U.S Files A Lawsuit Against Google

Oct 27, 2020 By Vedant J.
vjanapaty5's picture

Did you know that the phrase “Google it” is an official verb in the Oxford Dictionary?

The verb “to google” literally means “To use the Google search engine to find information on the Internet”. 

But is Google promoting itself to be the only internet search engine? That's exactly the question that the United States Department of Justice (DOJ) asked when they slammed an antitrust case against Google last week.

Let’s dive into the basics and history of antitrust and what both sides have to say about the case.

Antitrust and Monopoly

Imagine a group of companies that become a monopoly and work together as a cartel (known as a trust). Such a group can stifle trade and competition, and fix prices to their advantage. Antitrust (or competition policy) originated in the nineteenth century in the U.S. to prevent the formation of trusts and to promote competition.

One of the earliest antitrust cases involved John Rockefeller’s Standard Oil Co., a nexus of oil refiners and railway companies, that eliminated small businesses, dominated the oil industry, dictated prices and supply while circumventing taxes and federal regulations.

In response, the U.S. government passed the Sherman Act in 1890 that permitted the government to dissolve trusts like the Standard Oil Company. To further bolster the Sherman Act, President Woodrow Wilson established the Federal Trade Commission (FTC) in 1914 along with the Clayton Antitrust Act to regulate U.S. business practices. However, after World War I, the U.S. Supreme Court applied “the rule for reason” that not every trust was illegal.

Today, in order to prove a violation of the Sherman Antitrust Act, the DOJ has to prove the following about the defendant:

  • It wields large power in the market.
  • It abused this power.
  • It harmed its consumers to some degree.

Is Google Violating The Law?

Google founders Larry Page and Sergey BrinGoogle is accused of paying other companies to maintain its wide lead over competitors such as Bing and Yahoo!. For example, Google paid Apple $12 billion to be the default option on Apple’s browser, Safari -- this likely closed the door to competition in the search engine industry. In addition, an Apple employee is said to have stated that "our vision is that we work as if we are one company."

Today, Google has a market value of $1 trillion and annual revenue exceeding $160 billion. The official lawsuit begins with how Google has evolved over time from being “a scrappy startup with an innovative way to search the emerging internet” to a company using “anti-competitive tactics to maintain and extend its monopolies.” 

In response, Google denounced the lawsuit, by calling it “deeply flawed. They argue that consumers use the Google search engine because it is a superior product and do so out of choice, not compulsion. Additionally, it stated that this antitrust case, which is meant to protect consumers, will do nothing to help them. Besides, Google stated that it does not charge consumers, proving that there was no case of price-fixing. 

In 1984, the monopoly of the American Telephone & Telegraph Company (AT&T) led to its being divided into seven “Baby Bell” companies to promote competition. Similarly, the checks and balances put in place after Microsoft’s alleged stifling of other Internet browsers in 1999 may have allowed innovation to flourish, leading to the birth of Google.

So, how will this end for Google? We can’t Google the future, so only time will tell how this antitrust case plays out.

Sources: NY Times, Washington Post, Britannica, Reuters, CNN, HBR

Comments

Titusbug's picture
Titusbug October 28, 2020 - 8:32am
Crazy lot of 💰. ONE TRILLION!!!! Personally, I'll leave it to the DOJ.