Google in the Antitrust spotlight: is the Tech giant too powerful?

Introduction

It is undeniable that online advertising, particularly on social networks, has become a crucial channel for economies worldwide. Its ability to connect closely with the inclinations and preferences of individual consumers has revolutionized not only market dynamics but also the daily lives of anyone “connected.” At the forefront of this new global advertising landscape are the Big Tech companies (Amazon, Google, Facebook, Microsoft, Apple). Notably, the Mountain View giant, Google, has secured a dominant position in the search engine market, holding a market share of over 90%, which has enabled it to leverage this advantage to promote its advertising systems.

It is the responsibility and in the best interest of institutions worldwide to ensure that the dominance of Big Tech does not translate into an abuse of power, thereby undermining the proper functioning of competitive markets. This is precisely why Antitrust authorities face a significant challenge today: ensuring this does not happen by closely

monitoring the actions of these multinationals and uncovering any tactics designed to circumvent the regulations within their areas of influence.

From a European Prospective

For many years, it has been widely recognized that the European Commission for Competition allows very little to escape its scrutiny in the realm of the digital market. This is evidenced by the numerous rulings issued against Apple, Meta, and Google. The primary aim is to prevent these tech giants from turning their market positions into monopolistic control over certain sectors. To achieve this, the Commission draws clear boundaries through fines and new regulations. The key term in this context is “abuse of dominant position,” which renders unlawful the control exercised by a company with a dominant market share (exceeding 70%) over the supply and demand in a particular market segment.

The relationship with Google has been complex from the outset, characterized by a series of investigations, rulings, and fines dating back to 2010. It all began with an investigation launched at the start of the previous decade by the European Commission into Google’s anti-competitive behavior in the online search market. This inquiry concluded in 2016 with a decision ordering Google to cease its conduct. Then, in June 2017, the Californian giant was fined €2.42 billion for favoring its own price comparison service, Google Shopping. Subsequently, in July 2018, another European ruling found Google guilty of abusing its dominant position through Android by requiring device manufacturers to pre-install Google Search and Google Chrome. This led to a record fine of €4.34 billion.

The case of particular interest, however, is the €1.5 billion fine for anti-competitive restrictions in AdSense contracts, which prevented publishers from displaying ads from competitors. This penalty, imposed in March 2019, was based on a ruling that found Google guilty of “failing to “consider the entirety of relevant circumstances when assessing the duration of the contractual clauses deemed abusive,” as explained by the court.

AdSense, an advertising platform managed by Google since 2003, offers an online advertising intermediation service that enables website publishers with integrated search engines to display ads linked to online queries submitted on their websites. Publishers receive a share of the revenues generated from these ads. However, as previously mentioned, the service agreements negotiated with Google included clauses limiting or prohibiting the display of ads from competing services, leading companies like Microsoft, Expedia, and Deutsche Telecom to report the matter to antitrust authorities.

In its investigation conducted in Brussels, the European Commission identified these clauses as abusive of Google’s dominant position concerning competing services to AdSense for Search. While Google removed or amended these clauses in September 2016, this was insufficient to avoid the €1.5 billion fine. The Commission found three distinct violations that together constituted a single,continuous infringement from January 2006 to September 2016. Unsurprisingly, this decision was appealed by Google, whose management remained confident in the legitimacy of its approach to advertising intermediation services.

The EU Court’s ruling on the matter, issued just two months ago, highlighted certain errors made by the antitrust authorities in assessing the duration of the contested clauses and the market they covered. Moreover, the Commission failed to demonstrate that the three identified clauses each constituted an abuse of dominant position and collectively formed a single, continuous infringement. Nor did it establish how these clauses could have deterred publishers from seeking services from competing intermediaries.

In pursuing its objectives, antitrust authorities are often driven by the need to halt anti- competitive practices as quickly as possible, which is why it is not uncommon for the EU Court to overturn decisions and fines. While Google has managed to regain some ground, it is clear that this cross-border battle between Big Tech and institutions is far from over. The European Union is gradually working to dismantle the dominance of these tech giants to ensure a competitive and pressure-free market within its jurisdiction. It remains to be seen what the European Commission’s next steps will be in combating the “borderline” practices of Google and other tech giants in this ongoing chessboard of economic strategies and regulations, which will continue to shape the market for years to come.

