A search for fairness

Google case will be vital for competition laws

Hearing in an important antitrust case, the US Department of Justice (DoJ) versus Google, started last week in the District of Columbia. This is one of several crucial cases targeting Big Tech’s business practices. The outcome could determine the future of Internet search and, by extension, the future of businesses riding on the current model. Google, owned by Alphabet Inc, is overwhelmingly and indisputably the dominant search engine across jurisdictions, across devices, operating systems, and browsers. Google claims this is because it is the best search engine. The DoJ’s claim is that Google acts in anti-competitive fashion by paying billions to companies such as Apple to ensure the search engine is bundled as the default option. Several US states are also parties to this lawsuit.

Google claims these payments don’t prevent consumers from painlessly switching from the default Google search engine to any of the other search engines available — such as Bing, Baidu, Yandex, and a dozen others. Google, moreover, claims these payments are to ensure it is the default option and this is analogous to a manufacturer paying Walmart or W H Smith to prominently display its products and that is considered a perfectly legal, legitimate practice. Everyone concerned is well aware that consumer inertia means very few people will bother to switch search engines. Search is foundational to Alphabet’s business model even though the company has its fingers in many other digital and tech pies. Search ads contributed $162 billion to 2023 revenues, and those were roughly 58 per cent of Google’s total revenues. YouTube ads and Google Network ads contributed another $62 billion in advertising revenues. Non-advertising services (cloud, hardware, apps, and content) contribute only around 20 per cent of the top line. Apart from the direct cash flow, Google’s algorithms can analyse the search data patterns to derive knowledge about users and their behaviour, and monetise those insights too.

There are other lawsuits with similar thrusts pending against Google and Meta. Those include a case by the DoJ and state attorneys general against Google over its ad tech business. The Federal Trade Commission too has a case against Meta over its acquisitions of Instagram and WhatsApp. The DoJ is said to be considering bringing a case against Amazon for its practices on its marketplace and its Prime service, and it is investigating Apple as well. One big problem is that US antitrust laws were written a century ago to curb monopolistic behaviour by big oil and automobile firms. Analogies with displays in retail stores are understandable but it is intuitively obvious there is a difference between a browser and the display shelves at Walmart. But translating intuition into an interpretation of “old economy” laws will be hard.

Monopolies stifle innovation. The dominant player may see no need to innovate. Aspirants lack the competitive leverage and resources. Consumers (who go on to use non-search services) and advertisers could be paying more than they would in a more competitive environment. The DoJ will have to show how default search settings limit options available to consumers and, perhaps, draw attention to how Google’s search results are dotted by content about its own non-search services potentially shutting out rivals. If the court is satisfied that this practice is monopolistic, it would have to decide what rectification is possible. This case may determine how antitrust laws apply to business practices on digital platforms now, and in future.