Trade

The Power of Preference or Monopoly? Unpacking Google’s Search Engine Domination

November 26, 2024
Corporate Ethics, Data, Industry, Internet, Regulatory, Trade, Trusts and Estates

Donovan Ennevor, MJLST Staffer

When searching for an answer to a query online, would you ever use a different search engine than Google? The answer for most people is almost certainly no. Google’s search engine has achieved such market domination that “to Google” has become a verb in the English language.[1] Google controls 90% of the U.S. search engine market, with its closest competitors Yahoo and Bing holding around 3% each.[2] Is this simply because Google offers a superior product or is there some other more nefarious reason?

According to the Department of Justice (“DOJ”), the answer is the latter: Google has dominated its competitors by engaging in illegal practices and creating a monopoly. Federal Judge Amit Mehta agreed with the DOJ’s position and ruled in August 2024 that Google’s market domination was a monopoly achieved through improper means.[3] The remedies for Google’s breach of antitrust law are yet to be determined; however, their consequences could have far reaching implications for the future of Google and Big Tech.

United States v. Google LLC

In October 2020, the DOJ and 11 states filed a civil suit against Google in the U.S. District Court for the District of Columbia, alleging violations of U.S. antitrust laws.[4] A coalition of 35 states, Guam, Puerto Rico, and Washington D.C. filed a similar lawsuit in December 2020.[5] In 2021, the cases were consolidated into a single proceeding to address the overlapping claims.[6] An antitrust case of this magnitude had not been brought in nearly two decades.[7]

The petitioners’ complaint argued that Google’s dominance did not solely arise through superior technology, but rather, through exclusionary agreements designed to stifle competition in online search engine and search advertising markets.[8] The complaint alleged that Google maintained its monopolies by engaging in practices such as entering into exclusivity agreements that prohibited the preinstallation of competitors’ search engines, forcing preinstallation of Google’s search engine in prime mobile device locations, and making it undeletable regardless of consumer preference.[9] For example, Google’s agreement with Apple required that all Apple products and tools have Google as the preinstalled default—essentially an exclusive—search engine.[10] Google also allegedly used its monopoly profits to fund the payments to secure preferential treatment on devices, web browsers, and other search access points, creating a self-reinforcing cycle of monopolization.[11]

According to the petitioners, these practices not only limited competitor opportunities, but also harmed consumers by reducing search engine options and diminishing quality, particularly in areas like privacy and data use.[12] Furthermore, Google’s dominance in search advertising has allowed it to charge higher prices, impacting advertisers and lowering service quality—outcomes unlikely in a more competitive market.[13]

Google rebutted the petitioners’ argument, asserting instead that its search product is preferred due to its superiority and is freely chosen by its consumers.[14] Google also noted that if users wish to switch to a different search engine, they can do so easily.[15]

However, Judge Mehta agreed with the arguments posed by the petitioners and held Google’s market dominance in search and search advertising constituted a monopoly, achieved through exclusionary practices violating U.S. antitrust laws.[16] The case will now move to the remedy determination phase, where the DOJ and Google will argue what remedies are appropriate to impose on Google during a hearing in April 2025.[17]

The Proposed Remedies and Implications

In November, the petitioners filed their final proposed remedies—both behavioral and structural—for Google with the court.[18] Behavioral remedies govern a company’s conduct whereas structural remedies generally refer to reorganization and or divestment.[19] The proposed behavioral remedies include barring Google from entering exclusive preinstallation agreements and requiring Google to license certain indexes, data, and models that drive its search engine.[20] These remedies would help create more opportunities for competing search engines to gain visibility and improve their search capabilities and ad services. The petitioner’s filing mentioned they would also pursue structural remedies including forcing Google to breakup or divest from its Chrome browser and Android mobile operating system.[21] To ensure Google adheres to these changes, the petitioners proposed appointing a court-monitored technical committee to oversee Google’s compliance.[22]

It could be many years before any of the proposed remedies are actually instituted, given that Google has indicated it will appeal Judge Mehta’s ruling.[23] Additionally, given precedent it is unlikely that any structural remedies will be imposed or enforced.[24] However, any remedies ultimately approved would set a precedent for regulatory control over Big Tech, signaling that the U.S. government is willing to take strong steps to curb monopolistic practices. This could encourage further action against other tech giants and redefine regulatory expectations across the industry, particularly around data transparency and competition in digital advertising.

