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Google and antitrust: Big Tech’s first target could face more legal action

MarketWatch logo MarketWatch 12/10/2020 Jon Swartz
a sign in front of a building © MarketWatch photo illustration/iStockphoto

Of the Big Four tech companies, Google was the first to be targeted by the federal government this year, but that likely wasn’t the end of the legal actions against the search giant.

The Justice Department lawsuit, filed in late October with 11 state attorneys general, centers on Google’s conduct in the search market. Separate probes by the DOJ and states into Google’s power in digital advertising markets continue, as does the Justice Department’s review of Google’s proposed acquisition of Fitbit Inc.

Their focus is the fact that 86% of internet searches are done through Google, a staggering number that gives the unit of Alphabet Inc. nearly unilateral control over the distribution of information.

For more: Big Tech’s antitrust woes grow, but will it actually matter?

U.S. District Judge Amit Mehta of the District of Columbia, the judge in the Justice Department’s case, should also oversee class actions and other cases alleging antitrust violations against Google, according to a Nov. 5 court filing. Attorneys general in 11 states — including Florida, Georgia and Texas — have joined the DoJ’s case.

Google continues to stiff-arm the charges, offering its product’s superiority as a defense. “We repeatedly have underscored that people go to Google search because they want to, not because they have to,” Google Chief Financial Officer Ruth Porat said in a DealBook interview on Nov. 18. “Google rose to the position that it has because it is a better product. We keep innovating and investing” in such technology as machine learning.

Google Chief Legal Officer Kent Walker called the DOJ’s case “deeply flawed” in an Oct. 20 blog post, though the Silicon Valley powerhouse is employing a battalion of attorneys from prestigious law firms such as Wilson Sonsini Goodrich & Rosati and Morgan, Lewis & Bockius to represent it.

This indicates to Bhaskar Chakravorti, dean of global business at the Fletcher School at Tufts University, that the antitrust lawsuit will proceed slowly, and could erode. “Not enough Democratic state AGs got behind the DOJ’s actions in the first place — as in none,” Chakravorti told MarketWatch. “It was rushed through by [Attorney General William] Barr and an all-Republican cast of state AGs.”

A majority of states investigating Google did not sign on to the Justice Department’s suit, and could still bring charges.

See also: After charges against Google, road map to antitrust changes contains many potential routes

With House Democrats seeking a more comprehensive review of Big Tech’s powers, the antitrust lawsuit “contains a risk that it would detract from that much more holistic approach to tackling the power of Big Tech beyond Google alone,” Chakravorti said. “They may want to push the Google lawsuit back into the annex.”

Still, the evidence remains compelling. Yelp Inc. has long held that Google favored its own products and services in search, often to the exclusion of Yelp and at the expense of consumers. Google also allegedly stole content from developers, such as restaurant reviews from Yelp.

In the risk factors section of its 10-Q filing on July 31, Yelp warned that search engines have “made changes in the past to their ranking algorithms, methodologies and design layouts that have reduced the prominence of links to our platform and negatively impacted our traffic, and we expect they will continue to make such changes from time to time in the future.”

Yelp claims Google’s update to its search algorithm in the fourth quarter of 2019 may have harmed, and may be continuing to harm, its traffic. Similarly, Apple, Google or other marketplace operators “may make changes to their marketplaces that make access to our products more difficult,” according to the filing.

“From a broad business perspective, this is going to take a long time, years to play out, just like Microsoft,” Yelp Chief Financial Officer David Schwarzbach told MarketWatch. “We welcome the scrutiny, but remain focused on our own business. They [Google] are part of the competitive landscape we face. It is an element of the competition we face.”

U.S. regulators might also consider their legal path forward, following a series of antitrust charges by the European Union that resulted in nearly $10 billion in fines but little change in the competitive landscape. (In 2017, the EU fined Google $2.8 billion for abusing its market dominance by giving an “illegal advantage” in search results to Google Shopping.) The reason? European lawmakers largely left it to Google to fix the problems, antitrust lawyers and Google competitors warn.

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