The biggest book publisher in the United States is about to get bigger. ViacomCBS has agreed to sell Simon & Schuster to Penguin Random House for more than $2 billion in a deal that will create the first megapublisher.Penguin Random House, the largest book publisher in the United States, is owned by the German media conglomerate Bertelsmann. Adding Simon & Schuster, the third largest publisher, would create a book behemoth, a combination that could trigger antitrust concerns.The deal announced on Wednesday includes provisions that would protect ViacomCBS in the event that a sale is squashed by authorities. Bertelsmann would pay what …
LONDON — European Union regulators brought antitrust charges against Amazon on Tuesday, saying the online retail giant broke competition laws by unfairly using its size and access to data to harm smaller merchants who rely on the company to reach customers.
The European Commission, the executive branch of the 27-nation bloc, said Amazon had abused its dual role as both a retail store used by scores of vendors, and a merchant that sells its own competing goods on the platform. The authorities accused Amazon of harvesting nonpublic data from sellers who use its marketplace to spot popular products, then copy and sell them, often at a lower price.
“We must ensure that dual role platforms with market power, such as Amazon, do not distort competition,” Margrethe Vestager, the commission’s vice president for digital issues, said in a statement. “Data on the activity of third party sellers should not be used to the benefit of Amazon when it act as a competitor to these sellers.”
The case, which has been expected for months, is the latest front in a trans-Atlantic regulatory push against Amazon, Apple, Facebook and Google as the authorities in the United States and Europe take a more skeptical view of their business practices and dominance of the digital economy. Last month, the Justice Department brought antitrust charges against Google, and Apple and Facebook are also facing investigations in both Washington and Brussels.
Many in Europe will be watching to see how the Amazon announcement is received by the incoming administration of President-elect Joseph R. Biden Jr., who is expected to pursue policies that limit the industry’s power. The Trump administration has criticized Ms. Vestager for aiming at American companies like Apple, even as it initiated its own investigations of the industry.
In the Amazon case, the announcement on Tuesday is still preliminary and is just one part of the regulatory process. Amazon now has a chance to respond to the charges. It can take many months, or even years, before a fine and other penalties are announced. The commission also could reach a settlement with Amazon, or the case could be dropped.
The European Commission said it has also started a parallel investigation of Amazon policies around its “buy box,” an important piece of real estate on Amazon’s website that makes it easy for consumers to quickly click to make a purchase.
The commission is studying whether Amazon gives preferential treatment for the buy box to its own products and those of other sellers that pay to use Amazon’s logistics services.
Amazon denied any wrongdoing and said it supports thousands of businesses in Europe.
In Brussels, Amazon has been gearing up for a legal fight. It has hired a team of lawyers and economists, including several who in the past were encouraging tougher enforcement against Google and Microsoft.
“We disagree with the preliminary assertions of the European Commission and will continue to make every effort to ensure it has an accurate understanding of the facts,” the company said in a statement. “No company cares more about small businesses or has done more to support them over the past two decades than Amazon.”
The case reinforces the European Union’s role as a leading tech-industry watchdog, even as past investigations of companies like Google have done little to diminish their power. Authorities in Brussels have argued that the biggest tech platforms unfairly use their power to box out competitors, though means like bundling products, charging high fees in app stores and hoarding data.
Ms. Vestager has raised alarms about the “gatekeeper” role of companies like Amazon, Apple, Facebook and Google. The companies have reached such a size, Ms. Vestager has argued, that they are essentially micro-economies, setting rules and policies with little transparency that determine the fate of millions of other businesses that have no choice but to follow along.
About 2.3 million third-party merchants around the world use Amazon to reach customers, including about 37 percent who rely on the company as their sole source of income, according to a United States congressional report published last month. In the European Union, Amazon has information on about 800,000 active sellers using its platform, covering more than 1 billion products, according to the European Commission.
Ms. Vestager has warned the biggest companies will only grow stronger without tougher antitrust enforcement and new regulations, blocking new companies and innovations from emerging.
Next month, the European Commission is expected to unveil a new package of laws that would represent one of the world’s most sweeping set of regulations of the tech industry. It could include rules prohibiting the self-preferencing of products and requiring the biggest companies to share data with smaller rivals.
In the Amazon case, European authorities spent two years investigating the company’s dual role as both a retail store and seller of its own goods.
Amazon argues that it only makes up a small sliver of the global retail market, but for many smaller merchants the company is the main gateway to online sales. Worries about Amazon’s power have only grown during the pandemic, as internet sales become increasingly vital to businesses grappling with lockdowns and lost foot traffic. Since 2015, e-commerce sales in the European Union nearly doubled to about 720 billon euros, or about $850 billion.
Sellers have long raised concerns that if Amazon sees a particular product doing well on its website, the company would create its own version, sell it at a lower price and then give it better placement on the Amazon website.
The European Commission said those concerns were supported by a review of data on more than 80 million transactions and 100 million products. Ms. Vestager said it showed how Amazon used the data from outside sellers to determine what computer accessories, kitchen tools or other products to introduce, as well as where to set prices and how to manage the inventory.
The real-time information Amazon collects includes order totals, number of visitors to certain products and a merchant’s revenue.
“This is a case about big data,” said Ms. Vestager. She said the investigation centers on Amazon’s behavior in France and Germany, where she said Amazon has a “dominant” position in the market.
Critics of Amazon cheered the European decision.
“Amazon, by using its very powerful position on e-commerce markets and its dual role as both retailer and marketplace, is making it more difficult for independent retailers to compete fairly,” said Agustin Reyna, director of legal and economic affairs at the European Consumer Organization, a group that has been urging regulators to act against Amazon.
Monika Pronczuk contributed reporting from Brussels.
WASHINGTON — The tech industry had it easy under President Barack Obama. Regulators brought no major charges, executives rotated in and out of the administration, and efforts to strengthen privacy laws fizzled out.
The industry will have it much harder under president-elect Joseph R. Biden Jr.
Bipartisan support to restrain its power has grown sharply during the Trump administration, and shows no signs of going away as Democrats regain control of the White House. Mr. Biden is expected to take on the Silicon Valley giants on misinformation, privacy and antitrust, in a sharp departure from the polices pursued while he was vice president under Mr. Obama.
“The foundations of the concerns about digital platforms were developing during the Obama years, and yet the major tech issues from the Obama era are still with us and unresolved,” said Chris Lewis, the president of the consumer advocacy group Public Knowledge. “The genie is out of the bottle and the issues the public needs resolved are piling up without resolution.”
On the campaign trail, Mr. Biden rarely spoke about technology policy at length. But he has criticized social media companies, like Facebook, that have allowed disinformation to flourish on their sites, and he has expressed concern over power held by a handful of companies in tech and other industries.
