A major antitrust trial examining whether Google illegally maintains a monopoly in the search engine market, that also saw CEO Sundar Pichai and Microsoft boss Satya Nadella testify in court, has led to a decision that could spell trouble for the search giant. Google’s dominant market share fortified by barriers to entry easily establishes its monopoly power in online search, a US district court ruled in a landmark judgment on Monday, August 5. Additionally, the court held that Google’s monopoly of search text ads had also violated the country’s antitrust law. The ruling by Judge Amit P Mehta of the US district court of Columbia was delivered in an antitrust lawsuit filed by the Justice Department and other states against Google in 2020. The court trial took place in September last year and went on for around ten weeks. “[.] Google has violated Section 2 of the Sherman Act by maintaining its monopoly in two product markets in the United States - general search services and general text advertising - through its exclusive distribution agreements,” Judge Mehta wrote. Here are the important highlights of the monumental antitrust judgment spanning roughly 286 pages. Google’s monopoly power in the online search market According to the judgment, the plaintiffs said that Google controls a dominant and durable share of the search market, adding that its position is protected by high barriers of entry. In response, Google argued that it did not have monopoly in the broader market of query responses as there is vigorous competition in that space. However, the court rejected Google’s arguments and recognised the existence of a market comprising general search engines (GSEs). Notably, the court found that Google has monopoly power within this market. “Measured by query volume, Google enjoys an 89.2% share of the market for general search services, which increases to 94.9% on mobile devices. This overwhelms Bing’s share of 5.5% on all queries and 1.3% on mobile, as well as Yahoo’s and DDG’s shares, which are under 3% regardless of device type. Google does not contest these figures,” the order read. “Google has enjoyed an over-80% share since at least 2009. That is a durable dominant share by any measure,” it added. It also said that Google’s “near-complete” control of key distribution channels was a major barrier of entry for other search companies, adding that “the advent of artificial intelligence (AI) has not sufficiently eroded barriers to entry—at least not yet.” Google’s monopoly of text-based ads on search Text ads have the appearance of organic search results and provide web links to the advertiser’s site. They can include an image but are largely text-based, as per the order. The court found that Google controls a large and durable share of the text ads market. “In 2020, its market share in the text ads market was 88%, having grown steadily from 80% in 2016,” it said. This monopoly is further protected by significantly high entry barriers as only search engines can display text ads. “New entrants face the same major obstacles as would the developer of a new GSE,” the order read. “That Google makes changes to its text ads auctions without considering its rivals’ prices is something that only a firm with monopoly power is able to do,” it further said. However, the court did not recognise a separate market for search ads and further ruled that Google did not have monopoly power in that market. It based this decision on the lack of direct or indirect evidence presented by the plaintiffs. Google abused its monopoly position Google did not violate the Sherman Act by just having a monopoly in the two markets. Instead, the court found that it broke the law by indulging in behaviour that blocked out other search engines and search text ad companies. The court held that having Google Search as the preloaded, default search engine on all Apple and Android devices causes anticompetitive harm. It also said that Google has locked up 90 per cent of the online search market by striking deals with Apple as well as Samsung and Verizon to be the default search engine on their respective handsets and mobile carriers. “Google understands there is no genuine competition for the defaults because it knows that its partners cannot afford to go elsewhere. Time and again, Google’s partners have concluded that it is financially infeasible to switch default GSEs or seek greater flexibility in search offerings because it would mean sacrificing the hundreds of millions, if not billions, of dollars that Google pays them as revenue share,” the judgment read. Google hindered growth of Microsoft Bing, Apple Google’s deals with Apple and Android handset makers like Samsung to be the default search engine “significantly contributed to disincentivizing Microsoft from enlarging its investment in search,” the court said. “Microsoft stood no realistic chance of beating Google for the Apple default, and there is no evidence of any serious negotiations for Android placements. No profit-driven firm in Microsoft’s position would invest the substantial sums required to enhance its search product when there is little to no genuine opportunity for a default distribution deal,” the order read. On the other hand, the court held that Microsoft could have improved Bing by obtaining data from specialised vertical providers (SVPs) like travel booking sites Expedia and Booking.com. Coming to Apple, the court said that Google pays the iPhone maker more in revenue share than what it pays all other partners combined. This has kept Apple on the sidelines of the search market. “The prospect of losing tens of billions in guaranteed revenue from Google—which presently come at little to no cost to Apple—disincentivises Apple from launching its own search engine when it otherwise has built the capacity to do so,” the order read. Google’s response to the court verdict The search giant has said that it will appeal the decision handed down by the Columbia district court in the antitrust lawsuit brought by the US Department of Justice. “This decision recognises that Google offers the best search engine, but concludes that we shouldn’t be allowed to make it easily available,” Kent Walker, president of Global Affairs at Google, was quoted as saying by TechCrunch. “We appreciate the Court’s finding that Google is ‘the industry’s highest quality search engine, which has earned Google the trust of hundreds of millions of daily users’, that Google ‘has long been the best search engine, particularly on mobile devices’, ‘has continued to innovate in search’ and that ‘Apple and Mozilla occasionally assess Google’s search quality relative to its rivals and find Google’s to be superior,” the senior executive reportedly said. As for what penalties or sanctions have been imposed on Google, the judge is reportedly yet to pronounce legal remedies in the case.
