How U.S. enforcers could take on Google's search monopoly

U.S. authorities should target their potential antitrust suit against Google on the tech giant's greatest strength, two veteran antitrust experts say in a report out Thursday — its monopoly over online search.
The report lays out what it calls a pattern of conduct that Google has engaged in to entrench its dominance over the past 10 years — from acquiring rival upstarts to signing exclusive contracts to changing its platform in ways that disadvantage competitors. And it outlines how the Justice Department and the states could address those actions by bringing an antitrust case accusing the company of monopolistic behavior.
The report, by antitrust litigator David Dinielli and Obama-era DOJ economist Fiona Scott Morton, is being published by the Omidyar Network, a foundation backed by eBay founder Pierre Omidyar that has previously offered public advice to the Justice Department on how to take on Google and Facebook. Their newest analysis comes a day before a meeting where DOJ prosecutors and several state attorneys general are expected to debate how narrow or broad of an antitrust suit they could bring against the search giant.
Who wrote the report: Scott Morton is a well-known figure in antitrust, having served as the DOJ's top antitrust economist. She has also advised the House Judiciary Committee in its probe of Google and other tech giants and worked with state AGs on their challenge to T-Mobile's merger with Sprint.
Scott Morton now heads the Thurman Arnold Project at Yale, which has focused on competition and digital platforms. She also works for Charles River Associates, where she does economics consulting work for Apple and Amazon on antitrust. Dinielli, who aided the DOJ during its challenge ofAT&T's unsuccessful merger with T-Mobile in the early 2010s, is a senior adviser to Omidyar, which is dedicated to promoting responsible technology and a more equitable economy.
The pair sat down with POLITICO to talk about their latest work.
Key context: Launched in 1998, Google's search engine was a big leap forward in helping users find information and sites online, and the company quickly eclipsed its competitors on account of its simple design and novel algorithm. But Google's broad dominance over search has never been the focus of enforcement action by any of the antitrust authorities around the world who have brought individual cases against the company.
Instead, those cases have focused on narrower issues, such as the exclusive contracts Google has signed with smartphone makers for its Android mobile operating system, or allegations of bias against rival services in the company's shopping results.
But Dinielli and Scott Morton said regulators should look at the combination of all those actions, which shows the offensive and defensive steps Google has taken over the past decade to maintain control of the search market.
“Google’s real crown jewels are search,” Dinielli said in an interview with POLITICO this week. “We looked at the pattern: of acquisitions, of defaults and of conduct toward specialized search” to form the report.
How Google stays on top: Google has used three main methods to tamp down possible competitors, Dinielli and Scott Morton write: acquiring businesses whose technology might have given others rivals a leg up; using exclusive contracts to keep competitors from gaining traffic; and placing competing companies at a disadvantage in search results. Only the third part — allegations of search bias — was the subject of a probe that the U.S. Federal Trade Commission conducted into Google in the early 2010s, which ended with no formal action against the company.
Dinielli and Scott Morton argue that Google’s acquisitions of travel information provider ITA in 2011 and navigation app Waze in 2013 were intended to keep key information out of the hands of rivals. At the time of the merger, ITA powered Microsoft Bing’s travel searches, and though U.S. antitrust enforcers required Google to continue to give access to rivals for a certain period of time, Bing eventually ceded the field in 2015.
Likewise, Israeli mapping business Waze could have given another company valuable location data and a chance to compete against Google Maps. But that opportunity disappeared once the search giant scooped up the company for an eye-popping (for the time) $1.1 billion.
Google has also moved to ensure it remains the dominant search engine on mobile. Nearly all U.S. smartphones use either Google’s Android operating system or Apple iOS, and since 2007, Google has paid Apple to ensure that its search engine is the default on all iPhones sold in the United States. That latter deal is worth $12 billion in 2019, according to Goldman Sachs.
The search giant also entered into exclusive contracts with phone manufacturers like Samsung, LG and HTC that required them to install Google’s Chrome browser and set the company’s search engine as the default if they want to use Android plus Google's proprietary apps.
Finally, Google has altered the designs of its website and search algorithm to the disadvantage of rivals who offer specialized search results. Those include Amazon; Tripadvisor, which offers hotel, restaurant and sightseeing information and traveler reviews; and Yelp and Angie’s List, leading providers of local business reviews.
Over time, Google has placed more ads and its own features at the top of its search results page, pushing the results for its rivals further down the page, the Omidyar report alleges. Competing services must then either choose to accept the lower placement and sacrifice traffic, or buy ads from Google to appear at the top of the page.
Regulators weigh in: Europe’s primary competition authority fined Google €4.34 billion — roughly $4.88 billion — over its Android contracts in 2018. In response, this year Android device manufacturers have begun to ship out new phones that allow consumers to choose what search engine to use.
Russia’s antitrust authority reached a similar settlement with Google in 2017 in which the search giant agreed to pay roughly $7.8 million and allow a choice screen. That change led Russian-language search engine Yandex to grow from about a roughly 30 percent market share for mobile search inside Russia to the 43 percent share it has today.
The U.K.'s Competition and Markets Authority has also been studying the role of digital platforms, with a particular focus on Google and Facebook.
Since September, the U.S. Justice Department and a group of state attorneys general have been looking at whether Google's practices violate antitrust law. While the probe initially centered on the search giant's control over the digital advertising ecosystem, more recently prosecutors have considered the extent to which any antitrust suit should take on Google's conduct in search.
Where the FTC fell short: The FTC’s original probe of Google looked only at whether the company was giving top priority to its own products in its organic search results. The commission also considered each of the specialized search companies as a competitor to Google. The tech giant successfully persuaded the FTC that complaints about its search results were sour grapes by less successful rivals, since "competition was just a click away."
The Omidyar report suggests framing the issue another way — specialized search as a collective threat to Google’s general search business.
“When you think about those specialized search sites collectively, they are like Main Street” in a town, Scott Morton said in the interview. “Any little shop is not a substitute for something like Target. But all of the shops together on Main Street could substitute for Target.”
Specialized search platforms represent a threat to Google, she said, because they tend to offer consumers more depth — the ability to research and compare rather than just the ability to discover options.
“Any individualized search site is not a substitute for Google,” she said. “But collectively they could be a significant hit to Google.”
What happens next: Thursday's report is the third by the duo, whose previous work looked into Google’s control over the technology that underpins much of the advertising market and how Facebook’s acquisitions, roadblocks to interoperability and amassing of consumer datacould be the basis of an antitrust suit. The pair describe all three reports as potential roadmaps that enforcers could use to file antitrust complaints in the U.S.
Unlike with the previous two reports, the co-authors included a section on how regulators could seek to remedy Google’s monopoly in search, such as requiring the company to sell off Waze or prohibiting it from paying to be the default on mobile phones. Still, Dinielli and Scott Morton acknowledged that the problem isn’t simply limited to the U.S. because of the global nature of Google’s business.
“To the extent these companies are operating worldwide, this is a problem that requires multiple enforcements,” Dinielli said. “We are thrilled to see the investigation the [U.K.] CMA is doing, the actions in the past by the EU, but that is not enough. We need a consensus about how these behemoths should be acting worldwide.”