A Biden administration is expected to pursue the antitrust lawsuit filed against Google last month, people with knowledge of his campaign said. It may also introduce more antitrust cases against Facebook and possibly Amazon and Apple, which the Trump administration has investigated for more than a year.
The Biden campaign wouldn’t comment about specific cases or investigations. But a spokesman for it, Matt Hill, said Mr. Biden would take an aggressive stance toward the industry.
“Many technology giants and their executives have not only abused their power, but misled the American people, damaged our democracy and evaded any form of responsibility,” Mr. Hill said. “That ends with a President Biden.”
Mr. Biden’s clearest position on internet policy has been his call to revoke a legal shield known as Section 230 of the Communications Decency Act. That safe harbor has protected Google, Facebook, Amazon and Twitter from lawsuits for hosting or removing harmful or misleading content. He hasn’t elaborated on how he would revoke the shield, a 1996 law that the tech industry will fight vigorously to defend.
Also near the top of Mr. Biden’s agenda, his advisers have said, will be the extension of broadband internet service to low-income and rural households, which has become an urgent need during the pandemic as schools have shifted online. Billions in federal funding could come from legislation or the Federal Communications Commission, which hollowed out several regulations during the Trump administration.
The F.C.C. would also be poised to reinstall so-called net neutrality, a rule that prevented telecommunications companies from blocking or slowing internet traffic.
Hundreds of informal tech advisers, some of them current or former telecom and tech employees, have offered opinions, white papers and strategies for Mr. Biden’s campaign and possible presidency. Many of the top advisers have been proponents of strong legislation to limit the power of the tech companies.
Leading Mr. Biden’s team of tech advisers is Bruce Reed, his chief of staff when he was vice president. Mr. Reed served in recent years as general counsel for Common Sense Media, a child advocacy nonprofit in San Francisco that has lobbied for tech privacy and safety laws. Mr. Reed was instrumental in the creation of California’s privacy law in 2018.
Another top aide working on tech issues is Stef Feldman, a longtime member of Mr. Biden’s staff who led the campaign’s policy efforts. This year, she told Politico that among the issues she was tracking closely was “disparities in children’s ability to engage in remote learning due to a lack of access to technology” during the pandemic.
Mr. Biden will need to navigate a split in the Democratic Party over how aggressively to approach the tech companies. Progressives like Senator Elizabeth Warren of Massachusetts and Representative David Cicilline of Rhode Island have argued that the giants should be broken up, and those lawmakers will probably fight for regulators who feel similarly. Moderates in the party have shown a reluctance to break up the companies.
Many conservatives support the antitrust investigations being led by the Justice Department and the Federal Trade Commission. But they are likely to resist many of Mr. Biden’s tech policies, like online speech and privacy legislation that interferes in free markets. And with neither party controlling a large majority in the Senate, their opposition means that legislation could easily hit gridlock.
Mr. Biden will also face fierce pushback from the industry. In recent years, technology companies have expanded their lobbying, with Amazon, Apple, Facebook and Google spending $53.6 million on it last year — more than Wall Street, pharmaceutical and energy firms.
“Tremendous political influence will be brought to bear on a Biden White House by the tech lobby and its allies,” said Jeffrey Chester, head of the Center for Digital Democracy, a privacy advocacy group. “However, it’s night and day in terms of how tech is viewed now and during the Obama years.”
Current and former tech executives and lobbyists, as well as former regulators, said that while the industry expected a Biden administration to be tough on the companies, particularly in antitrust areas, it would welcome a change from the unpredictable Trump administration.
“The Trump administration was a showbiz, and as a result no one knew what to expect,” said Tom Wheeler, a Democrat who was chairman of the Federal Communications Commission under Mr. Obama. “Silicon Valley will at least be pleased with stability knowing there is a plan, rather than a whim-of-the-moment policy creation.”
Bruce Sewell, Apple’s general counsel and its chief of government affairs from 2009-17, said, “If you’re in Silicon Valley and you’re the head of one of these companies, you’re probably saying, ‘Biden’s not going to be easier on us — but at least it’s back to the devil that we know.’”
Mr. Biden is expected to largely extend the hard line Mr. Trump has taken against Chinese tech firms that officials say pose a national security threat. The Trump administration has moved to strip Chinese telecom equipment from American networks, stop Silicon Valley companies from building undersea cables to mainland China and remove Chinese-owned products like TikTok from Apple’s and Google’s app stores.
Mr. Trump has pressured American allies to take the same steps. But Mr. Biden may try to take a more conciliatory approach with European policymakers who have grown to see China’s influence over technology as a major threat — which could encourage him to overcome the gap between Europe’s tough internet regulations and the United States’ hands-off approach.
“A Biden administration would definitely seek to put pressure on Beijing in a multilateral way, but one of the first things they’ll have to think about is: How do we work with Europeans when there is a massive digital chasm?” said Samm Sacks, a cybersecurity policy and China digital economy fellow at the think tank New America.
OAKLAND, Calif. — When Tim Cook and Sundar Pichai, the chief executives of Apple and Google, were photographed eating dinner together in 2017 at an upscale Vietnamese restaurant called Tamarine, the picture set off a tabloid-worthy frenzy about the relationship between the two most powerful companies in Silicon Valley.
As the two men sipped red wine at a window table inside the restaurant in Palo Alto, their companies were in tense negotiations to renew one of the most lucrative business deals in history: an agreement to feature Google’s search engine as the preselected choice on Apple’s iPhone and other devices. The updated deal was worth billions of dollars to both companies and cemented their status at the top of the tech industry’s pecking order.
Now, the partnership is in jeopardy. Last Tuesday, the Justice Department filed a landmark lawsuit against Google — the U.S. government’s biggest antitrust case in two decades — and homed in on the alliance as a prime example of what prosecutors say are the company’s illegal tactics to protect its monopoly and choke off competition in web search.
The scrutiny of the pact, which was first inked 15 years ago and has rarely been discussed by either company, has highlighted the special relationship between Silicon Valley’s two most valuable companies — an unlikely union of rivals that regulators say is unfairly preventing smaller companies from flourishing.
“We have this sort of strange term in Silicon Valley: co-opetition,” said Bruce Sewell, Apple’s general counsel from 2009 to 2017. “You have brutal competition, but at the same time, you have necessary cooperation.”
Apple and Google are joined at the hip even though Mr. Cook has said internet advertising, Google’s bread and butter, engages in “surveillance” of consumers and even though Steve Jobs, Apple’s co-founder, once promised “thermonuclear war” on his Silicon Valley neighbor when he learned it was working on a rival to the iPhone.
