 Indeed, the DOJ contends that Google effectively owns or controls search distribution channels for roughly 80% of general search queries in the U.S., and that in recent years Google has accounted for nearly 90% of all general search engine queries in the U.S. and about 95% of queries on mobile devices.5
The complaint further alleges that Google's anticompetitive conduct harms consumers through reduced choice and the quality of search services, impedes innovation of competing products, and forces companies "to buy more search advertising from Google to remain relevant" and precludes them from purchasing advertisements "at more attractive terms."6
The DOJ's lawsuit against Google is the highest-profile antitrust action by the U.S. government against a technology company since the DOJ's suit against Microsoft more than two decades ago, which ended in a settlement imposing limits on Microsoft's bundling of products around Windows.7The DOJ claims that increased competition resulting from the Microsoft case paved the way for Google to grow from a small startup into the "Internet behemoth" it is today, leading Google to deploy the same anticompetitive tactics it opposed decades ago.8
Additional Liability Concerns for Google
State attorneys general have conducted parallel investigations into Google's anticompetitive conduct, and more lawsuits may be forthcoming. An investigation led by a group of states, including New York, may conclude soon, and any complaint would likely be consolidated with the DOJ's lawsuit.9 Attorneys general led by Texas are also expected to file a separate lawsuit focused on Google's advertising business as soon as next month.10
In addition, three putative consumer class actions on behalf of purchasers of Android mobile apps from the Google Play Store have already been filed in the wake of the DOJ's complaint. The suits allege that Google's restrictive agreements foreclose competition in the Android mobile app market, enabling Google to charge consumers supracompetitive prices for app purchases, in violation of federal and state antitrust laws.11 Another consolidated class action was filed on behalf of developers of Android apps sold via the Google Play Store, alleging that Google's anticompetitive practices allow the company to impose supracompetitive developer transaction fees and minimum price-fixing.12 Additional consumer class actions are likely to follow, similar to the private antitrust multidistrict litigation that followed the DOJ's Microsoft lawsuit13 and in light of the Supreme Court's recent holding in Apple, Inc. v. Pepper, 139 S. Ct. 1514 (2019), that iPhone owners could sue Apple for alleged monopolization as direct purchasers of applications in the App Store.
The DOJ's lawsuit may also set off additional private antitrust actions from competitors that have been allegedly harmed by Google's conduct, as occurred following the DOJ's Microsoft suit. For example, specialized search providers, such as Yelp and Expedia, may argue that Google's placement of its own products above theirs in Google search results give it an unfair advantage, forcing them to buy more search advertising from Google to remain relevant. And companies with voice search rivals to Google Assistant, like Amazon's Alexa, may allege antitrust claims based on preinstallation agreements that impose a voice-searching preference for Google Assistant.
In addition, companies that purchased search and display advertising from Google may file antitrust claims. The ability of search ads to respond to consumer inquiries in real time make this form of advertising highly valuable, and advertisers may argue that Google's alleged monopoly over search advertising allows it to manipulate inventory, raise prices and reduce the quality of services advertisers are provided. In this regard, the DOJ's complaint alleges that Google "monetizes" its search monopoly for search advertising and general search text advertising and that advertisers pay Google approximately $40 billion a year to place ads on Google's search engine results page.14 The DOJ's complaint does not allege the extent to which advertisers may have been overcharged, but does assert that advertisers bought more advertising from Google because of the alleged anticompetitive conduct and would have otherwise purchased advertising "at more attractive terms."15And while the DOJ's complaint focuses on search advertising, a putative class action was just filed on behalf of display advertisers and publishers, alleging that Google leverages its monopoly power to control the intermediary services between advertisers and publishers.16 According to the suit, this enables Google to coerce the purchase and use of its display advertising services and rig advertising auctions, resulting in advertisers paying higher prices and publishers losing ad revenue.
Notably, the federal antitrust laws provide for automatic treble damages in these pending and potential private civil lawsuits.
1 United States v. Google LLC, No. 1:20-cv-3010 (D.D.C. Oct. 20, 2020) (Compl. ); Press Release, DOJ, Statement of the Attorney General on the Announcement Of Civil Antitrust Lawsuit Filed Against Google (Oct. 20, 2020), https://www.justice.gov/opa/pr/statement-attorney-general-announcement-civil-antitrust-lawsuit-filed-against-google.
