US vs. Google (2024): An Explainer

While the US District Court has found a case for violation of the Sherman Act, it is yet to pronounce on the remedies which would be made applicable to Google Inc. as a follow-up.
Factual background
The Department of Justice (DOJ), US along with multiple states filed two lawsuits against Google in 2020 alleging that the company is violating various antitrust laws in the US. The plaintiffs alleged that Google has unlawfully used various distribution agreements to thwart competition and maintain its monopoly in the market for general search services and in various online advertising markets. These distribution agreements are further exclusive in nature where Google secures the default positioning on nearly all desktop and mobile devices in the US. Google denied such allegations.
Core issues
The Court in line with the facts presented, looked into what are the applicable ‘relevant markets’ and whether Google has monopolistic power in those markets. Separately, the Court looked into various commercial agreements (‘distribution channels’) signed by Google, i.e. MADA, RSA, ISA etc. and whether they are exclusive in nature. Once the relevant markets and monopolistic power in them were established, the Court juxtaposed the purported exclusive agreements on these markets to demonstrate whether they resulted in anti-competitive concerns, or not.
Relevant markets identified
Based on the analysis, the Court identified the following three relevant markets:
1) General search services - General search services are a gateway to the World Wide Web. Search on a general search service is not constrained by subject matter, inventory, or query type. The Search Engine Result Pages (SERPs) on general search contain organic links, advertisements and vertical offerings based on the type of query.
2) Search advertising market - It includes all advertisements served in response to a query - whether entered on a GSE, an SVP or a social media platform. They are a direct expression of a user’s specific motivation or interest in real-time. Further, they are not intermediated by privacy filters which otherwise would be applicable in non-search Ads.
3) General search text Advertisement market - General search text advertisements are displayed on a SERP in response to a user’s query. Text ads have the unique appearance of organic search results and provide web links to the advertiser’s site. They further allow the advertisers to highlight discounts, seasonal offerings, new products, or other promotions by writing a ‘copy’ for such Ads.
The Court did hypothesize the presence of a fourth relevant market, i.e. general search Ads, however, based on various third-party testimonies, it concluded to the contrary.
Monopolistic power
The Court held that while Google has monopolistic power in two of the identified relevant markets, i.e. general search services and general search text Ads market, it doesn't enjoy such power in the third market (search Ads market). Some of the key parameters used by the Court to ascertain monopolistic power include:
1) Ability to price independent of the competition (‘direct evidence’) - The monopolistic power stands established wherever the dominant firm is able to increase prices or degrade the quality of the concerned product as per its own convenience. Even if the firm actually doesn't raise such prices or degrade such a quality, the existence of such power in itself is an important factor.
2) Market share and barriers to entry (‘indirect evidence’) - Other key factors to determine monopolistic power include market share and the existence of barriers to entry. Any share above two-third of the total market for a consistent time duration could be qualified as a predominant share. Barriers to entry are further marked by high capital costs, control of key distribution channels, brand recognition and scale among others.
To assess the alleged unlawful conduct of Google, the Court paid attention to what should be the legal standard for a conduct to be termed ‘exclusionary’. The Court paid reliance on various case laws such as ZF Meritor, LLC v. Eaton Corp. (2012), Microsoft and LePage’s Inc. v. 3M (2003) to make this inquiry. The Court concluded that the purported exclusion need not be express in nature and consideration of practical aspects of the industry is equally important. Based on this standard, the Court concluded that market conditions are such that even though various browser agreements and MADAs as signed by Google with various entities aren't per se exclusive, the net effect of the same is equivalent.
The Court then went on to measure the impact of such exclusive agreements on general search services and the general search text Ads market. The Court held that as far as general search services are concerned, such exclusive agreements foreclose a substantial share of the market (50%), deprive rivals of the necessary scale and have reduced incentives to invest and innovate to cause anti-competitive effects in the market. There are no, or minimal pro-competitive effects of such conduct which would have otherwise balanced the antitrust concerns.
In the case of the general search text Ads market, the Court made a similar conclusion on the foreclosure of a substantial share of the market (45%). It further held that such agreements allow Google to charge supracompetitive and profitable prices and degrade the quality of text Ads. In the given market realities and absence of scale, such exclusive agreements have further limited competitors’ Ad revenue.
Findings of the Court
The Court concluded in the following terms:
a) That there are three relevant markets involved in the case, i.e. general search services, search Ads and General search text Ads;
b) while there is a possibility of delineating a fourth relevant market based on rival submissions of the parties, i.e. general search Ads, the factors mentioned in Brown Shoe judgment and empirical analysis would show otherwise;
c) Google has monopolistic power in two of the relevant markets, i.e. general search services and general search text Ads market;
d) the browser and Android agreements concluded by Google with various entities are exclusive in nature;
e) such exclusive agreements result in anti-competitive effects in the relevant market of general search services and general search text Ads unchecked by pro-competitive effects of such agreements.
Throughout the case, the Court paid excessive reliance on various expert evidence and testimonies presented before itself.
Likely way ahead
Google, in all likelihood, would file an appeal against the findings of the Court. The timelines involved in the case remain unclear as the District Court is yet to rule on the remedies which would be imposed on Google as a follow up to the violation.