Apple and Google’s parent company, Alphabet, worth more than $3 trillion combined, do compete on plenty of fronts, like smartphones, digital maps and laptops. But they also know how to make nice when it suits their interests. And few deals have been nicer to both sides of the table than the iPhone search deal.
Nearly half of Google’s search traffic now comes from Apple devices, according to the Justice Department, and the prospect of losing the Apple deal has been described as a “code red” scenario inside the company. When iPhone users search on Google, they see the search ads that drive Google’s business. They can also find their way to other Google products, like YouTube.
A former Google executive, who asked not to be identified because he was not permitted to talk about the deal, said the prospect of losing Apple’s traffic was “terrifying” to the company.
The Justice Department, which is asking for a court injunction preventing Google from entering into deals like the one it made with Apple, argues that the arrangement has unfairly helped make Google, which handles 92 percent of the world’s internet searches, the center of consumers’ online lives.
Online businesses like Yelp and Expedia, as well as companies ranging from noodle shops to news organizations, often complain that Google’s search domination enables it to charge advertising fees when people simply look up their names, as well as to steer consumers toward its own products, like Google Maps. Microsoft, which had its own antitrust battle two decades ago, has told British regulators that if it were the default option on iPhones and iPads, it would make more advertising money for every search on its rival search engine, Bing.
What’s more, competitors like DuckDuckGo, a small search engine that sells itself as a privacy-focused alternative to Google, could never match Google’s tab with Apple.
Apple now receives an estimated $8 billion to $12 billion in annual payments — up from $1 billion a year in 2014 — in exchange for building Google’s search engine into its products. It is probably the single biggest payment that Google makes to anyone and accounts for 14 to 21 percent of Apple’s annual profits. That’s not money Apple would be eager to walk away from.
In fact, Mr. Cook and Mr. Pichai met again in 2018 to discuss how they could increase revenue from search. After the meeting, a senior Apple employee wrote to a Google counterpart that “our vision is that we work as if we are one company,” according to the Justice Department’s complaint.
A forced breakup could mean the loss of easy money to Apple. But it would be a more significant threat to Google, which would have no obvious way to replace the lost traffic. It could also push Apple to acquire or build its own search engine. Within Google, people believe that Apple is one of the few companies in the world that could offer a formidable alternative, according to one former executive. Google has also worried that without the agreement, Apple could make it more difficult for iPhone users to get to the Google search engine.
A spokesman for Apple declined to comment on the partnership, while a Google spokesman pointed to a blog post in which the company defended the relationship.
Even though its bill with Apple keeps going up, Google has said again and again that it dominates internet search because consumers prefer it, not because it is buying customers. The company argues that the Justice Department is painting an incomplete picture; its partnership with Apple, it says, is no different than Coca-Cola paying a supermarket for prominent shelf space.
Other search engines like Microsoft’s Bing also have revenue-sharing agreements with Apple to appear as secondary search options on iPhones, Google says in its defense. It adds that Apple allows people to change their default search engine from Google — though few probably do because people typically don’t tinker with such settings and many prefer Google anyway.
Apple has rarely, if ever, publicly acknowledged its deal with Google, and according to Bernstein Research, has mentioned its so-called licensing revenue in an earnings call for the first time this year.
According to a former senior executive who spoke on the condition of anonymity because of confidentiality contracts, Apple’s leaders have made the same calculation about Google as much of the general public: The utility of its search engine is worth the cost of its invasive practices.
“Their search engine is the best,” Mr. Cook said when asked by Axios in late 2018 why he partnered with a company he also implicitly criticized. He added that Apple had also created ways to blunt Google’s collection of data, such as a private-browsing mode on Apple’s internet browser.
The deal is not limited to searches in Apple’s Safari browser; it extends to virtually all searches done on Apple devices, including with Apple’s virtual assistant, Siri, and on Google’s iPhone app and Chrome browser.
The relationship between the companies has swung from friendly to contentious to today’s “co-opetition.” In the early years of Google, the company’s co-founders, Larry Page and Sergey Brin, saw Mr. Jobs as a mentor, and they would take long walks with him to discuss the future of technology.
In 2005, Apple and Google inked what at the time seemed like a modest deal: Google would be the default search engine on Apple’s Safari browser on Mac computers.
Quickly, Mr. Cook, then still a deputy to Mr. Jobs, saw the arrangement’s lucrative potential, according to another former senior Apple executive who asked not to be named. Google’s payments were pure profit, and all Apple had to do was feature a search engine its users already wanted.
Apple expanded the deal for its big upcoming product: the iPhone. When Mr. Jobs unveiled the iPhone in 2007, he invited Eric Schmidt, Google’s then chief executive, to join him onstage for the first of Apple’s many famous iPhone events.
“If we just sort of merged the two companies, we could just call them AppleGoo,” joked Mr. Schmidt, who was also on Apple’s board of directors. With Google search on the iPhone, he added, “you can actually merge without merging.”
Then the relationship soured. Google had quietly been developing a competitor to the iPhone: smartphone software called Android that any phone maker could use. Mr. Jobs was furious. In 2010, Apple sued a phone maker that used Android. “I’m going to destroy Android,” Mr. Jobs told his biographer, Walter Isaacson. “I will spend my last dying breath if I need to.”
A year later, Apple introduced Siri. Instead of Google underpinning the virtual assistant, it was Microsoft’s Bing.
Yet the companies’ partnership on iPhones continued — too lucrative for either side to blow it up. Apple had arranged the deal to require periodic renegotiations, according to a former senior executive, and each time, it extracted more money from Google.
“You have to be able to maintain those relationships and not burn a bridge,” said Mr. Sewell, Apple’s former general counsel, who declined to discuss specifics of the deal. “At the same time, when you’re negotiating on behalf of your company and you’re trying to get the best deal, then, you know, the gloves come off.”
Around 2017, the deal was up for renewal. Google was facing a squeeze, with clicks on its mobile ads not growing fast enough. Apple was not satisfied with Bing’s performance for Siri. And Mr. Cook had just announced that Apple aimed to double its services revenue to $50 billion by 2020, an ambitious goal that would be possible only with Google’s payments.
By the fall of 2017, Apple announced that Google was now helping Siri answer questions, and Google disclosed that its payments for search traffic had jumped. The company offered an anodyne explanation to part of the reason it was suddenly paying some unnamed company hundreds of millions of dollars more: “changes in partner agreements.”
WASHINGTON — The Federal Trade Commission is moving closer to a decision about filing an antitrust lawsuit against Facebook for its market power in social networking, according to two people with knowledge of the agency’s talks.
The five members of the F.T.C. met on Thursday to discuss its investigation into Facebook and whether the company had bought smaller rivals to maintain a monopoly, the people said. They said three documents about Facebook had been prepared by the agency and circulated among its leaders: One addresses the company’s potential antitrust violations, another analyzes its economics, and a third assesses the risks of litigation.
