DOJ’s lawsuit against Google is about more than just search engines
Last Tuesday, the Department of Justice (DOJ) and 11 state attorneys general sued Google in federal court in Washington, D.C., under the Sherman Act, a federal statute dating back to 1890 that bans companies from fixing prices or taking other steps to constrain or rig markets, on the rationale that competition is healthy.
Consumers benefit from having choices, and competition keeps prices low, incentivizes businesses to produce high-quality products and services and spurs innovation.
The Sherman Act was passed in the midst of the Gilded Age — a period of immense economic growth that produced the country’s first large corporations like Standard Oil and the American Railway Union. A public outcry over surging prices on essential goods and exclusive cartels prompted Congress to act. Fast-forward 130 years. In its lawsuit, DOJ claims that Google has cornered the search engine and online advertising markets by effectively becoming the “gatekeeper of the Internet.”
DOJ’s complaint alleges that there are only three search engines available today — Google, DuckDuckGo and Microsoft’s Bing, which sells its results to Yahoo!. According to the government, Google accounts for nearly 90 percent of search queries in the United States. Although DuckDuckGo “differentiates itself from Google through its privacy-protective policies,” DOJ adds, “Google’s control of search access points means that these new search models are denied the tools to become true rivals: effective paths to market and access, at scale, to consumers, advertisers, or data.” And through its agreements with other companies like Apple, LG, Motorola, Samsung, AT&T, T-Mobile and Verizon, Google has allegedly forked over billions to secure default — and in some instances, exclusive — status for its general search engine on various devices.
A critical difference between a company like Standard Oil and Google is the “cost” of their goods and services. Google is “free”— at least to the extent that users do not have to pay a fee for it. But it turns out that Google is far from free.
The reason Google is not free derives from how Google makes its money: advertising. Advertisers pay around $40 billion annually to put ads on the Google search engine result page, or “SERP.” Smaller competitors cannot pay billions for equivalent access. As a result, consumers lose by having fewer options pop up when they punch in a search. To be sure, consumers can always switch to Bing or DuckDuckGo. But the constricted range of possible search results is not where the real harm to consumers lies.
According to DOJ’s complaint, “When asked to name Google’s biggest strength in search, Google’s former CEO explained: ‘Scale is the key. We just have so much scale in terms of the date we can bring to bear.’” Translation? Users pay for Google access — but not in dollars. We pay for Google searches with our personal data, which may be even more valuable than money these days.
According to Wired magazine, Google takes great pains to protect user privacy from data exposure. Computer science researcher Douglas Schmidt of Vanderbilt University elaborated: “Google does a good job of protecting your data from hackers, protecting you from phishing, making it easier to zero out your search history or go incognito.” However, “their business model is to collect as much data about you as possible and cross-correlate it so they can try to link your online personal with your offline persona. This tracking is just absolutely essential to their business.”
It’s not the hackability of the data that Google collects that’s the problem. The problem is the data that Google keeps and sells. Google does not sell widgets or oil or railway access. It sells human data.
According to DOJ, “Google’s search index contains hundreds of billions of webpages and is well over 100,000,000 gigabytes in size.” Consumers willingly (if not unwittingly) provide their data in the form of searches, clicks and swipes in exchange for access to Google’s powerful search engine. “Google then monetizes the consumer’s information and attention by selling ads.” At the same time, DOJ claims, Google “forecloses distribution to Google’s search rivals, weakening them as competitive alternatives for consumers and advertisers by denying them scale.” (Only 5 percent of Google’s value comes from people’s location and other information.)
In 2001, Microsoft settled a similar Sherman Act lawsuit with DOJ, which sued the software giant over its requirement that PC users of its Windows operating system use its web browser, Internet Explorer, which could not be uninstalled. Following a 76-day trial, a federal judge ordered the breakup of Microsoft, but that resolution was reversed on appeal and the case ultimately settled, with Microsoft agreeing to share some of its programming software with third-party companies.
On its face, DOJ’s latest complaint against Google is short on proposed remedies for the company’s allegedly monopolistic behavior, merely seeking “structural relief as needed to cure any anticompetitive harm.” It could be years before the case is ultimately resolved. But as the litigation unfolds, DOJ lawyers might do well to focus on Google’s revenue model in framing possible relief. From that vantage point, it’s possible to imagine consumer benefits that go well beyond more varied search results.
Imagine a court-ordered remedy that somehow manages to prompt serious competitors to enter the search engine market against Google. Imagine further that increased competition spurs serious innovation in the search engine market. Next imagine that increased competition for market share incentivizes Google or a competitor to flip the revenue model — by paying customers for their data rather than requiring that consumers hand their data over as payment for internet searches. To be sure, antitrust lawyers would have much to say about the pros, cons or feasibility of such an approach. But the damage caused by so-called “surveillance capitalism” is real and unrelenting. Like its forebearers in 1890, the next Congress would do well to address it.
Kim Wehle is a former assistant U.S. attorney and a former associate independent counsel in the Whitewater investigation. Wehle is also a professor at the University of Baltimore School of Law. She is the author of “How to Read the Constitution and—Why” and “What You Need to Know About Voting—and Why.” Follow her on Twitter @kimwehle.