Why Breaking Up Google Is ‘Unlikely,’ Despite Justice Department’s Antitrust Lawsuit

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The U.S. government will have a hard time proving Google’s dominance brings “harm to consumers,” one antitrust expert tells TheWrap

Alphabet CEO Sundar Pichai is expected to be called to the stand in the government's antitrust case against Google.

It’s “unlikely” Google will be broken up due to a new antitrust lawsuit from the U.S. Justice Department — but that doesn’t mean it’s completely out of the woods, according to Penn State professor and anti-trust expert John Lopatka. The hurdle the Justice Department needs to clear isn’t just proving Google is a monopoly when it comes to online search, Lopatka said. The government will also have to show Google reached monopoly status using anticompetitive means or that “harm” has been done, and that could be trickier. On Tuesday, the government filed a lawsuit against Google, claiming it’s a “monopolist” that enjoys a major advantage by being the go-to search engine for hundreds of millions of devices in the U.S. — a reality that essentially makes it impossible for competitors to gain traction. About 90% of U.S. search queries are funneled through Google, the lawsuit said, which the government claims bars competitors from gaining enough users to scale their businesses. The idea is that typically, with no real substitutes, there’s “harm to consumers” — which is an essential ingredient for effective antitrust claims — but that’s not necessarily the case here, Lopatka said. “What the government wants to say is, there are no good substitutes for search services. And although that’s true, we’re normally concerned about that, in an antitrust case, because it gives the monopolist the ability to raise prices… but the problem we have here, is, in search, users aren’t charged at all. So who cares?” That’s where there the case gets interesting. Instead, the government is arguing Google holds a monopoly over search advertising — and, thus, harms advertisers by being able to charge them more. (Google, which is a subsidiary of Alphabet Inc., has long been at the top of the online ad world, alongside Facebook, with Alphabet clearing nearly $135 billion in total ad revenue last year. Together, the two companies combine to control about 60% of all online ad sales.) The government, in its filing, said Google gains this advantage through lucrative deals with Apple to be the default search engine on devices like iPhone. Google pays Apple somewhere between $8 billion-$12 billion per year for this advantage, the government said. “Google has had a series of search distribution agreements with Apple, effectively locking up one of the most significant distribution channels for general search engines,” the DOJ’s lawsuit said. “Although it is possible to change the search default on Safari from Google to a competing general search engine, few people do, making Google the de facto exclusive general search engine. That is why Google pays Apple billions on a yearly basis for default status.” There’s an incentive for this. The more consumers using Google Search, the more advertisers are willing to pay to be on it. But the “problem the government is going to have,” Lopatka said, is showing its Apple arrangement is what drives Google’s ability to charge advertisers more. “The government wants to make those contracts look nefarious, and I’m not so sure they are.” What Google will argue, Lopatka said, is, “It’s not the contracts that are creating [the] monopoly; it’s just the nature of the market.” In other words, it’s dominant because users want to use it. And that’s not enough reason to break it up. Still, Google isn’t home-free just yet. The fact it’s facing an antitrust lawsuit at all is a major threat to its business, and it comes at a time when Washington, D.C. seems to have a renewed interest on reigning in Big Tech. Lopatka said that he gives it “slightly better than 50% odds Google would win” the case. But that would be a long, drawn out process that saps resources. It’s also anything but a slam dunk. So reaching a settlement could be the end result of this, Lopatka said. (This would look similar to how the government’s case against Microsoft, the last real showdown between tech and D.C., played out two decades ago.) One realistic possibility, as part of a settlement, would be for Google to stop paying companies to become the default search engine. As a result, users would then need to opt for their preferred search engine. If that’s the case, we’ll truly see whether Google reached it’s dominant status because users love it so much.


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