Notes

[1] See Virginia Heffernan, Just Google It: A Short History of a Newfound Verb, Wired (Nov. 15, 2017, 7:00 AM), https://www.wired.com/story/just-google-it-a-short-history-of-a-newfound-verb/.

[2] Justice Department Calls for Sanctions Against Google in Landmark Antitrust Case, Nat’l Pub. Radio, (Oct. 9, 2024, 12:38 AM), https://www.npr.org/2024/10/09/nx-s1-5146006/justice-department-sanctions-google-search-engine-lawsuit [hereinafter Calls for Sanctions Against Google].

[3] United States v. Google LLC, 2024 WL 3647498, 1, 134 (2024).

[4] Justice Department Sues Monopolist Google For Violating Antitrust Laws, U.S. Dep’t of Just. (Oct. 20, 2020), https://www.justice.gov/opa/pr/justice-department-sues-monopolist-google-violating-antitrust-laws [hereinafter Justice Department Calls for Sanctions].

[5] Dara Kerr, United States Takes on Google in Biggest Tech Monopoly Trial of 21st Century, Nat’l Pub. Radio, (Sept. 12, 2023, 5:00 AM), https://www.npr.org/2023/09/12/1198558372/doj-google-monopoly-antitrust-trial-search-engine.

[6] Tracker Detail US v. Google LLC / State of Colorado v. Google LLC, TechPolicy.Press, https://www.techpolicy.press/tracker/us-v-google-llc/ (last visited Nov. 20, 2024).

[7] Calls for Sanctions Against Google, supra note 2 (“The last antitrust case of this magnitude to make it to trial was in 1998, when the Justice Department sued Microsoft.”).

[8] Justice Department Calls for Sanctions, supra note 4.

[9] Id.

[10] Id.

[11] Id.

[12] Id.

[13] Id.

[14] Kerrr, supra note 5.

[15] Id.

[16] United States v. Google LLC, 2024 WL 3647498, 1, 4 (2024).

[17] Calls for Sanctions Against Google, supra note 2.

[18] Steve Brachmann, DOJ, State AGs File Proposed Remedial Framework in Google Search Antitrust Case, (Oct. 13, 2024, 12:15 PM), https://ipwatchdog.com/2024/10/13/doj-state-ags-file-proposed-remedial-framework-google-search-antitrust-case/id=182031/.

[19] Dan Robinson, Uncle Sam may force Google to sell Chrome browser, or Android OS, The Reg. (Oct. 9, 2024, 12:56 pm), https://www.theregister.com/2024/10/09/usa_vs_google_proposed_remedies/.

[20] Brachmann, supra note 18.

[21] Exec. Summary of Plaintiff’s Proposed Final Judgement at 3–4, United States v. Google LLC No. 1:20-cv-03010-APM (D.D.C. Nov. 20, 2024). Id at 4.

[22] Id.

[23] See Jane Wolfe & Miles Kruppa, Google Loses Antitrust Case Over Search-Engine Dominance, Wall Street J. (Aug. 5, 2024, 5:02 pm), https://www.wsj.com/tech/google-loses-federal-antitrust-case-27810c43?mod=article_inline.

[24] See Makenzie Holland, Google Breakup Unlikely in Event of Guilty Verdict, Tech Target (Oct. 11, 2023), https://www.techtarget.com/searchcio/news/366555177/Google-breakup-unlikely-in-event-of-guilty-verdict. See also Michael Brick, U.S. Appeals Court Overturns Microsoft Antitrust Ruling, N.Y. Times (Jun 28, 2001), https://www.nytimes.com/2001/06/28/business/us-appeals-court-overturns-microsoft-antitrust-ruling.html. (summarizing the U.S. Court of Appeals decision overturning of the structural remedies imposed on Microsoft in an antitrust case).

