Google prepares for biggest US antitrust showdown since Microsoft

It will be 25 years next month since US government lawyers stood up in a federal courtroom in Washington to accuse Microsoft of illegally squashing competition. The landmark case, brought at the height of its dominance of the technology industry, culminated in a judge ordering a break-up of the company, though the ruling was overturned on appeal. 

On Tuesday, a Washington courtroom will again become the focus for a historic Department of Justice effort to rein in one of the tech world’s most powerful companies. Its complaint against Google is the first against the latest generation of dominant tech companies to make it to court. The outcome, according to many legal observers, will be an important test of the ambitious legal strategy of US regulators and help to determine their wider efforts to rein in Big Tech.

The comparisons with Microsoft will resonate loudly — not least because the justice department itself has framed the Google case as an attempt to extend rules established in that case to the latest generation of tech giants. Echoing a widely-held view in antitrust circles, Michael Carrier, a law professor at Rutgers University, said it marked “the most significant antitrust monopoly case since Microsoft”.

Three years ago, when the US government first mapped out its legal campaign, many investors worried it would put a dent in Big Tech’s profits, said Paul Gallant, a stock market analyst at Cowen in Washington. Many have since come to believe that the regulators were stretching to hold the tech companies accountable and US courts were unlikely to back them, he added.

If Google prevails, “there will be no changes to its business model — and the case will be particularly positive for other tech companies facing [antitrust] lawsuits”, Gallant said. Yet with Big Tech riding high on Wall Street this year, a government victory could bring a sharp setback.

Meanwhile, for the Biden administration, the case marks the first test of its shift to a tougher antitrust enforcement stance against Big Tech. “For better or worse, this trial will shape opinion on whether the agency heads can successfully take on a Big Tech Goliath or whether they have overplayed their hand,” Carrier said.

It is a particularly significant moment for Jonathan Kanter, head of the Department of Justice’s antitrust unit. He is among a new generation of progressive antitrust officials appointed by president Joe Biden in a bid to tackle what the White House sees as excessive corporate power.

While Kanter inherited the case, he has made no secret of his ambition to rein in Big Tech. He told the Financial Times last year that tech was “the new oil” and that the government should ensure “the law and our enforcement programme is calibrated to its realities”. The DoJ brought a second case against Google, over its advertising practices, in January.

Kanter’s involvement has also brought a personal edge to legal confrontation. The enforcement chief previously made his name on high-profile tech cases including representing Microsoft, Yelp and other companies against Google. In 2021, the search company called for an investigation into whether he should be recused from litigation and investigations against it.

The justice department has not yet indicated what remedies it would seek if it wins, but its clear ambition to score a big win in a prominent tech trial has raised expectations that it will seek strong sanctions. Google’s critics in the tech industry have called for a break-up of the company, though many legal experts say that is unlikely.

There is no obvious division of Google’s business that would deal with the issues raised by the trial, said Donald Polden, a law professor at Santa Clara University in Silicon Valley. A more likely outcome would be rules to prevent future abuse and the kind of ongoing monitoring of its business that was imposed on Microsoft, he said.

The DoJ’s complaint against Google, filed in 2020, contains parallels to the Microsoft case. It turns on a series of agreements the company forged that guarantee its search engine appears prominently when users turn on their smartphone or open a browser. Those contracts illegally shut out competitors, according to DoJ, which has compared them to the contracts Microsoft signed with PC makers to promote its Internet Explorer browser and crush Netscape.

However, legal experts point to significant differences with the Microsoft case that have left the US government facing an uphill battle.

Central to the case will be whether the DoJ can show that Google’s contracts shut out competitors. They include a deal with Apple that makes Google’s search engine the default on Apple’s devices, bringing in billions of dollars a year. The case also involves a series of contracts with smartphone makers and mobile telecoms companies that support the Android operating system and give Google search pole position.

Google has argued that, unlike the contracts Microsoft forced on PC makers to ensure use of its browser, the shape of its agreements were mainly determined by companies such as Apple, which designed their own user interfaces and allowed companies other than Google to bid.

Also, in many cases, the agreements were not exclusive, allowing handset makers and others to give varying degrees of prominence to other search engines, said Polden. That would make it harder for the DoJ to prove that Google actively shut out competitors, he said.

Google itself likens the contracts to the deals that food companies strike to get prominent placement on supermarket shelves, making them a regular part of commercial life.

To make its case that the agreements are exclusionary, meanwhile, the DoJ is expected to call witnesses from companies that struck the deals. Apple has lost an attempt to prevent three of its top executives from being called to testify, including Eddy Cue, head of its services business. Others tech executives are also expected to appear, including Google chief executive Sundar Pichai.

In another contrast with the Microsoft case, Google also claims it is far easier for today’s smartphone users to switch to a different search engine than it was for PC users to switch to the Netscape browser. For its part, the DoJ is expected to call behavioural experts to show that few smartphone users ever think of changing the default settings on their handsets, in effect excluding Google’s search competitors.

Despite the challenges faced by the DoJ, however, many experts argue that the outcome of the trial is finely balanced, particularly given Google’s dominance of the search market.

“Google claims that it won based on the superiority of its product, but the government can reply that consumers were denied a chance to see the other products and decide,” said John Coffee, a professor at Columbia Law School. “I think this will be a close case in court.”

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