Regulators claim that Google has monopoly-like power over its search and advertisements business, meaning Big Tech could be in trouble again.
Oct. 24, 2020
The Department of Justice’s long-awaited antitrust case against Google (NASDAQ: GOOG) was filed this week, accusing the company of having an unfair advantage over the search and advertising industries.
The DOJ called Google a gatekeeper of the internet and the case focuses heavily on accusations of it paying Apple, along with other mobile manufacturers, billions of dollars in order for it to be those companies’ default search browsers.
In Google’s first lawsuit, the DOJ alleges that the company insists that mobile manufacturers preload its search app — along with its other apps including Google Chrome, Google Maps, YouTube, and Google Play — onto its products by using interlocking contracts. The DOJ stated that Google’s involvement in anti-competitive behavior has been going on for years with the aim of blocking out rival search engine businesses, and made the dramatic statement: “Two decades ago, Google became the darling of Silicon Valley as a scrappy startup with an innovative way to search the emerging internet. That Google is long gone.”
Google dominates the search engine game, with over 90% of all the searches in the U.S taking place on its service. This has the potential of affecting consumers, as it makes it more difficult for viewers to see reviews and products listed on competitor websites. Google’s power over its advertising business also pushes the price up of corporations’ advertisement costs, as it is the dominant online ad business, it can charge more than it would be able to if there was a competitive market.
Google defended its case by stating that, if the government succeeded with this trial, 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.” Google claims that it holds no superior power from stopping people from getting information elsewhere, it states that it provides a free service to help people navigate their lives.
If the Department of Justice is successful with this trial, its parent company Alphabet may have to change the way it does business, which could mean Google having to split up its operations.
The Battle of Bringing Down Big Tech
Apple has recently come under fire for similar accusations of abuse of power in its App Store as it has a huge advantage in being the provider of the operating system, the gatekeeper of the only app store that is allowed, and creator of its own apps. If Apple was broken up, users could pick their own default app store, which would restore competition back to the mobile app marketplace.
The ‘digital monopolies’ may operate in different markets, however, Google, Amazon, Apple, and Facebook all have allegedly committed similar antitrust practices. Google acquiring Android and Facebook buying Instagram and WhatsApp were all methods to get rid of potential rivals. Apple’s control of the App Store and Amazon’s capability of under-cutting third-party retailers who use its platform are all ways of stifling competition. Google’s new lawsuit could just be another addition to the long line of reasons as to why big tech might be broken up.
A report made by the House of Antitrust subcommittee this month suggested an overhaul of federal laws that would make it easier for them to take on the four big tech companies, to potentially break big tech up. Letitia James, the Attorney General of New York, said that it is a very important and historic time for federal and antitrust authorities as they work together to protect competition and innovation in the technology sector.
How is it looking for Google?
It is hoped that the outcome of these antitrust lawsuits will be a less concentrated technology marketplace, allowing for greater innovation and better consumer experiences. Meanwhile, investors appear unbothered by the news, as shares of Google’s parent company Alphabet, rose by almost 2% after the case was filed. With Congress determined to break up big tech, will Google’s trial be the straw that broke the camel’s back?
A MyWallSt subscription gives you access to over 100 market-beating stock picks and the research to back them up. Our analyst team post daily insights, subscriber-only podcasts and the headlines that move the market. Get your free access now!
MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.