Robinhood Changed the Game(Stop) of Modern Day Investing but Did They Go Too Far?

February 21, 2021
Antitrust, Class Action, Corporate Ethics, Economy, Financial Law, Internet, Litigation, Trade, Video Games

Amanda Erickson, MJLST Staffer

It is likely that you have heard the video game chain, GameStop, in the news more frequently than normal. GameStop is a publicly traded company that is known for selling, trading, and purchasing gaming devices and accessories. Along with many other retailers during the COVID-19 pandemic, GameStop has been struggling. Not only did COVID-19 affect its operations, but the Internet beat the company’s outdated business model. Prior to January 2021, GameStop’s stock prices reflected the apparent new reality of gaming. In March 2015, GameStop’s closing price was around $40 a share, but at the beginning of January 2021, it was at $20 a share. With a downward trend like this, it might come as a shock to learn that on January 27, 2021, GameStop’s closing price was at $347.51 a share, with the stock briefly peaking at $483 on the following day.

This dramatic surge can be accredited to a large group of amateur traders on the Reddit forum, r/WallStreetBets, who promoted investments in the stock. This sudden surge forced large scale institutional investors, who originally bet against the stock through short positions, to buy the stock in order to hedge their positions. Short selling involves “borrowing” shares of a company, and quickly selling the borrowed shares into the market. The short seller hopes that these shares will fall in price, so that they can buy the shares back at a potentially lower price. If this happens, they can return the shares back that they “borrowed” and keep the difference as profit. The practice of short selling is controversial. Short selling can lead to stock price manipulation and can generate misinformation about a company, but it can also serve to check and balance the markets. The group on Reddit knew that short sellers had positions betting against GameStop and wanted to take advantage of these positions. This caused the stock price to soar when these short sellers had to repurchase their borrowed shares.

This historic scene intrigued many day traders to participate and place bets on GameStop, and other stocks that this Reddit group was promoting. Many chose to use Robinhood, a free online trading app, to make these trades. Robinhood introduced a radical business model in 2014 by offering consumers a platform that allowed them to trade with zero commissions, and ultimately changed the way the industry operated. That is until Robinhood issued a statement on January 28, 2021 announcing that “in light of recent volatility, we restricted transactions for certain securities,” including GameStop. Later that day, Robinhood issued another statement saying it would allow limited buying of those securities starting the next day. This came as a shock to many Robinhood users, because Robinhood’s mission is to “democratize finance for all.” These events exacerbated previous questions about the profitability model of Robinhood and ultimately left many users questioning Robinhood’s mission.

The first lawsuit was filed by a Robinhood user on January 28, 2021, alleging that Robinhood blocked its users from purchasing any of GameStop’s stock “in the midst of an unprecedented stock rise thereby depriv[ing] retail investors of the ability to invest in the open-market and manipulating the open market.” Robinhood is now facing over 30 lawsuits, with that number only rising. The chaos surrounding GameStop stock has caught lawmakers’ attention, and they are now calling for congressional action. On January 29, 2021, the Securities and Exchange Commission issued a statement informing that it is “closely monitoring and evaluating the extreme price volatility of certain stocks’ trading prices” and expressed that it will “closely review actions taken by regulated entities that may disadvantage investors.” Robinhood issued another statement on January 29, 2021, stating they did not want to stop people from buying these stocks, but that they had to take these steps to conform with their regulatory capital requirements.

