The largest antitrust case of the last quarter century has been playing out in federal district court in Washington D.C. since mid-September. The U.S. Department of Justice’s case against Google has been widely compared to the DOJ’s successful battle against Microsoft in 1998—the same year two Stanford PhD students, Larry Page and Sergey Brin, founded Google in a Menlo Park garage.
The DOJ and a group of state attorneys general are arguing that Google has run afoul of U.S. antitrust laws by negotiating default search engine contracts with wireless carriers and phone makers that gave Google unfair market advantage. The crux of Google’s position is that consumers choose Google’s search engine simply because it is the best, not because of anti-competitive practices.
The trial is expected to last well into the latter part of November, with a decision not expected until early 2024.
Here, Stanford Law School Visiting Fellow Douglas Melamed discusses the landmark case, some factors many people might not be considering, and the relevant laws. Melamed previously was Senior Vice President and General Counsel of Intel Corporation. He served in the DOJ as Acting Assistant Attorney General in charge of the Antitrust Division earlier in his career, when the DOJ’s case against Microsoft was being litigated.
What are the key points of the Google case?
All antitrust cases are ultimately about two issues: First, did the defendant’s conduct increase or preserve its market power? In this case, we’re talking about Google’s market power in online search. Second, was the conduct anti-competitive, or was it some form of legitimate competition? The government has to win both issues to win the case. Here, that means the government has to show both that the agreements at issue in the case—agreements that give Google default status on Apple and Android devices—had a meaningful impact on preserving Google’s monopoly in search—that they really handicap rivals—and that those agreements are not a legitimate form of competition.
And how does this case fit into the broader context of antitrust enforcement right now, namely with regard to so-called Big Tech?
There is a populist sentiment on both the right and the left that is focused with special intensity on the tech platforms, particularly the ones that are characterized as communications or information media: Google, Facebook, Twitter and so forth. There’s a broader concern on the left about inequality in the distribution of wealth and of economic and political power. That has fueled a push by those now in charge of the agencies for more aggressive antitrust enforcement. It should be noted, though, that this case against Google was filed at the end of the Trump administration. Overall, I think the case reflects the desire of many in both parties to, in some form, cut Big Tech down to size.
The case against Google has been compared widely to the DOJ’s eight-month case against Microsoft in the late 1990s, but these are different times and different players. What are some notable differences?
The Microsoft case was extremely controversial at the time because the government hadn’t brought a monopolization case since the AT&T case 20 years earlier. And of course, Microsoft and Bill Gates personified, in a unique way, wealth and economic power. The issues in both the Microsoft case and the Google case at a certain level of generality are very similar. They’re based on allegations that a very large incumbent monopoly used anti-competitive conduct to insulate its monopoly from new competition. But there are two big differences.
One is a legal difference. In the Microsoft case, the court found that almost none of Microsoft’s conduct that the federal government challenged served any legitimate purpose at all. The conduct in the Google case is much more complex. I think it clearly has some legitimate benefits, and the question is how the courts are going to fit that into the overall analysis.
The second involves an equally important contextual difference. The Microsoft case focused on a rather traditional business dispute, but Google provides a dominant information and communications platform. Throughout our history, we’ve been uneasy when firms are perceived to control an important information source. This goes back for decades, and antitrust laws have been enforced with particular aggressiveness with respect to such firms. I think that power over communications platforms and information taps into a deep populist sentiment and is part of what’s going on in the Google case.
What are the legitimate benefits that you alluded to?
Google has claimed several, but I think the most important is that, to the extent default status makes Google search more widely used, it increases the data available to Google and thereby improves the quality of Google search for both users and advertisers.
The Justice Department has the burden to show that Google’s business deals harmed competition for search. What is their strategy and how is it playing out so far?
The first thing they have to prove is that these agreements to make Google the default search engine on devices have had a real impact on rivals. It’s not just about moving a few dollars around. The government has to show that there is a real “stickiness” with Google being the default search engine, either because switching to another search platform is difficult or annoying, because users are passive, or because users assume the manufacturer of the device chose the best search engine. The government has started rather effectively, from what I can tell through the media coverage, to show that Google was very aware of the potential of these defaults to have a real impact on rivals and therefore to insulate it from competition.
However, I think the question of harm to competing search engines is likely to turn more on the numbers than on the narrative-focused documents that have been highlighted in the media coverage, particularly since those documents are pretty old now. I think the critical numbers are going to be those that shed light on the stickiness of a default search engine on a device. One way to analyze this would be to look at Microsoft devices. Microsoft makes its own search engine, Bing, the default search engine on its own devices. So you could look a few weeks or months after the purchase of the device, after most people who are going to switch the default search engine have done so, and compare the percentage of the users that switched away from Bing as their default and with the percentage that did not switch from Google to another search engine when Google was the default on other devices. The difference in Google’s share, depending on the starting point, might be attributable to the power or stickiness of the default.