No decision on a case has been made, the people said. The commissioners must vote before any case is pursued.
Facebook and the F.T.C. declined to comment. The Washington Post reported earlier that the commission met about the Facebook investigation on Thursday.
Lawmakers and policymakers in Washington have ramped up antitrust actions against the largest technology companies, often in a bipartisan effort. On Tuesday, the Justice Department sued Google, accusing it of illegally maintaining its monopoly power in search and search advertising — the first such government action against a tech company in two decades. Two weeks ago, the House Judiciary Committee recommended taking action to break up the big tech platforms, including Facebook, Amazon, Apple and Google.
The actions reflect growing frustration toward the companies, which total around $5 trillion in value and have transformed commerce, speech, media and advertising globally. That power has drawn the scrutiny of conservatives like President Trump and liberals like Senator Elizabeth Warren of Massachusetts.
The U.S. investigations began last year when the Justice Department started examining Google and other tech companies. Joseph Simons, the chairman of the F.T.C. and a Trump appointee, also opened an investigation into Facebook in June 2019. Around the same time, four dozen state attorneys general began a parallel investigation into the social network.
Facebook has tangled with the F.T.C. before, but mainly over privacy issues. The company reached a privacy settlement in 2011 with the agency. In 2018, the F.T.C. opened an investigation into Facebook for violating that settlement, prompted by a report from The New York Times and The Observer of London on how the company allowed Cambridge Analytica, a British consulting firm to the Trump campaign, to harvest the personal information of its users. As a result, Facebook last year agreed to a record $5 billion settlement with the F.T.C. on data privacy violations.
The antitrust investigation by the F.T.C. has been far-reaching. The agency has collected thousands of internal documents from Facebook’s leaders. It has also interviewed people from the company’s rivals, such as Snap, which owns the Snapchat app, about Facebook’s dominant position in social networking and its business practices.
In August, Mark Zuckerberg, Facebook’s chief executive, answered questions under oath as part of the inquiry.
The company has denied violations of antitrust laws. It points to competition in online social networks, including the fast rise of the Chinese-owned viral video app TikTok, as proof that it does not have a lock on the market.
But with nearly three billion users across its apps and a market value of $792 billion, Facebook is unrivaled in size among social networking apps. Part of its dominance has been due to acquisitions of smaller rivals. Facebook bought the photo-sharing app Instagram for $1 billion in 2012. It bought WhatsApp, the messaging app, for $19 billion in 2014. Both mergers were approved by the F.T.C.
The commission’s investigation has largely focused on Facebook’s mergers with companies like Instagram and WhatsApp, people with knowledge of the inquiry said. The deals remove competition from the market and have bolstered Facebook’s reach and clout, its critics have said.
In a July antitrust hearing with House lawmakers, Mr. Zuckerberg was confronted with emails showing that a Facebook executive had referred to Instagram during the acquisition process as a “competitive threat.” Mr. Zuckerberg said Instagram’s success was due to Facebook.
But his answer did not appear to satisfy House lawmakers.
In an antitrust report this month, staff of the House Judiciary Committee said Facebook’s power in social networking was so immense that the company “has tipped the market toward monopoly such that Facebook competes more vigorously among its own products — Facebook, Instagram, WhatsApp and Messenger — than with actual competitors.”
For decades, America’s antitrust laws — originally designed to curb the power of 19th-century corporate giants in railroads, oil and steel — have been hailed as “the Magna Carta of free enterprise” and have proved remarkably durable and adaptable.
But even as the Justice Department filed an antitrust suit against Google on Tuesday for unlawfully maintaining a monopoly in search and search advertising, a growing number of legal experts and economists have started questioning whether traditional antitrust is up to the task of addressing the competitive concerns raised by today’s digital behemoths. Further help, they said, is needed.
Antitrust cases typically proceed at the stately pace of the courts, with trials and appeals that can drag on for years. Those delays, the legal experts and economists said, would give Google, Facebook, Amazon and Apple a free hand to become even more entrenched in the markets they dominate.
A more rapid-response approach is required, they said. One solution: a specialist regulator that would focus on the major tech companies. It would establish and enforce a set of basic rules of conduct, which would include not allowing the companies to favor their own services, exclude competitors or acquire emerging rivals and require them to permit competitors access to their platforms and data on reasonable terms.
The British government has already said it would create a digital markets unit, with calls for a Big Tech regulator to also be introduced in the European Union and in Australia. In the United States, recommendations for a digital markets regulator have also been made in expert reports and in congressional testimony. It could be a separate agency or perhaps a digital division inside the Federal Trade Commission.
Significantly, the leading proponents of this path in the United States are mainstream antitrust experts and economists rather than break-’em-up firebrands. Jason Furman, a professor at Harvard University and chair of the Council of Economic Advisers in the Obama administration, led an advisory group to the British government that recommended the creation of a digital markets unit in 2019.
Breaking up the big tech companies, Mr. Furman said, is a bad idea because that would risk losing some of the consumer benefits these digital utilities undeniably deliver. A regulator is necessary to police digital markets and the behavior of the tech giants, he said.
“I’m a small ‘c’ conservative, and I’m not a fan of regulation generally,” Mr. Furman said. “But it’s needed in this space.”
Regulators that focus on specific sectors of the economy are common in the United States. For financial markets, there is the Securities and Exchange Commission; for airlines, the Federal Aviation Administration; for pharmaceuticals, the Food and Drug Administration; for telecommunications, the Federal Communications Commission; and so on.
There is also precedent for picking out a handful of big companies for special treatment. In banking, the biggest banks with the most customers and loans are classified as “systemically important financial institutions” and subject to more stringent scrutiny.
Several supporters of a new tech regulator were officials in the Obama administration, which was known for being friendly to Silicon Valley. But the advocates said that experience — as well as the conservative, pro-big business drift of court rulings in recent years — left them frustrated with antitrust law as the only way to restrain the growing market power and conduct of the big tech companies.
“The mechanism of antitrust is not working to protect competition,” said Fiona Scott Morton, an official in the Justice Department’s antitrust division in the Obama administration, who is an economist at the Yale University School of Management. “So let’s do something else — use a different tool.”
Ms. Scott Morton led an expert panel on antitrust in a report last year on digital platforms by the Stigler Center at the University of Chicago’s Booth School of Business. The report recommended the creation of a regulatory authority. (Ms. Scott Morton has been a forceful critic of Google, but also a consultant to Apple and Amazon.)
Such a regulatory approach carries the risk of government’s meddling in a fast-moving industry that could hobble innovation, some antitrust experts warned. While antitrust law reacts to alleged anticompetitive behavior and can thus be slow, that shortcoming is preferable to prescriptive government rules and regulations, they said.
