Recently, Google lost (probably its most important case in history) against the US Department of Justice, and Google is still reeling from its implications. Let’s break down the case for you.
Source: Maison Office
The DoJ claimed in its filings that Google had violated anti-trust laws and used illegal back-door tactics to crush its competitors. But, what’s an anti-trust statute?
The anti-trust laws in the US are a series of laws dedicated to cracking down on companies that try to monopolize the market to their advantage. A trust is simply a group of companies that come together to form a monopoly in the market to control pricing.
If you owned the only grocery in the neighbourhood and no one had a car, everyone would come to your store simply because they were hungry, and you could dictate your prices and everyone would have to follow along. That’s what constitutes a monopoly.
What’s the first thing that pops into your mind when I say ‘search’? It’s most likely going to be Google. I don’t search for things anymore, but I google it! And statistics tell the same story. Google absolutely dominates the search market (with an 88% market share overall and a 95% market share on phone searches) and it is starting to take that for granted and hence has switched to monopolistic measures to retain its brand. That’s monopolization in real life.
There are multiple ways you could monopolize the market. If you are sufficiently large enough, you could strong-arm or bully suppliers and shippers into not contracting with your competitor if they don’t want to lose huge business. Or, you could buy out your rivals by undercutting your prices until they lose their market and buy out your conglomerate. And, that’s what the DoJ is accusing Google of.
Now, the DoJ has a legal precedent to follow, as this case is eerily similar to one of the biggest legal cases that rocked the American oil industry, the disintegration of Standard Oil. This was one of the most important cases in anti-trust history which broke down one of the most powerful companies in the world, which owned 50% of all energy reserves in the world.
There are two aspects to the anti-trust law: the Sherman Antitrust Act and the Clayton Act. The Sherman Act states that companies cannot restrict trade by fixing prices or wages, rigging bids, or criminally controlling the market.
Another angle to this law is the Clayton act that states that you cannot perform actions that can lead to restricting your competition such as predatory pricing and forced mergers.
Now, how does this apply to Google? Similar to Standard Oil, Google broke the second section of the Sherman Act and violated two provisions of the law:
- Possession of monopolistic power (which creates an arena of anti-competitive behaviour in the market)
- Maintaining power without a superior product (which means that unless Google has an earth-shattering product, they’re just illegally sticking on to the market)
Now, the argument that you all have is Google has a superior product, and I agree. There’s no company that’s even close to the level that Google has reached in terms of search engines, but the problem starts with the way Google implements its products.
On any Android device, Google is the default search engine. When you search on Mozilla Firefox, you are using Google. And what’s even stranger, Google pays Apple 20 billion dollars (which is 1/5th of Apple’s annual profits the year the ruling was conducted) a year simply to keep Safari’s default browser as Google’s search engine (which is 36% of search revenue). If this isn’t called a monopoly, what is?
Another argument that is proposed against Google is that it abuses the power of being a default web engine. Just look into any device and you’ll find Google doing the searches for you. The only place Google is not there is in Microsoft Edge, where Bing is used. Google has paid billions of dollars to ensure companies use Google as a default, and that’s why it’s virtually almost impossible to defeat Google in the search engine market.
The judge dealing with this particular case thought so too. In the judge’s remarks, he states that Google is a monopolist, the deals were fundamentally anti-competitive in nature and practice and invoking the Sherman Act, he called Google’s actions illegal.
So, what’s on the plate for Google? Using the Standard Oil case, we could be seeing a division of the company as we know it. Instead of Google being a single entity, it could be split up into various smaller and independent businesses such as Gemini, Gmail, Android, Maps etc.
But then again, maybe nothing will happen to Google. The trouble with large companies is that they have played such an important role in the economy that they are virtually irreplaceable. Just ask Bill Gates when he was involved in an anti-trust case in the early 2000s when 90% of all computers were made by Microsoft. The DoJ argued that Microsoft used their market influence to expand Internet Explorer (now Edge) and force out other search engines like Netscape, but Bill Gates got off almost clean with just a few negative remarks from the presiding judge and bad publicity.
Google will still have to face the music though, as it’s already being fined by the European Union to the tune of 8.3 billion euros in three separate anti-trust laws.