Google is ‘A Monopoly Gatekeeper:’ DOJ Antitrust Lawsuit

‘Two decades ago, Google became the darling of Silicon Valley as a scrappy startup with an innovative way to search the emerging internet,’ the lawsuit states. ‘That Google is long gone. The Google of today is a monopoly gatekeeper for the internet and one of the wealthiest companies on the planet, with a market value of $1 trillion and annual revenue exceeding $160 billion.’

Google has “willfully maintained and abused its monopoly power” in general search services, search advertising and general search text advertising through “anti-competitive and exclusionary distribution agreements” in violation of the federal Sherman Antitrust Act that bans monopolistic business practices, according to an antitrust lawsuit filed today by the U.S. Department of Justice and 11 states.

The Mountain View, Calif.-based Google’s distribution agreements lock up the preset default positions for search access points on browsers, mobile devices, computers and other devices; require pre-installation and prominent placement of Google’s apps; tie Google’s search access points to Google Play and Google APIs; and include other restrictions that drive queries to Google at the expense of its search rivals, according to the federal complaint filed in the U.S. District Court for the District of Columbia.

The U.S. Attorney General filed the long-awaited lawsuit -- the biggest antitrust case since the U.S. government’s lawsuit against Microsoft in 1998 and part of a broader attack on the power of big tech companies by regulators in the United States and abroad -- joined by the states of Arkansas, Florida, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Montana, South Carolina and Texas, all of which have Republican state attorneys general.

“Two decades ago, Google became the darling of Silicon Valley as a scrappy startup with an innovative way to search the emerging internet,” the lawsuit states. “That Google is long gone. The Google of today is a monopoly gatekeeper for the internet and one of the wealthiest companies on the planet, with a market value of $1 trillion and annual revenue exceeding $160 billion. For many years, Google has used anti-competitive 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.”

In a brief statement, Google called the lawsuit “deeply flawed.”

“People use Google because they choose to -- not because they‘re forced to or because they can’t find alternatives,” a Google spokesperson said, noting the company expects to issue a lengthier statement later today.

Shares of Google parent company Alphabet were trading at $1,534.20 of noon today, up $4.26.

Google pays billions of dollars each year to distributors to secure default status for its general search engine and, in many cases, to specifically prohibit Google’s counter-parties from dealing with its competitors, according to the lawsuit. Those distributors include popular device manufacturers such as Apple, LG, Motorola and Samsung, major U.S. wireless carriers such as AT&T, T-Mobile and Verizon, and browser developers such as Mozilla, Opera and UCWeb.

“Some of these agreements also require distributors to take a bundle of Google apps, including its search apps, and feature them on devices in prime positions where consumers are most likely to start their internet searches,” court documents state.

Google’s “exclusionary” agreements cover just under 60 percent of all general search queries, and nearly half the remaining queries are funneled through Google owned-and-operated properties such as Google’s Chrome browser, according to the lawsuit.

“Between its exclusionary contracts and owned-and-operated properties, Google effectively owns or controls search distribution channels accounting for roughly 80 percent of the general search queries in the United States,” court documents state. “Largely as a result of Google’s exclusionary agreements and anti-competitive conduct, Google in recent years has accounted for nearly 90 percent of all general-search-engine queries in the United States and almost 95 percent of queries on mobile devices.”

The lawsuit alleges that Google’s general search engine competitors are denied “vital distribution, scale, and product recognition -- ensuring they have no real chance to challenge Google,” which is so dominant that it’s name has become a “verb that means to search the internet.”

Advertisers pay about $40 billion annually to place ads on Google’s search engine results, according to the lawsuit.

“It is these search advertising monopoly revenues that Google ‘shares’ with distributors in return for commitments to favor Google’s search engine,” the complaint states. “These enormous payments create a strong disincentive for distributors to switch. The payments also raise barriers to entry for rivals -- particularly for small, innovative search companies that cannot afford to pay a multi-billion-dollar entry fee.”