“I’m very uncomfortable with the regulatory path, especially if it means things like getting government approval for product changes,” said Herbert Hovenkamp, a professor at the University of Pennsylvania Law School. “The history of regulation shows that it is an innovation killer.”
A. Douglas Melamed, a former general counsel of Intel and a former antitrust official in the Justice Department, shared that concern. But Mr. Melamed, a member of the expert panel for the Stigler Center report, said the tech giants did pose a competition problem.
“I think regulation might make sense if it is narrowly focused, not running the industry,” said Mr. Melamed, who is a professor at Stanford Law School.
The last major antitrust action against a big technology company was the landmark Microsoft case in the 1990s. The case began with a suit filed in 1994 by the Federal Trade Commission and a simultaneous consent decree.
The Justice Department and several states later picked up the pursuit, investigated anew, filed suit and conducted an exhaustive trial. Microsoft was found to have repeatedly violated the nation’s antitrust laws, and the company then reached a settlement with the government, which a federal court approved in 2002.
In the Microsoft case, the antitrust legal process worked, in its way. Yet its impact is still debated. Without the suit and years of scrutiny, some observers said, Microsoft could have throttled the rise of Google.
But others said the technological shift toward the internet and away from the personal computer meant that Microsoft had lost the gatekeeper power it once held. Technology, not antitrust, they insisted, opened the door to competition.
Triumph or not, the Microsoft case was two decades ago. Proponents of a new regulator said antitrust law was ill suited by itself to restraining today’s faster-moving digital giants. In the internet economy, they said, the forces that reinforce and expand the power of a market leader — called network effects — are stronger and more rapid than in the personal computer era.
“Antitrust is not a fully adequate tool to deal with the companies that dominate these markets,” said Gene Kimmelman, who was on the Stigler Center panel and a co-author of a recent report by the Shorenstein Center at Harvard that called for the creation of a “digital platform agency” in America.
Another argument for the regulatory option is that competition concerns now span four companies, not just one. Apple, Amazon, Facebook and Google are in different markets, including search, online advertising, e-commerce and social networks. Bringing separate antitrust cases against them would most likely be beyond the resources of the government.
“When the competition issues are larger than a single firm, regulation might be the better tool to use,” said Andrew I. Gavil, a law professor at Howard University.
OAKLAND, Calif. — When Sundar Pichai succeeded Larry Page as the head of Google’s parent company in December, he was handed a bag of problems: Shareholders had sued the company, Alphabet, over big financial packages handed to executives accused of misconduct. An admired office culture was fraying. Most of all, antitrust regulators were circling.
On Tuesday, the Justice Department accused Google of being “a monopoly gatekeeper of the internet,” one that uses anticompetitive tactics to protect and strengthen its dominant hold over web search and search advertising.
Google, which has generated vast profits through a recession, a pandemic and earlier investigations by government regulators on five continents, now faces the first truly existential crisis in its 22-year history.
The company’s founders, Mr. Page and Sergey Brin, have left the defense to the soft-spoken Mr. Pichai, who has worked his way up the ranks over 16 years with a reputation for being a conscientious caretaker rather than an impassioned entrepreneur.
Mr. Pichai, a former product manager, may seem an unlikely candidate to lead his company’s fight with the federal government. But if the tech industry’s bumptious history with antitrust enforcement is any lesson, a caretaker who has reluctantly stepped into the spotlight might be preferable to a charismatic leader born to it.
Mr. Pichai, 48, is expected to make the case — as he has for some time — that the company is not a monopoly even though it has a 92 percent global market share of internet searches. Google is good for the country, so goes the corporate message, and has been a humble economic engine — not a predatory job killer.
“He has to come off as an individual who is trying to do the right thing not only for his company but broader society,” said Paul Vaaler, a business and law professor at the University of Minnesota. “If he comes off as evasive, petulant and a smart aleck, this is going to be a killer in front of the court and the court of public opinion.”
Google declined to make Mr. Pichai available for an interview. In an email to employees on Tuesday, he urged Google employees to stay focused on their work so that users will continue to use its products not because they have to but because they want to.
“Scrutiny is nothing new for Google, and we look forward to presenting our case,” Mr. Pichai wrote. “I’ve had Googlers ask me how they can help, and my answer is simple: Keep doing what you’re doing.”
Few executives have faced a challenge like this, and the most iconic figures in the technology industry have wilted under the glare of antitrust scrutiny.
Bill Gates, who was chief executive of Microsoft in the last big technology antitrust case brought by the Justice Department two decades ago, came across as combative and evasive in depositions, reinforcing the view that the company was a win-at-all-costs bully. Mr. Gates said last year that the lawsuit had been such a “distraction” that he “screwed up” the transition to mobile phone software and ceded the market to Google.
Mr. Page dealt with impending antitrust scrutiny with detachment, spending his time on futuristic technology projects instead of huddling with lawyers. Even as the European Union handed down three fines against Google for anticompetitive practices, Mr. Page barely addressed the matter publicly.
On a conference call with reporters on Tuesday, officials at the Justice Department declined to reveal whether they had spoken to Mr. Page during its investigation.
In its complaint, the Justice Department, along with 11 states, said Google had foreclosed competition in the search market by striking deals with handset manufacturers, including Apple, and mobile carriers to block rivals from competing effectively.
“For the sake of American consumers, advertisers and all companies now reliant on the internet economy, the time has come to stop Google’s anticompetitive conduct and restore competition,” the complaint said.
Google said that the case was “deeply flawed” and that the Justice Department was relying on “dubious antitrust arguments.”
Google is also the target of an antitrust inquiry by state attorneys general looking into its advertising technology and web search. And Europe continues to investigate the company over its data collection even after the three fines since 2017, totaling nearly $10 billion.
At Mr. Pichai’s side are senior executives who are also inclined to strike an accommodating tone. He has surrounded himself with other serious, buttoned-up career Google managers who bring a lot of boring to the table.
The point person for handling the case is Kent Walker, Google’s chief legal officer and head of global affairs. Though Mr. Walker, who worked at the Justice Department as an assistant U.S. attorney and joined Google in 2006, oversees many of the company’s messiest issues, he rarely makes headlines — a testament, current and former colleagues said, to his lawyerly pragmatism.
Google has appointed Halimah DeLaine Prado as its new general counsel. A 14-year veteran of the company’s legal department, Ms. Prado was most recently a vice president overseeing the global team that advised Google on products including advertising, cloud computing, search, YouTube and hardware. While Ms. Prado doesn’t have a background in antitrust, she has been at Google since 2006 and is, by now, well versed in competition law.