The frenzy has since calmed down but left many Americans with questions surrounding the legality of Robinhood’s actions. While it may seem like Robinhood went against everything the free market has to offer, legal experts disagree, and it all boils down to the contract. The Robinhood contract states “I understand Robinhood may at any time, in its sole discretion and without prior notice to Me, prohibit or restrict My ability to trade securities.” Just how broad is that discretion, though? The issue now is if Robinhood treated some users differently than others. Columbia Law School professor, Joshua Mitts, said, “when hedge funds are going to lose from a trading suspension, they don’t face any lockup like this, any suspension, any halt at the retail level, but when retail investors find themselves locked in, they find themselves unable to exit the trade.” This protective action by Robinhood directly contradicts the language in the Robinhood contract that states that the user agrees Robinhood does not “provide investment advice in connection with this Account.” The language in this contract may seem clear separately, but when examining Robinhood’s restrictions, it leaves room to question what constitutes advice when restricting retail investors’ trades.

Robinhood’s practices are now under scrutiny by retail investors who question the priority of the company. The current lawsuits against Robinhood could potentially impact how fintech companies are able to generate profits and what federal oversight they might have moving forward. This instance of confusion between retail investors and their platform choice points to the potential weaknesses in this new form of trading. While GameStop’s stock price may have declined since January 28, the events that unfolded will likely change the guidelines of retail investing in the future.

Impact on IP: What Effect Will the US-China “Phase 1” Trade Deal Have

February 28, 2020
Intellectual Property, International Law, Trade

Ian Sannes, MJLST Staffer

After 18 months of intense negotiations, the US and China finally reached an agreement with many provisions covering a wide variety of topics. Although the agreement has a focus on tariffs, it also addresses intellectual property (IP) rights both in China and the US. This deal is referred to as “Phase 1” and went into effect last week. In part, the deal is meant to increase and facilitate the ability of US businesses to operate in China.

From the US point of view, this deal strengthens IP rights of US patents in China. In fact, this strengthening of IP rights is arguably the most significant part of the entire deal. However, China also benefits from this because, as the previous deputy director of the National Economic Council Clete Willems said, “better intellectual property protection means more investment in China.” This makes sense, if US products are protected in China, then US companies will want to invest heavily to develop those products in a country that has more purchasing power than any other country in the world.

So, what changes to IP protections have been made?

The cornerstones of the IP protections implemented in the deal are wide-ranging. They include increasing trade secret protections, increasing pharmaceutical IP protections, extending patent terms, combating counterfeits, reforming trademark provisions, and improving judicial enforcement in IP cases. Some of these changes are discussed in more detail below.

The deal also put a stop to “forced technology transfers” that require US firms to share technology with Chinese companies to compete in their market. However, some are concerned that since this provision requires a wronged company to file a complaint with the Office of the US Trade Representative that may depend on other Chinese government approvals, this provision may be hard to enforce in practice.

Many US companies believe certain judicial proceedings in China are a pretext to force them to disclose valuable trade secrets. Phase 1 prohibits any proceeding from forcing such unauthorized disclosure of information. The deal also shifts the burden to the defendant in a trade secret case to prove their innocence after the plaintiff survives dismissal of the case. The deal brings the Chinese definition of trade secret more in line with the definition used in the US by expanding it to include “electronic intrusion and breach of confidentiality.”

The deal also increases patent terms for pharmaceuticals “to compensate for unreasonable delays” made in granting the pharmaceutical patents. This makes it easier for US drugs that took many years to make it through the Chinese patent system to recoup the development costs and to turn a profit. The deal allows for up to five years of extension to patent terms. Furthermore, the deal includes provisions for “effective and expeditious” actions against “counterfeit medicines and biologics, including active pharmaceutical ingredients, bulk chemicals, and biological substances.”

Finally, the deal also increases the severity of punishments for stealing or infringing IP rights. Besides improvements to detect and stop infringing counterfeits, audits may also be used to show that the Chinese government itself only uses licensed software.

These are just some of the many provisions included in Phase 1. The deal helps to make the US and Chinese IP systems “further aligned” and this can create efficiencies in standardization, improve clarity, and promote cooperation. This deal strengthens both the US and China economies and promotes trade and investment in each country while protecting IP. Furthermore, a Phase 2 trade deal is likely in the future. Hopefully, this new deal will include more IP protections for both countries and strengthen the economic bond between the countries even more.

Trade

Donovan Ennevor, MJLST Staffer

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