CEO of Alphabet and Google Sundar Pichai in Warsaw, Poland on March 29, 2022.
Mateusz Wlodarczyk | Nurphoto | Getty Images
The Department of Justice’s newest problem to Google’s tech empire is an bold swing on the firm with the potential to rearrange the digital promoting market. But alongside the potential of nice reward comes important threat in looking for to push the boundaries of antitrust regulation.
“DOJ is going big or going home here,” mentioned Daniel Francis, who teaches antitrust at NYU School of Law and beforehand labored as deputy director of the Federal Trade Commission’s Bureau of Competition, the place he labored on the company’s monopoly case in opposition to Facebook.
The DOJ’s antitrust chief Jonathan Kanter has indicated he is snug with taking dangers, typically saying in public remarks that it is essential to deliver circumstances that search to problem present conventions in antitrust regulation. He mentioned he prefers extra everlasting treatments like breakups in comparison with guarantees to vary habits. That sentiment comes by way of within the DOJ’s request in its newest lawsuit for the courtroom to power Google to spin off components of its advert enterprise.
Antitrust specialists say the Justice Department paints a compelling story in regards to the methods Google allegedly used acquisitions and exclusionary methods to fend off rivals and keep monopoly energy within the digital promoting house. It’s one which, if the federal government will get its manner, would break aside a enterprise that is generated greater than $50 billion in income for Google within the final quarter, doubtlessly opening up a complete market through which Google is at the moment one of the vital essential gamers.
But, they warn, the federal government will face important challenges in proving its case in a courtroom system that progressive antitrust enforcers and plenty of lawmakers consider has taken on a myopic view of the scope of antitrust regulation, particularly in terms of digital markets.
“If they prove the violations they allege, they’re going to get a remedy that’s going to shake up the market,” mentioned Doug Melamed, a scholar-in-residence at Stanford Law School who served on the Antitrust Division, together with as performing assistant legal professional basic, from 1996-2001 in the course of the landmark case in opposition to Microsoft. “But it’s not obvious they’re going to win this case.”
Challenges and strengths
Experts interviewed for this text mentioned the DOJ will face the problem of charting comparatively underexplored areas of antitrust regulation in proving to the courtroom that Google’s conduct violated the regulation and harmed competitors with out benefitting customers. Though that is a tall order, it may include an enormous upside if the company succeeds, probably increasing the scope of antitrust regulation for digital monopoly circumstances to come back.
“All antitrust cases are an uphill battle for plaintiffs, thanks to 40 years of case law,” mentioned Rebecca Haw Allensworth, an antitrust professor at Vanderbilt Law School. “This one’s no exception.”
But, Allensworth added, the federal government’s challenges could also be completely different than these in lots of different antitrust circumstances.
“Usually the difficulty, especially in cases involving platforms, is market definition,” she mentioned. In this case, the federal government argued the related market is writer advert servers, advert exchanges, and advertiser advert networks — the three sides of the promoting stack Google has its hand in, which the DOJ mentioned it is leveraged to field out rivals. “And here, I think that that is relatively straightforward for the DOJ.”
“One way to look at the latest complaint is that it is the newest and most complete draft of a critique that antitrust agencies in the U.S. and abroad have been building against Google for over a decade,” William Kovacic, who served on the Federal Trade Commission from 2006 to 2011 and is now a professor at George Washington Law, mentioned in an e mail.
Compared to the DOJ’s earlier lawsuit, which argued Google maintained its monopoly over search services through exclusionary contracts with phone manufacturers, this one advances more nontraditional theories of harm, according to Francis, the NYU Law professor and former FTC official. That also makes it more likely that Google will move to dismiss the case to at least narrow the claims it may have to fight later on — a move it did not take in the earlier suit, he added.
“This case breaks much more new ground and it articulates theories, or it seems to articulate theories, that are right out on the border of what existing antitrust prohibits,” Francis said. “And we’re going to find out, when all is said and done, where the boundaries of digital monopolization really lie.”
High risk, high reward?
CEO of Alphabet and Google Sundar Pichai in Warsaw, Poland on March 29, 2022.
Mateusz Wlodarczyk | Nurphoto | Getty Images
DOJ took a gamble with this case. But if it wins, the rewards could match the risk.
“In terms of the potential impact of the remedy, this could be a bigger case than Microsoft,” said Melamed.
Still, Francis cautioned, a court could order a less disruptive remedy, like paying damages if it finds the government was harmed as an advertising purchaser, or simply requiring Google to stop the allegedly illegal conduct, even if it rules in the DOJ’s favor.
Like all antitrust cases, this one is unlikely to be concluded anytime soon. Still, a key decision by the Justice Department could make it speedier than otherwise expected. The agency filed the case in the Eastern District of Virginia, which has gained a reputation as the “rocket docket” for its relatively efficient pace in moving cases along.
“What that signals to me is that, given the timeframe for antitrust litigation is notoriously slow, DOJ is doing everything that they can in their choice of venue to ensure that this litigation moves forward before technological and commercial changes make it obsolete,” Francis said.
He added that the judge who has been assigned the trial, Clinton appointee Leonie Brinkema, is regarded as smart and fair and has handled antitrust cases before, including one Francis litigated years ago.
“I could imagine that both sides will feel pretty good about having drawn Judge Brinkema as a fair, efficient and sophisticated judge who will move the case along in an expeditious way,” Francis said.
Still, there are hardly any judges who have experience with a case like this one, simply because there haven’t been that many digital monopolization cases decided in court.
“So any judge who would be hearing this case is going to be confronting frontier issues of antitrust theory and principle,” Francis said.
Immediate impact
Outside of the courts, the case could have a more immediate impact in other ways.
“From the point of view of strategy, the case adds a major complication to Google’s defense by increasing the multiplicity and seriousness of public agency antitrust enforcement challenges,” said Kovacic, the former FTC commissioner. “The swarming of enforcement at home and abroad is forcing the company to defend itself in multiple fora in the US and in jurisdictions such as the EU and India.”
Regardless of outcomes, Kovacic said the sheer volume of lawsuits and regulation can create a distraction for top management and will likely lead Google to more carefully consider its actions.
“That can be a serious drag on company performance,” Kovacic wrote.
The suit could also lend credence to lawmakers’ efforts to legislate around digital ad markets. One proposal, the Competition and Transparency in Digital Advertising Act, would prohibit large companies like Google from owning more than one part of the digital advertising system, so it couldn’t own tools on both the buy and sell side as it currently does.
Importantly, the bill is sponsored by Sen. Mike Lee, R-Utah, the ranking member of the Senate Judiciary subcommittee on antitrust. Lee has remained skeptical of some other digital market antitrust reforms, but his leadership on this bill suggests there may be a broader group of Republicans willing to support this kind of measure.
“An antitrust lawsuit is good, but will take a long time and apply to only one company,” Lee tweeted following the DOJ’s announcement, saying he would quickly reintroduce the measure. “We need to make sure competition works for everyone, and soon.”
Rep. Ken Buck, R-Colo., who has backed the House model of the invoice, referred to as the digital advert laws “The most important bill we can move forward” in a current interview with The Washington Post.
“This is clearly the blockbuster case so far from the DOJ antitrust division,” Francis mentioned. “And I think it represents a flagship effort to establish new law on the borders of monopolization doctrine. And at the end of it — win, lose or draw — it’s really going to contribute to our understanding of what the Sherman Act actually prohibits in tech markets.”
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