No images? Click here Welcome to The Corner. In this issue, we examine whether comments made by the presiding judge in the Google Search trial indicate that the court may be considering structural remedies for the tech giant, such as divestment of certain business units.
Karina Montoya and Bria Smith Final arguments in the Department of Justice’s first antitrust trial against Google, held at the district court in Washington D.C., concluded last week. Most news coverage has thus far has concentrated on the DOJ’s charge that Google illegally uses exclusive dealing to secure market dominance in search, such as the billions it annually pays to Apple to keep Google the default search engine on the Safari web-browser app. But a comment made last Friday by Judge Amit Mehta suggests that another charge brought by DOJ may be even more important in determining how the case is ultimately decided and what remedies may result. Part of the DOJ’s claim that Google has an illegal monopoly over search rests on evidence that Google can raise the prices it charges for ads on its search engine site without losing business. DOJ argues that only a monopolist could set prices without considering pressures from rivals or market demand (in this case from advertisers), and In his comments, Judge Mehta seemed to agree. “It's clear Google has control of the bid process [to sell ads],” he told Google’s lead lawyer. “The question is whether Google can use this control to raise prices in a sustained way [without losing business], and the record here suggests that this is what is happening.” There is indeed substantial evidence that over the last two decades Google has had the ability to increase ad prices for certain ads between 5 and 10 percent without losing clients. Google has not denied it controls the bid process but claims that when it raises prices it is merely engaging in “experiments” to assess Google’s value to advertisers. It also argues that price increases should be “adjusted to quality,” pointing to purported improvements in click-through rates. But regardless of whether these defenses are accepted, the trial record shows that many advertisers feel compelled to pay for ads on Google search even when ads on other platforms and in other publications yield better returns on investment. The apparent reason for that is the sheer scale of Google search, which DOJ argues is achieved illegally through deals like the one it has with Apple. If Judge Mehta rules that Google has an illegal monopoly in search advertising, that can strengthen another charge made by DOJ: that Google has used its ownership of a product known as SA360 to entrench its power in this market. Google acquired SA360 as part of its DoubleClick purchase in 2008. Known formerly as DoubleClick Search, SA360 was used by advertisers to buy ads on Google’s search engine and other rivals, mainly Microsoft’s Bing, as well as Yahoo and DuckDuckGo, which syndicate Microsoft Ads. But once Google fully integrated SA360 into its ad business, it gave clients buying ads on Google’s search engine the ability to make those ads more profitable compared to those bought on other rivals. Essentially, SA360 is supposed to be a neutral intermediary between advertisers and Google’s search rivals, but Google is allegedly using it to advantage itself and crush rivals. Fully 92% of the ad spend on SA360 goes to Google even though the platform serves ads for all search engines. Judge Mehta’s comment may also have implications for another pending case against Google brought by DOJ and several states. That suit, whose trial will start September 9 in the federal court in Alexandria, Virginia, charges that Google more generally monopolizes and manipulates the digital ad exchange market in which publishers and advertisers meet to sell and buy ads through a series of auctions. The plaintiffs in that case are demanding a full divestiture of the advertising technology (ad tech) products owned by Google in this market that generate conflicts of interest, be that an ad exchange or other products that manage publishers’ inventory and advertisers’ demand simultaneously. In both cases, if Google is found guilty of manipulating digital ad markets, that could lead to remedies that will dramatically change the structure of digital advertising markets, with wide-ranging implications for the financing of journalism and the market structure of the internet more generally.
Last week, Open Markets Executive Director Barry Lynn testified at a U.S. Trade Representative public hearing on “Promoting Supply Chain Resilience.” In his testimony, Lynn drew from his two decades of reporting on how corporate control over our supply chains has resulted in regional concentration of production and dangerous supply chain choke points. He also presented a series of solutions to de-concentrate and dramatically strengthen our supply chains. Among his recommendations were bright-line rules that are easy to understand and enforce; viewing trade and industrial policy as a subset of competition policy to avoid concentration; and applying common carrier-style rules to dominant online platforms like Google and Twitter. Two years ago, Lynn delivered similar testimony in a House Judiciary Committee hearing on how extreme and growing market concentration chokes supply chains and worsens inflation. Read the full testimony here.
In late April, the Open Markets Institute filed an amicus brief in El Koussa v. Campbell, a case before the Supreme Judicial Court of Massachusetts, arguing that the business models of app-based gig companies like Uber and Lyft are deceptive in nature. The brief supports a group of workers and voters challenging a proposed ballot initiative in that state which they say violates Article 48 of the Massachusetts Constitution, which prohibits distinct policy issues from being lumped together in one ballot initiative that voters must then approve or disapprove as a whole. The Open Markets brief argues the proposed ballot initiatives present many separate questions, not just one, for voters. “The proposed initiatives raise a number of important questions, which is exactly why they do not pass muster as single-issue choices for voters as the challengers have argued,” said Sandeep Vaheesan, Open Markets’ legal director and one of the authors of the brief. The brief was coauthored by Open Markets’ legal counsel Tara Pincock and Joel Fleming of Equity Litigation Group LLP, Read the full brief here. 📝 WHAT WE'VE BEEN UP TO:
🔊 ANTI-MONOPOLY RISING:
We appreciate your readership. Please consider making a contribution to support the continued publication of this newsletter. 📈 VITAL STAT:$58 billion vs $5.9 billionThe amount in 2023 revenues for Google’s search advertising versus its nearest competitor Bing. Google controls 85% of the U.S. search engine market and 90% of the global market, a capture that spurred the Department of Justice’s lawsuit over the tech giant’s search dominance. Closing arguments in the trial were heard last week, with a ruling expected by the end of the year. (Tech Policy Press) 📚 WHAT WE'RE READING:The Wolves of K Street: Wall Street Journal investigative reporter Brody Mullins and Washingtonian magazine senior writer Luke Mullins pull back the curtain on the powerhouse lobbying firms that dominate Washington. By telling the stories of how three lobbying empires rose to prominence, the authors demonstrate the sweeping influence large corporations have on American policymaking. 🔎 TIPS? COMMENTS? SUGGESTIONS? We would love to hear from you—just reply to this e-mail and drop us a line. Give us your feedback, alert us to competition policy news, or let us know your favorite story from this issue. |