At the end of the day, I expect that the court will find that Google has a monopoly in general search, and that its search engine default agreements harm competitors to at least some extent and thus, at least to some extent, help to preserve its monopoly. If so, the outcome of the case is likely to depend on how the court assesses the claimed benefits of the agreements.
What might be missing from mainstream news coverage of the Google trial and what key points might most Americans not understand about big antitrust trials like this one?
In the public discussion, there’s a widespread notion, fueled in part by populist drum beating, that antitrust is all about cutting big guys down to size, eliminating monopoly, and reining in the big players. But that’s not what antitrust law is about. The statutes are quite clear. Antitrust law is simply about prohibiting bad conduct that harms competition. And the remedies therefore are not built around the idea of “Oh, they did a bad thing, let’s break them up.” Rather, the laws are limited to remedying the particular harm caused by the particular aspect of the defendant’s conduct, if any, that is found to be unlawful.
The relevant antitrust laws were drafted well before the Internet age. Are these laws adequate to address all the nuances in this case? Would some of these issues and alleged wrongdoings be better addressed through legislation?
That issue came up in the Microsoft case: Was antitrust law sufficient to deal with modern technology? In fact, Congress created the Antitrust Modernization Commission in the early 2000s to study that question. It issued a report that said, basically, the antitrust laws are okay.
The Sherman Act and the Clayton Act, the basic statutes at issue, were passed 100-plus years ago. They’re very general, and that’s deliberate. They’re meant to apply to almost all forms of commercial conduct throughout the economy. Their meaning has not been found in the statutory language, which is ambiguous, but rather in hundreds of court decisions over the years that have given meaning to the statutes. While I do not agree with every decision, I think the laws are conceptually sound and supple enough to address the issues in the Internet age, just as they addressed issues that arose in the early days of the Industrial Revolution and issues that have arisen since then.
But, the courts have construed those laws to enable them to be applied by generalist courts throughout the country to all kinds of commercial conduct. While the laws are conceptually sound and suitable for all industries, in principle, one could imagine industries that raise unique issues that are better addressed by more targeted legislation or regulation by an expert agency. I don’t think the issues about default search engines or those raised in the other pending litigation with which I am familiar require that. But it wouldn’t be crazy to say, look, we need with respect to certain issues that might arise with the tech platforms laws that are more aggressive or more precisely focused than the laws that have been shaped to apply more generally to all industries. So maybe we should have specialized, targeted legislation or regulation aimed at the tech platforms. But I don’t think the legislation that’s been proposed is very sound, and I’m skeptical that Congress is capable of passing sound legislation.
This isn’t the only current antitrust case against Google. What else is going on?
Google is facing a lot of antitrust issues around the world and in this country. I think the most important challenge to Google in this country are cases brought first by a number of states, and then by the Justice Department, alleging that Google’s acquisition of Doubleclick, and its use of Doubleclick and other assets involved in the sale of advertising, have unlawfully created a monopoly on the advertising side of the platform. That’s a potentially huge case in terms of possibly changing the way Google does business.
Internationally, I think the biggest challenge for Google, and the horse is already well out the barn on this, are the new regulatory laws that have been adopted and are in the process of being implemented in the European Union, particularly the Digital Markets Act, which impacts a fairly long list of “gatekeeper platforms” including Google. The laws impose on these companies several broad regulatory constraints that will inhibit their ability to prefer their own products on their platforms, to extend their operations into adjacent areas, and to refuse to interoperate with others who might need access to their platform. That regulation could be a very big deal.
Doug Melamed practiced law for 43 years before spending the 2014-15 academic year at the Law School as the Herman Phleger Visiting Professor of Law. He was Professor of the Practice of Law from 2015 until 2022 and today serves as a Visiting Fellow at the Law School. From 2009 until 2014, he was Senior Vice President and General Counsel of Intel Corporation and was responsible for overseeing Intel’s legal, government affairs and corporate affairs departments. Prior to joining Intel in 2009, he was a partner in the Washington, D.C., office of WilmerHale, a global law firm in which he served as a chair of the Antitrust and Competition Practice Group. His practice included appellate and trial court litigation, counseling, and representing clients in matters before government law enforcement and regulatory agencies. From 1996 to 2001, Melamed served in the U.S. Department of Justice as Acting Assistant Attorney General in charge of the Antitrust Division and, before that, as Principal Deputy Assistant Attorney General.