From the U.S. Prospective

Google has found itself under scrutiny by U.S. justice authorities in one of the largest antitrust cases in recent decades. The American tech giant was accused of the monopolization of online search and the manipulation of the market to maintain dominant position at the expense of the rules of fair competition. This case has been deemed historic, of equivalent importance to the 1998 Microsoft case, and a disposition on the matter could redefine the future of Google and that of the whole technology industry.

The filing of the antitrust case between the US government and Google is one of the most significant legal developments in the technology industry in the last decade. Skewed competition in online advertising and the search market is what Google has been accused of by the Department of Justice (DoJ). The case could redefine the regulatory framework for digital platforms with crucial contributions from economists, legal experts and companies, not to mention that its outcome could have important implications not only for Google but also for global antitrust policies. The Department of Justice has charged Google with using unfair methods to reinforce its dominance in the online search market by depriving opportunities to its rivals and minimizing consumer choice. According to the DoJ, the agreements that Google allegedly made with Apple, Samsung, and other tech manufacturers are clearly defined and explicitly detail the arrangements. Due to these contracts, billions of devices used Google’s search engine as their default, making it hard for competitors to gain prominence. In the United States vs. Google LLC, Judge Amit P. Mehta of the District of Columbia ruled that Google had unlawfully maintained a monopoly in violation of Section 2 of the Sherman Act, though remedies are still under consideration as Google plans to appeal. The case began in October 2022 when the DoJ, along with 11 states, filed a complaint against Google, which was later joined by a similar lawsuit from 38 other states. In this ten week marathon trial that started on September 12, 2023, the DoJ made two points, on which it rested its prima facie case for monopoly, to wit: (1) Google had possessed considerable monopoly power in the market, and (2) Google had acquired or maintained such a position through anticompetitive conduct. This led Judge Mehta to conclude that General search engines (ESGs) and general search text advertising represent separate markets with their unique character and applications.

GSEs offer a level of completeness not compatible with other platforms, furthermore The fact that over 92% of Google advertisers use text-only ads suggests that product listing ads are themselves an inadequate substitute for these ads. Google has significant market power: approximately 90% in GSEs and 88% in text ads. The marketsare also insulated by barriers to entry created by high costs, control of distribution channels, brand recognition and economics. of scale.

Moreover, Google prices its ads with disregard for rivals’ prices, another factor confirming its market power.

The trial’s outcome has set the stage for the next critical phase: deciding on the remedies. Judge Mehta ruled that Google’s agreements violated antitrust laws, and the court is now considering appropriate measures to address these violations. Potential remedies range from behavioral adjustments, such as ending exclusive agreements and introducing a search engine selection screen, to more drastic structural changes, like separating Google Search from its Chrome browser or Android operating system. While such structural remedies are unlikely due to their complexity, a more practical approach could involve banning Google from paying for default search engine status.

The implications of this case are far-reaching. On a financial level, both Google and its partners, such as Apple, could face significant losses. Apple, for instance, reportedly earned around $20 billion in 2022 alone from its deal with Google to make its search engine the default on Apple devices. Losing such agreements could impact Apple’s earnings by up to 6%. For consumers, a break from Google’s default status could lead to increased competition, offering more choice and greater personalization in search experiences. At the same time, competitors could find new opportunities to challenge Google’s dominance, potentially reshaping the search and advertising markets with innovative technologies.

Beyond the immediate consequences for Google, this case represents a broader shift in how governments approach Big Tech. For Attorney General Merrick Garland, the trial is seen as a landmark victory that sends a clear message: no company is above the law. The case could pave the way for stricter enforcement of antitrust laws across the tech industry, with other giants like Apple, Amazon, and Meta likely to face increased scrutiny as regulators seek to rein in their market power.Interestingly, this is not the only legal challenge Google faces. In September 2024, the DoJ filed a separate antitrust case targeting the company’s dominance in digital advertising technology. The outcome of the current trial on search exclusivity is expected to influence this new case, further underscoring the heightened regulatory pressure on Google.

In conclusion, this case is far more than a legal battle over Google’s business practices. It marks a turning point in the regulation of digital markets and raises fundamental questions about how governments should handle the growing power of Big Tech. As the proceedings move toward the remedy phase, set for a public hearing in spring 2025, the world is watching closely. The decisions made in this case could shape not only the future of Google but also the broader dynamics of competition and innovation in the technology industry for years to come.

CC: Cosimo Compere, Piero Fioretto