Reining in monopolies

Anti-trust suit against Google could have lessons for India

The US Department of Justice has launched an anti-trust suit against Google, accusing the search engine giant of deploying anti-competitive practices and using market dominance to muscle out rivals. As of now, 11 states have joined the federal lawsuit. The implications could be far-reaching. In an extreme scenario, Google could be forced to break up business divisions and spin them off into different companies after erecting “Chinese Walls” to ensure fair access to rivals. At the very least, it will spend time, headspace, and expensive legal resources to fight these charges. It is also likely that the regulatory contours of the search engine business will change as a consequence, whether Google is exonerated or not.

Although the timing of the suit, initiated by a Republican Administration two weeks before a presidential election, has led to conspiracy theories, there is bi-partisan support. Senior Democratic Party leaders have made similar charges. The suit follows up on a recent joint-party report by Congress, which accuses Google, Amazon, Apple, and Facebook of monopolistic actions. Anti-trust suits can be protracted. The most famous case for business historians was the break-up of energy behemoth Standard Oil into 34 companies by a US Supreme Court decree, back in 1911. Telecom monopoly AT&T was broken up into the seven regional “Baby bells” in 1984. The last such US lawsuit was in 1998, when Microsoft was accused of misusing its dominance in operating systems to force-feed the Internet Explorer browser. Prior to that, IBM endured an anti-trust suit between 1969 and 1982. IBM and Microsoft emerged legally unscathed. But both companies lost market share as they focused on legal battles. In the 1980s, IBM allowed Microsoft and Apple to grab the nascent home PC market; Microsoft was overtaken by Mozilla and Google in the browser wars.

Google has long been under the scanner for allegedly monopolistic behaviour. It holds an overwhelming market share in search and, hence, in search-related advertising. Advertising contributed about $135 billion in 2019, which was 84 per cent of Google’s revenues. Google’s licensed operating system, Android, also rules the smartphone market, while the Chrome browser has a dominant market share in desktops and mobiles. The Android dominance allows Google to charge a whopping 30 per cent commission on apps listed in the Android Play Store. This suit accuses Google of using that dominance to promote other businesses it controls. It was fined a record 4.3 billion euros in the EU for anti-competitive practices, and told to offer a choice of four default browsers on the Android. The tech giant turned that EU decree into a revenue-generator. It holds auctions every quarter where other search engines bid to be installed on Android smartphones. 

This suit could open the floodgates for similar action against Apple, Facebook, Amazon, and others. That US Congress report referenced above alleges Amazon mistreats third-party sellers; Apple’s app-store fees and policies are anti-competitive; and Facebook has tried to eliminate rivals via targeted acquisitions. In principle, reining in monopolies is a good thing. India’s experience is a pointer. Consumers have benefited as government monopolies have been removed in sectors such as banking, aviation, and telecom. Whenever any sector turns into a monopoly, or becomes highly concentrated in market share, regulators must also ensure competition is not wiped out by unethical means. India’s own Competition Commission needs to consider being more active in the regulation of sectors like telecom, retail, ports, and airports, where such concentrations are occurring.