U.S. DOJ, State Attorneys General File Antitrust Complaint Against Google

Orrick, Herrington & Sutcliffe LLP
Contact

Orrick, Herrington & Sutcliffe LLP

On October 20, the U.S. Department of Justice filed its long-awaited antitrust complaint against Google, joined by 11 state Attorneys General (Arkansas, Florida, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Montana, South Carolina, and Texas). The lawsuit was filed in the U.S. District Court for the District of Columbia.

The complaint begins with this opening statement:

Two decades ago, Google became the darling of Silicon Valley as a scrappy startup with an innovative way to search the emerging internet. That Google is long gone. The Google of today is a monopoly gatekeeper for the internet. . . For many years, Google has used anticompetitive tactics to maintain and extend its monopolies in the markets for general search services, search advertising, and general search text advertising – the cornerstones of its empire.

The complaint focuses on Google’s efforts to become the default general search engine for mobile and computer search access points, which in turn endows its general search engine with “de facto exclusivity.” The complaint alleges that “Google has entered into exclusionary agreements, including tying arrangements, and engaged in anticompetitive conduct to lock up distribution channels and block rivals.”

The complaint also alleges that Google is dominant in the relevant markets for search (90% market share, with 95% share of mobile search) as well as search advertising (70%-plus market shares) and general text advertising (70%+ market shares).

Industry Background

  • The complaint begins with a history of search engines, search advertising, and general search text advertising dating back to the early 1990s. Over time, the search advertising business has grown considerably to over $50 billion a year and is dominated by Google.
  • The complaint describes how Google pays billions each year to distributors such as smart phone makers and wireless carriers “to secure default status for its general search engine” and to prohibit those same companies “from dealing with Google’s competitors.” The complaint also describes Google’s mobile search distribution channels, computer search distribution channels, and revenue sharing agreements.

Alleged Anticompetitive Conduct

  • The complaint alleges that Google is a monopolist in the general search services, search advertising, and general search text advertising markets, and that the company uses it monopoly positions to continuously foreclose rivals and protect its monopolies.
  • Exclusionary Agreements: For example, the complaint alleges Google has maintained its monopolies by implementing and enforcing exclusionary agreements with distributors that deny rivals access to the most important distribution channels.
  • Google’s agreements allegedly lock up mobile distribution of search.

    • Distribution on Mobile Devices: Some mobile device makers allegedly are required under their agreements to make Google’s search engine the default engine, and to use Google for general search queries. Google allegedly pays device makers billions that exclusivity and controls one mobile distribution channel with its distributor agreements and owned-and-operated distribution properties.
  • Google Agreements Lock Up Browser Distribution: Google also allegedly has entered into exclusive revenue sharing agreements with browser distributors which require them to make Google the preset default general search engine for search access points. In exchange for being the preset default general search engine, Google allegedly shares up to 40 percent of the advertising revenue it generates from these search access points with Google’s browser rivals.

Alleged Anticompetitive Effects

The complaint alleges that Google’s conduct has harmed competition by:

  • Foreclosing competition in general search services and protecting a large majority of search queries in the U.S. against any meaningful competition.
  • Excluding general search services rivals from effective distribution channels and thereby denying rivals the necessary scale to compete effectively.
  • Impeding other potential distribution paths for general search services rivals.
  • Increasing barriers to entry and excluding competition at emerging search access points from nascent competitors on both computers and mobile devices.
  • Stunting innovation in new products that could serve as alternative search access points or disruptors to the traditional Google search model.
  • Insulating Google from significant competitive pressure to improve its general search, search advertising, and general search text advertising products and services.

Alleged Antitrust Violations

  • Maintaining monopoly of general search services in violation Sherman Act § 2.
  • Maintaining monopoly of search advertising in violation of Sherman Act § 2.
  • Maintaining monopoly of general search text advertising in violation of Sherman Act § 2.

Request for Relief

  • Plaintiffs request that the Court adjudge and decree that Google acted unlawfully to maintain general search services, search advertising, and general search text advertising monopolies in violation of Section 2 of the Sherman Act.
  • They request the Court enter structural relief as needed to cure any anticompetitive practices and enjoin Google from “from continuing to engage in the anticompetitive practices described herein.”
  • Plaintiffs further request that the Court “[e]nter any other preliminary or permanent relief necessary and appropriate to restore competitive conditions in the markets affected by Google’s unlawful conduct.”

State Attorneys General Investigations

Last September, 50 state and territorial Attorneys General announced an antitrust investigation into Google. Yet, the U.S. DOJ complaint filed on October 20 was joined by only 11 state AGs, all Republicans.

Shortly after that complaint was filed, a bipartisan group of state AGs from Colorado, Iowa, Nebraska, New York, North Carolina, Tennessee, and Utah released a joint statement regarding the filing and the multistate investigation into Google:

Over the last year, both the U.S. DOJ and state attorneys general have conducted separate but parallel investigations into Google’s anticompetitive market behavior. We appreciate the strong bipartisan cooperation among the states and the good working relationship with the DOJ on these serious issues. This is a historic time for both federal and state antitrust authorities, as we work to protect competition and innovation in our technology markets. We plan to conclude parts of our investigation of Google in the coming weeks. If we decide to file a complaint, we would file a motion to consolidate our case with the DOJ’s. We would then litigate the consolidated case cooperatively, much as we did in the Microsoft case.

In addition, it is important to note that the U.S. DOJ investigation into advertising tech is ongoing and may be the basis for a second state AG multistate lawsuit as well.

Written by:

Orrick, Herrington & Sutcliffe LLP
Contact
more
less

Orrick, Herrington & Sutcliffe LLP on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.