The company is expected to rely heavily on its high-priced law firms to help manage the battle, including Wilson Sonsini Goodrich & Rosati, a top Silicon Valley firm, and Williams & Connolly, which has defended Google in other competition law cases.
Wilson Sonsini has represented Google from the company’s inception and helped it defend itself in a Federal Trade Commission investigation into its search business. In 2013, the agency chose not to bring charges.
Regardless of the legal argument for prosecuting Google as a monopoly, the case may shape the public perception of the company long after it has been resolved.
Until now, Google’s public posture has been a shrug. Mr. Pichai has said that the antitrust scrutiny is nothing new and that, if anything, the company welcomes the look into its business practices. Google has argued that it competes in rapidly changing markets, and that its dominance can evaporate quickly with the emergence of new rivals.
“Google operates in highly competitive and dynamic global markets, in which prices are free or falling and products are constantly improving,” Mr. Pichai said in his opening remarks to a House antitrust panel in July. “Google’s continued success is not guaranteed.”
Mr. Pichai is familiar with the machinations of antitrust proceedings. In 2009, when he was a vice president of product management, he lobbied the European competition authorities to take action on Microsoft’s Internet Explorer web browser.
“We are confident that more competition in this space will mean greater innovation on the web and a better user experience for people everywhere,” Mr. Pichai wrote in a blog post at the time, sentiments that search rivals say about Google today.
But shortly after he became Google’s chief executive in 2015, Mr. Pichai displayed his tendency for pragmatism when he buried the hatchet with Microsoft. The two companies agreed to stop complaining to regulators about each other.
Early in his tenure running Google, Mr. Pichai was reluctant to press its case in Washington — a job that one of his predecessors, Eric Schmidt, had reveled in. Mr. Schmidt, a big donor in Democratic politics, was a frequent visitor to the White House during the Obama presidency and served on the President’s Council of Advisors on Science and Technology.
In 2018, Google declined to send Mr. Pichai to testify at a Senate Intelligence Committee hearing on Russian interference in the 2016 presidential election. Annoyed senators left an empty seat for the company’s representative next to executives from Facebook and Twitter. (Mr. Page was also invited to testify, but there was never any expectation from people within the company that he would.)
Since then, Mr. Pichai has made frequent trips to Washington, testified at other congressional hearings and held meetings with President Trump.
Microsoft’s long battle with the government has also influenced how Google plans to wage its antitrust fight. Many Google executives believe Microsoft was too combative with the Justice Department, bringing the company to a standstill.
For most of the last decade, even as Google has dealt with antitrust investigations in the United States and Europe, the company has continued expanding into new businesses and acquire companies, such as the fitness tracker maker Fitbit last year.
Now the bill for that growth may have come due. And like it or not, it has been left to Mr. Pichai. Mr. Page, who is a year younger than Mr. Pichai and who Forbes says is worth $65 billion, is pursuing other interests.
Mr. Pichai “hasn’t had to deal with anything of this magnitude,” said Michael Cusumano, a professor and deputy dean at the Massachusetts Institute of Technology’s Sloan School of Management. “He has to face the government. He has no choice.”
WASHINGTON — The Justice Department accused Google of illegally protecting its monopoly over search and search advertising in a lawsuit filed on Tuesday, the government’s most significant legal challenge to a tech company’s market power in a generation.
In a 57-page complaint, filed in the U.S. District Court in the District of Columbia, the agency accused Google of locking out competition in search by obtaining several exclusive business contracts and agreements. Google’s deals with Apple, mobile carriers and other handset makers to place its search engine as the default option for consumers accounted for most of its dominant market share in search, the agency said, a figure that it put at around 80 percent.
“For many years,” the suit said, “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 suit reflects the pushback against the power of the nation’s largest corporations, and especially technology giants like Google, Amazon, Facebook and Apple. Conservatives like President Trump and liberals like Senator Elizabeth Warren have been highly critical of the concentration of power in a handful of tech behemoths.
Attorney General William P. Barr, who was appointed by Mr. Trump, has played an unusually active role in the investigation. He pushed career Justice Department attorneys to bring the case by the end of September, prompting pushback from lawyers who wanted more time and complained of political influence. Mr. Barr has spoken publicly about the inquiry for months and set tight deadlines for the prosecutors leading the effort.
The lawsuit may stretch on for years and could set off a cascade of other antitrust lawsuits from state attorneys general. About four dozen states and jurisdictions have conducted parallel investigations and are expected to bring separate complaints against the company’s grip on technology for online advertising. Eleven state attorneys generals, all Republicans, signed on to support the federal lawsuit.
A victory for the government could remake one of America’s most recognizable companies and the internet economy that it has helped define since it was founded by two Stanford University graduate students in 1998. The Justice Department will not immediately put forward remedies, such as selling off parts of the company, in the lawsuit, the officials said. Such actions are typically pursued in later stages of a case.
Ryan Shores, an associate deputy attorney general, said “nothing is off the table” in terms of remedies.
Google has long denied accusations of antitrust violations, and the company is expected to fight the government’s efforts by using its global network of lawyers, economists and lobbyists. Alphabet, valued at $1.04 trillion and with cash reserves of $120 billion, has fought similar antitrust lawsuits in Europe. The company spent $12.7 million lobbying in the United States in 2019, making it one of the top corporate spenders in Washington.
The company says it has strong competition in the search market, with more people finding information on sites like Amazon. It says its services have been a boon for small businesses.
“Today’s lawsuit by the Department of Justice is deeply flawed,” Kent Walker, the company’s chief legal officer, said in a blog post. “People use Google because they choose to, not because they’re forced to, or because they can’t find alternatives.”
Mr. Walker said the lawsuit would do “nothing to help consumers. To the contrary, it would artificially prop up lower-quality search alternatives, raise phone prices and make it harder for people to get the search services they want to use.”
Democratic lawmakers on the House Judiciary Committee released a sprawling report on the tech giants two weeks ago, also accusing Google of controlling a monopoly over online search and the ads that come up when users enter a query.
“A significant number of entities — spanning major public corporations, small businesses and entrepreneurs — depend on Google for traffic, and no alternate search engine serves as a substitute,” the report said. The lawmakers also accused Apple, Amazon and Facebook of abusing their market power. They called for more aggressive enforcement of antitrust laws, and for Congress to consider strengthening them.
The scrutiny reflects how Google has become a dominant player in communications, commerce and media over the last two decades. That business is lucrative: Last year, Google brought in $34.3 billion in search revenue in the United States, according to the research firm eMarketer. That figure is expected to grow to $42.5 billion by 2022, the firm said.