2 This lawsuit is not the first time that Google has faced antitrust scrutiny; the FTC investigated Google seven years ago but ultimately chose not to file suit, and the European Union has already initiated three antitrust suits against the company, resulting in more than $9 billion in fines.
3 Press Release, DOJ, Statement of the Attorney General on the Announcement Of Civil Antitrust Lawsuit Filed Against Google (Oct. 20, 2020), https://www.justice.gov/opa/pr/statement-attorney-general-announcement-civil-antitrust-lawsuit-filed-against-google.
4 Compl. ¶ 6.
5 nbsp;Id. ¶¶ 5, 93; Press Release, DOJ, Justice Department Sues Monopolist Google For Violating Antitrust Laws (Oct. 20, 2020), https://www.justice.gov/opa/pr/justice-department-sues-monopolist-google-violating-antitrust-laws.
6 Compl. ¶¶ 170-171.
7 Matthew Perlman, Law360.com, Microsoft Case Looms Over DOJ's Google Antitrust Action (Oct. 21, 2020), https://www.law360.com/competition/articles/1321716/microsoft-case-looms-over-doj-s-google-antitrust-action?nl_pk=2397c8c4-1ccb-4bda-8fc8-d5d12671d6b4&utm_source=newsletter&utm_medium=email&utm_campaign=competition.
8 Press Release, DOJ, Statement of the Attorney General on the Announcement Of Civil Antitrust Lawsuit Filed Against Google (Oct. 20, 2020), https://www.justice.gov/opa/pr/statement-attorney-general-announcement-civil-antitrust-lawsuit-filed-against-google.
9 See Jonathan Shieber & Ingrid Lunden, TechCrunch, The Justice Department Has Filed Its Antitrust Lawsuit Against Google (Oct. 20, 2020), https://techcrunch.com/2020/10/20/justice-department-will-reportedly-file-its-antitrust-lawsuit-against-google-today/; Press Release, N.Y. State Office of Attorney General, Attorney General James Announces Bipartisan Antitrust Investigation Into Google Will Continue (Oct. 20, 2020), https://ag.ny.gov/press-release/2020/attorney-general-james-announces-bipartisan-antitrust-investigation-google-will.
10 See Diane Bartz & David Shepardson, Reuters, U.S. Says Google Breakup May Be Needed to End Violations of Antitrust Law (Oct. 20, 2020), https://www.reuters.com/article/marketsNews/idUSL1N2HB0EX?il=0.
11 Carroll v. Google LLC, No. 3:20-cv-07379 (N.D. Cal. Oct. 21, 2020) (alleging violations of the Sherman Act (15 U.S.C. § 1) and the antitrust laws of more than 20 states); Herrera v. Google LLC, No. 5:20-cv-07365 (N.D. Cal. Oct. 20, 2020) (alleging violations of the Sherman Act (15 U.S.C. §§ 1, 2) and California Cartwright Act (Cal. Bus. & Prof. Code §§ 16700 et seq.)); McNamara v. Google, LLC, No. 5:20-cv-07361 (N.D. Cal. Oct. 20, 2020) (alleging violations of the Sherman Act (15 U.S.C. § 2) and California Unfair Competition Law (Cal. Bus. & Prof. Code §§ 17200 et seq.)).
12 Pure Sweat Basketball, Inc. v. Google LLC, No. 5:20-cv-05792 (N.D. Cal. Oct. 21, 2020) (alleging violations of the Sherman and Clayton Acts (15 U.S.C. §§ 1, 2, 3, 15, 26), California Cartwright Act (Cal. Bus. & Prof. Code §§ 16700 et seq.) and California Unfair Competition Law (Cal. Bus. & Prof. Code §§ 17200 et seq.)).
13 See In re Microsoft Corp. Antitrust Litigation, MDL Docket No. 1332 (D. Md. Jan. 21, 2003)
14 Compl. ¶ 7.
15 Id. ¶ 171.
16 Grand Atlas LLC v. Google LLC, No. 1:20-cv-03057 (D.D.C. Oct. 22, 2020) (alleging violations of the Sherman Act (15 U.S.C. § 2) and California Unfair Competition Law (Cal. Bus. & Prof. Code § 17200, et seq.)).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Mr Daniel B. Goldman
Kramer Levin Naftalis & Frankel LLP
1177 Avenue Of The Americas
© Mondaq Ltd, 2020 - Tel. +44 (0)20 8544 8300 - http://www.mondaq.com, source Business Briefing