What the Google Just Happened?

Much of the material I write about in this blog is taken from the news media, obviously, but sometimes I write about the story or issue that the media piece is covering, while other times I am writing about the media piece itself. This article is going to be of the second type.

You have likely read or heard that the US Department of Justice brought an antitrust case against Google (four years ago, actually), and that the judge presiding over this case has just recently found against Google. Most headlines say something like ‘Google found guilty of being a monopolist’. This is an oversimplification. The DoJ accused Google of violating a rather specific US antitrust statute, and the judge found that it did. In this case (you can read the judge’s decision here) it was Section 2 of the Sherman Antitrust Act, and here is what the judge himself had to say about that statute in his decision:

“Section 2 of the Sherman Act makes it unlawful for a firm to ‘monopolize.’ ….The offense of monopolization requires proof of two elements: (1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.”

Thus, it is indeed true that the DoJ had to show that Google has ‘monopoly power’ in the search engine market (arguing that aspect of the case is where a bunch of economists made big consulting fees, you can bet). However, it also has to show that Google did something willful to acquire or maintain that monopoly power. Being a monopoly due to, say, selling a superior product, implies no harm, no litigation.

From what I have read, it is Google’s agreements with other companies – like Apple – to make Google the default search engine on the devices they sell in return for a payment from Google that were found to violate part (2) above. For example, Google paid Apple $20B (yea, that’s a B) for making Google the default search engine on every iPhone’s Safari browser.

A lot has been written about the consequences of this decision for average Joes and Jills like you and I. How, if at all, will it change what happens on the internet, particularly in searching the web?

I haven’t read everything written about this, and there has been a lot, but I did come across an article on the National Post website, posted on August 9, written by one Matt Stoller, with the title:

Landmark decision means Google’s control of the web is ending

Wow. I am aware that Mr. Stoller almost certainly did not write that headline for his article, but a note to whoever did – this case was about Google’s search engine only, and if you know anything about Google, you know they have plenty of other operations on ‘the web’ (the parent company, Alphabet, owns Youtube, just to name one). In any case, it is a bit much to talk about Google’s ‘control of the web’. (If any firm could be said to ‘control the web’ my money would be on Microsoft, but that’s a blog for another day).

However, the rest of the article I have to credit to Mr Stoller, and he has some remarkable things to say about this just-issued decision. For example, he writes: ‘So there we go, Google’s control of the web is ending.’

Ah. So, maybe he did write that headline.

Then there’s this –

‘The implications of this decision will have ripple effects across the internet, the law, and big business for generations.’

Generations. One senses a taste for hyperbole in Mr. Stoller’s writing, no?

Here are two facts about this case that seem relevant to understanding how important it will turn out to be for average internet users.

1. Google has already said it will appeal the judge’s ruling.
2. The judge’s decision is the final step in what is only the first stage of this trial, which is called the ‘liability’ phase. What now follows is the ‘remedy’ phase.

Regarding point 1, some of you may recall that in the early 2000s the US brought a case based on the same Section 2 of the Sherman Act against good ol’ Microsoft, accusing it of monopolizing the market for personal computer operating systems. The government won that case too, but it was then overturned by the US Court of Appeals for the D.C. Circuit. So, it’s a bit too soon to be counting any chickens, and the judicial appeal process could drag on for some time.

Stoller ignores my point 1 in his article, but not point 2, since he writes the following:

“This part of the trial was what is called the liability phase, which is to determine whether Google broke the law. Judge Mehta found that it did. The next stage is called the remedy phase, during which the court will hear arguments about what to do to address the bad conduct.”

What to do, indeed. A company the size of Google, even just its search engine division, is an incredibly complex organization. It is fair to say that no one working in Google’s search engine division – including the person at the top – is aware of everything that happens within it. It’s just too big and complicated. So, what do you suppose are the chances that the DoJ and the judge, who agree that Google has behaved badly, but know approximately nothing about running a tech company, can figure out what remedy is needed to force Google to behave better in the future?

They can, presumably, do the obvious thing of declaring illegal Google’s contracts with Apple and others regarding the Google search engine’s status as the default search engine on their installed browsers. But it will still be true that Apple et al are going to choose some search engine to be available on the devices they sell. Do we really believe that Google can find no other way to persuade those companies that Google’s search engine is the one they should have as the default on their installed browsers? Given that (according to the Financial Times) Google currently handles more than 90 per cent of online queries  and that ‘google’ has become a synonym for ‘search for’, why indeed would all the companies with whom Google currently has agreements not leave it as their default search engine? It’s already the one most people use. What can the learned judge and assorted lawyers and economists working for the DoJ possibly come up with to change that simple fact?

Finally, a comment on the Stoller article’s most hyperbolic paragraph:

“What about the rest of business? Well, this decision means monopolization law is back. Exclusive contracts and arrangements are pervasive in American commerce, and until recently, executives could reliably exploit such deals without fearing that they might face any legal liability. But that era is over. This case is in the headlines, which means every single competent executive in America in any firm with market power is going to get a memo from their antitrust or general counsel on what they can and can’t do going forward. And they will likely begin changing their behaviour to avoid being brought to court for monopolization.”

So Stoller thinks the case will trigger memos from counsel all across the corporate universe. Well, maybe not. Even if this Google decision is not reversed on appeal, and even if the DoJ and judge come up with some way to actually reduce Google’s ongoing share of the search market, it is simply not true that any Google executives are going to face ‘legal liability’. Google might have to pay a fine, and it might be a whopper. However, for any person within Google to face a legal sanction, the DoJ would have had to bring a criminal case against Google (and its executives) under Section 2 of the Sherman Act. The DoJ can do this, but they did not in the Google case, and in fact they almost never do. What they did was sue Google, a very different matter. The reason for this is simple; the DoJ can only win a criminal case against Google or any of its executives if it proves its allegations beyond a reasonable doubt. That’s a much higher standard than the standard of proving one’s case by a preponderance of the evidence, which is what is required in a civil lawsuit. The DoJ wanted to win this case and change Google’s business practices, so they filed a lawsuit, not a criminal case. Google executives might get fired by their company, but legal liability is not on the table.

The only antitrust violations that are typically prosecuted as criminal cases in the US (Canadian law and practice are similar in this regard)  are those of price-fixing or bid-rigging, which violate  Section 1 of the Sherman Act. In such criminal cases executives can indeed be fined or even imprisoned if the government wins the case, but again, this is not what happened in the US vs Google case.

Going forward, there is perhaps some reason to think executives of other companies need to worry about ‘legal liability’ for entering into exclusive contracts that violate Section 2, but only because in 2022 the DoJ announced that they would start pursuing more criminal cases under Section 2 of the Sherman Act. The Department has in fact filed two Sherman section 2 criminal cases in the last 50 years, one in 2022 and the most recent in 2024. However, they didn’t pursue a criminal case against Google, and the two recent cases in which criminal charges were brought were against executives of relatively small companies.  So, if other executives have reason to be worried about legal liability, it does not arise from the judge’s decision in phase one of this case against Google.

If executives in other companies got memos about what to do or not do from their legal counsel, it would have happened after the DoJ’s 2022 announcement, not after judge Mehta’s recent decision in this case. And….did those memos cause executives in other companies to change their behavior? No way to know, really, until and unless more criminal Section 2 cases actually are brought – and maybe not then.

So maybe ‘….monopolization law is back’ is a bit premature. However, it is not fair to be too hard on the enthusiastic Mr. Stoller. If you go to the Financial Times article on this case, available here, you will find other worthies waxing equally hyperbolic about the meaning and significance of this still-incomplete case.

Peeps are gonna believe what peeps wanna believe.