In its complaint, the Justice Department said that Google’s actions had hurt consumers by stifling innovation, reducing choice and diminishing the quality of search services, including consumer data privacy. It also said that advertisers that use its products “must pay a toll to Google’s search advertising and general search text advertising monopolies.”
The lawsuit is the result of an investigation that has stretched for more than a year. Prosecutors have spoken with Google’s rivals in technology and media, collecting information and documents that could be used to build a case.
The Justice Department also investigated Google’s behavior and acquisitions in the overall market for digital advertising, which includes search, web display and video ads.
But the search case is the most straightforward, giving the government its best chance to win. To prevail, the Justice Department has to show two things: that Google is dominant in search, and that its deals with Apple and other companies hobble competition in the search market.
Gene Kimmelman, a former senior antitrust official at the agency, said the case focused on how Google’s lock on search allowed it to “control a treasure trove of user data and deny access to competitors.” He said the focus on contracts was significant because some were made when Microsoft’s Bing and Yahoo posed a competitive threat to Google’s search.
In its blog post, Google argued that there is nothing wrong with its agreements with Apple, other handset manufacturers and carriers, comparing them to cereal brands paying for prominent placement on store shelves. It also said it was not difficult for consumers to switch default settings from Google to another search engine.
Mr. Barr, a former telecom executive at Verizon who once argued an antitrust case before the Supreme Court, signaled that he would put the tech giants under new scrutiny at his confirmation hearing in early 2019. He said that “a lot of people wonder how such huge behemoths that now exist in Silicon Valley have taken shape under the nose of the antitrust enforcers.”
He put the investigation under the control of his deputy, Jeffrey Rosen, who in turn hired an aide from a major law firm to oversee the case and other technology matters. Mr. Barr’s grip over the investigation tightened when the head of the Justice Department’s antitrust division, Makan Delrahim, recused himself from the investigation because he represented Google in its acquisition of the ad service DoubleClick in 2007.
Mr. Barr pushed prosecutors to wrap up their inquiries — and decide whether to bring a case — before Election Day. While Justice Department officials are usually tight-lipped about their investigations until a case is filed, Mr. Barr publicly declared his intention to make a decision on the Google matter by the end of the summer.
This year, most of the roughly 40 lawyers building the case said they opposed bringing a complaint by Mr. Barr’s Sept. 30 deadline. Some said they would not sign the complaint, and several left the case this summer.
In a call with reporters on Tuesday, the agency’s lawyers were guarded about many aspects of the investigation, such as whether they considered building out the case to other parts of Google’s business or about their conversations with the company. They specifically avoided answering a question about whether the agency spoke to Larry Page, Google’s co-founder and former chief executive of its parent company, Alphabet.
Google last faced serious scrutiny from an American antitrust regulator nearly a decade ago, when the Federal Trade Commission investigated whether it had abused its power over the search market. The agency’s staff recommended bringing charges against the company, according to a memo reported on by The Wall Street Journal. But the agency’s five commissioners voted in 2013 not to bring a case.
Other governments have been more aggressive toward the big tech companies. The European Union has brought three antitrust cases against Google in recent years, focused on its search engine, advertising business and Android mobile operating system. Regulators in Britain and Australia are examining the digital advertising market, in inquiries that could ultimately implicate the company.
“It’s the most newsworthy monopolization action brought by the government since the Microsoft case in the late ‘90s,” said Bill Baer, a former chief of the Justice Department’s antitrust division. “It’s significant in that the government believes that a highly successful tech platform has engaged in conduct that maintains its monopoly power unlawfully, and as a result injures consumers and competition.”
Google and its allies will likely criticize the suit as politically motivated. The Trump administration has attacked Google, which owns YouTube, and other online platform companies as being slanted against conservative views.
The lawsuit will likely outlast the Trump administration. The Justice Department spent more than a decade taking on Microsoft. The agency filed its lawsuit against the company in 1998 and the settlement was approved in 2002.
Google’s representatives said they anticipated that it would be at least a year before the case went to trial.
While it is possible that a new Democratic administration would review the strategy behind the case, experts said it was unlikely that it would be withdrawn under new leadership.
Steve Lohr contributed reporting
About 20 years ago, I typed Google.com into my web browser for the first time. It loaded a search bar and buttons. I punched in “D.M.V. sample test,” scrolled through the results and clicked on a site.
Wow, I thought to myself. Google’s minimalist design was a refreshing alternative to other search engines at the time — remember AltaVista, Yahoo! and Lycos? — which greeted us with a jumble of ads and links to news articles. Even better, Google seemed to show more up-to-date, relevant results.
And the entire experience took just a few seconds. Once I found the link I needed, I was done with Google.
Two decades later, my experience with Google is considerably different. When I do a Google search in 2020, I spend far more time in the internet company’s universe. If I look for chocolate chips, for example, I see Google ads for chocolate chips pop up at the top of my screen, followed by recipes that Google has scraped from across the web, followed by Google Maps and Google Reviews of nearby bakeries, followed by YouTube videos for how to bake chocolate chip cookies. (YouTube, of course, is owned by Google.)
It isn’t just that I am spending more time in a Google search, either. The Silicon Valley company has leveraged the act of looking for something online into such a vast technology empire over the years that it has crept into my home, my work, my devices and much more. It has become the tech brand that dominates my life — and probably yours, too.
On my Apple iPhone, I use Google’s apps for photo albums and maps, along with tools for calendar, email and documents. On my computer and tablet, the various web browsers I use feature Google as the default search bar. For work, I use Google Finance (to look up stock quotes), Google Drive (to store files), Google Meet (to teleconference) and Google Hangouts (to communicate).
In my home, Google is also everywhere. My Nest home security camera is made by Google. A Google voice service rings my door buzzer. To learn how to repair a gutter, I recently watched home improvement videos on YouTube. In online maps, Google has photos of my house taken from outer space and camera-embedded cars.
By my unofficial estimate, I spend at least seven hours a day on Google-related products.
Google’s prevalence has brought the company to a critical point. On Tuesday, the Justice Department sued it for anticompetitive practices, in the most significant antitrust action by the U.S. government against a technology company in decades. The government’s case focused on Google’s search and how it appeared to create a monopoly through exclusive business contracts and agreements that locked out rivals.
Google said in a tweet that the lawsuit was “deeply flawed.” The company added, “People use Google because they choose to, not because they’re forced to or because they can’t find alternatives.”
To Gabriel Weinberg, the chief executive of DuckDuckGo, which offers a privacy-focused search engine, what I have experienced was Google’s plan all along.
“I don’t think it was happenstance,” he said. “They’ve been using their different products to maintain their dominance in their core market, which is search.”
That has created a privacy cost for many of us, Mr. Weinberg said. Google, he said, collects reams of information about us across its products, allowing it to stitch together detailed profiles about our behavior and interests.
