AAI Congratulates DOJ on Bringing Major Section 2 Case: Awaits Further Developments from the States

Yesterday, the Trump Administration’s Department of Justice (DOJ) delivered an October antitrust surprise: A complaint filed in District of Columbia federal court alleging that Google has violated Section 2 of the Sherman Act.

“The American Antitrust Institute applauds the DOJ for enforcing U.S. monopolization law,” said AAI President Diana Moss. “We especially credit the hard work of the Antitrust Division staff for making the case that Google has anticompetitively maintained and enhanced monopoly power in three U.S. markets and caused harm to competition and consumers,” Moss added.

Eleven southern and midwestern states joined the DOJ’s complaint. However, a bipartisan coalition of seven other states announced that upon completion of a separate, pending investigation, they will consider bringing a separate action and moving to consolidate the cases and litigate them cooperatively, much as in the Microsoft case.

Earlier this year, AAI expressed skepticism that the Trump Administration would ever bring a meaningful Section 2 case given its track record and previous filings, which AAI chronicled in its April 2020 report, The State of Antitrust Enforcement and Competition Policy in the U.S. Indeed, until yesterday, this DOJ’s only court appearances in Section 2 cases were to actively fight against enforcement, most notably in the Qualcomm case when it worked to undermine its sister agency.

“AAI believes this administration has done Section 2 a grave disservice on several occasions in the past, but today it deserves credit for bringing an historic case against a dominant firm in a major sector of the U.S. economy,” said AAI Vice President of Legal Advocacy Randy Stutz.

The principal contention in the government’s complaint is that Google pays other firms—including device manufacturers, wireless carriers, and web browsers—to protect itself from search competition that might threaten Google’s search engine.

Like the European Commission’s 2016 case against Google, which culminated in a €4.34 billion fine, the DOJ complaint also challenges Google’s pre-installation and anti-forking agreements with Android handset manufacturers. Those agreements allegedly tie Google’s most essential apps to a suite of other Google apps that are strategically placed on the Android home screen and prevent handset manufacturers from selling rival phones running alternative Android-based operating systems.

The DOJ complaint alleges that Google’s exclusionary mobile contracting practices, coupled with its owned-and-operated products that employ Google’s proprietary search engine, close off any access points through which a rival search engine might offer an attractive competing product to consumers. Such access points include not only the iPhone, Android phones, rival open-source Android operating systems, and browsers, but also voice-assisted products, “Internet of Things” products, and future innovative offerings that could one day connect rival search engines to consumers.

According to the DOJ complaint, Google’s collective practices result in a number of anti-competitive effects. These include: (1) substantial foreclosure of competition for a large majority of U.S. search queries, (2) exclusion of both established and nascent search rivals, (3) higher entry barriers at emerging search access points, (4) diminished innovation and (5) diminished product quality. The complaint alleges that these effects harm consumers, rivals, advertisers, and app developers.

“The DOJ complaint is notable because it highlights the potential non-price effects of anticompetitive conduct, such as effects on quality and innovation, particularly in the digital technology sector,” noted AAI’s Moss.

The case also highlights a number of important implications and items on the antitrust “watch list.” For example, with Europe’s head start on enforcement against Google, the international antitrust community will be watching to see how the U.S. and European cases handle overlapping challenges and issues.

Moreover, with the prospect of multi-lateral coordination between state and federal enforcers in the offing, it will be incumbent on state and federal enforcers to work together effectively, without divergences and distractions reminiscent of the Sprint/T-Mobile merger litigation.

Finally, it should not go unnoticed that, while the complaint does not allege violations of Section 1 of the Sherman Act, it highlights myriad types of agreements involving Google and other market participants that facilitated and reinforced market dominance and the exercise of market power. “The DOJ and the states should be looking closely at those agreements as well,” noted AAI’s Moss.