So in 2012, Mr. Weinberg broke up with Google and purged his accounts. “I got to understand the privacy implications of building massive profiles on people — and the massive harm,” he said.
But Jeff Jarvis, a professor at the Craig Newmark Graduate School of Journalism and the author of “What Would Google Do?,” a book about the search giant’s rise, said there was still plenty of room outside Google’s world. For one, we don’t use Google for social media — we’re on Facebook and TikTok. Artificial intelligence, even the type that Google is developing, is still pretty unintelligent, he added.
“The internet is still very, very young,” Mr. Jarvis said.
To test that argument, I decided to catalog Google’s presence in our lives. Here are some results.
When we browse the web, we are probably interacting with Google without even realizing it. That’s because most websites that we visit contain Google’s ad technologies, which track our browsing. When we load a web article containing an ad served by Google, the company keeps a record of the website that loaded the ad — even if we didn’t click on the ad.
And guess what. Most ads we see are served by Google. Last year, the company and Facebook accounted for 59 percent of digital ad spending, according to the research firm eMarketer. Google dominates 63 percent of that slice of the pie.
Google’s ad technologies also include invisible analytics code, which runs in the background of many websites. About 74 percent of the sites we visit run Google analytics, according to an analysis by DuckDuckGo. So that’s even more data we are feeding about ourselves to Google, often without knowing it.
Phones and Computers
Let’s start with Android, the most popular mobile operating system in the world. People with Android devices inevitably download apps from Google’s Play store.
Android includes Google’s staple apps for maps and email, and Google search is prominently featured for looking up articles and digging through device settings. Google’s voice-powered virtual assistant is also part of Android devices.
Even if you own an Apple iPhone, as I do, Google looms large.
Google has been the default search bar on the iPhone’s Safari browser since 2007. Gmail is the most popular email service in the world, with more than 1.5 billion users, so chances are you use it on your iPhone. And good luck finding a service other than YouTube for watching those cooking and music videos on your phone.
In fact, Google owns 10 of the 100 most-downloaded apps in the Google and Apple app stores, according to App Annie, a mobile analytics firm.
Outside smartphones, Google is the dominant force on our personal computers. By some estimates, more than 65 percent of us use Google’s Chrome web browser. And in education, our schools have chosen the Chromebook, low-cost PCs that run Google’s operating system, as the most widely used tech tool for students.
This can be brief: YouTube is by far the largest video-hosting platform. Period. About 215 million Americans watch YouTube, spending 27 minutes a day on the site, on average. That’s up from 22 minutes a few years ago, according to eMarketer.
Another way you might watch Google videos is through YouTube TV, a streaming service that offers a modest bundle of TV channels. Released in 2017, YouTube TV had more than two million users last year, according to Google. That’s not far behind Sling TV, a similar bundle service introduced by Dish in 2015, which had about 2.6 million subscribers last year.
The Home and Beyond
If you recently bought an internet-connected gadget for your home, chances are that Google is behind it. After all, the company offers Google Home, one of the most popular smart speakers and powered by Google’s virtual assistant, and it owns Nest, the smart-home brand that makes internet-connected security cameras, smoke alarms and thermostats.
We often interact with Google even when we use an app that lacks a clear connection with it. That’s because Google provides the cloud infrastructure, or the server technology that lets us stream videos and download files, to other brands. If you’re using TikTok in the United States, guess what: You’re in Google’s cloud. (TikTok may soon switch cloud providers under a deal with Oracle.)
Even Mr. Weinberg, who quit Google, said he had been unable to shake its services entirely. He said he still watched the occasional Google-hosted video when there was no alternative.
“If somebody’s sending a video that I need to watch and it’s only on YouTube, then that’s just the reality,” he said.
The Justice Department sued Google on Tuesday, accusing the company of illegally abusing its dominance in internet search in ways that harm competitors and consumers.
The suit is the first antitrust action against the company, owned by Alphabet, to result from investigations by the Justice Department, Congress and 50 states and territories. State attorneys general and federal officials have also been investigating Google’s behavior in the market for online advertising. And a group of states is exploring a broader search case against Google.
Here is what you need to know about the suit.
What is really happening here?
This is one step against a single company. But it is also a response to the policy question of what measures, if any, should be taken to curb today’s tech giants, which hold the power to shape markets, communication and even public opinion.
Politics steered the timing and shape of this suit. Attorney General William P. Barr wanted to move quickly to take action before the election, making good on President Trump’s pledge to take on Big Tech. Eleven states joined the suit.
What is the Justice Department saying Google did illegally?
This is a monopoly defense case. The government says that Google is illegally protecting its dominant position in the market for search and search advertising with the deals it has struck with companies like Apple. Google pays Apple billions of dollars a year to have its search engine set as the default option on iPhones and other devices.
The Justice Department is also challenging contracts Google has with smartphone makers that use Google’s Android operating system, requiring them to install its search engine as the default.
The Justice Department also investigated Google’s behavior and acquisitions in the overall market for digital advertising, which includes search, web display and video ads. Online advertising was the source of virtually all of Alphabet’s $34 billion in profit last year.
But the search case is the most straightforward, giving the government its best chance to win. To prevail, the Justice Department has to show two things — that Google is dominant in search, and that its deals with Apple and other companies hobble competition in the search market.
What will be Google’s defense?
In short: We’re not dominant and competition on the internet is just “one click away.”
That is the essence of recent testimony in Congress by Google executives. Google’s share of the search market in the United States is about 80 percent. But looking only at the market for “general” search, the company says, is myopic. Nearly half of online shopping searches, it notes, begin on Amazon.
Next, Google says the deals the Justice Department is citing are entirely legal. Such company-to-company deals violate antitrust law only if they can be shown to exclude competition. Users can freely switch to other search engines, like Microsoft’s Bing or Yahoo Search, anytime they want, Google insists. Its search service, Google says, is the runaway market leader because people prefer it.
What is the consumer harm when Google’s search service is free?
Consumer harm, the government argues, can result in several ways. Less competition in a market means less innovation and less consumer choice in the long run. That, in theory, could close the market to rivals that collect less data for targeted advertising than Google. Enhanced privacy, for example, would be a consumer benefit.
Goods that are free to consumers are not exempt from antitrust oversight. In the landmark Microsoft case of the late 1990s, the software giant bundled its web browser for free into its dominant Windows operating system. Microsoft lost because, using restrictive contracts, it bullied personal computer makers and others to try to prevent them from offering competing web browser software — competition that could have undermined the Windows monopoly.
What happens next?
Unless the government and Google reach a settlement, they’re headed to court. Trials and appeals in such cases can take years.
Whatever the outcome, one thing is certain: Google will face continued scrutiny for a long time.