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The Department of Justice and 11 U.S. states filed an antitrust lawsuit on Tuesday against Google, a unit of Alphabet (GOOG, GOOGL), accusing it of engaging in anticompetitive behavior in its search and search advertising businesses.
The long-anticipated suit claims that Google has used anticompetitive tactics to maintain its dominance in general search, search advertising, and general search advertising — what the lawsuit calls “the cornerstones of its empire.”
The suit targets deals that Google has with device makers like Apple (AAPL), browser developers, and wireless carriers like Yahoo Finance parent Verizon (VZ) to make Google the default search engine. Those agreements effectively shut out competition for search, the suit alleges.
“Two decades ago, Google became the darling of Silicon Valley as a scrappy startup with an innovative way to search the emerging internet,” the lawsuit stated. “That Google is long gone.”
For its part, Google released the following statement: “Today’s lawsuit by the Department of Justice is deeply flawed. People use Google because they choose to — not because they're forced to or because they can't find alternatives. We will have a full statement this morning.”
In addition to the Justice Department, the following states are listed as plaintiffs: Arkansas, Florida, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Montana, South Carolina, and Texas.
New York Attorney General Letitia James also released a statement saying that she and the attorneys general of Colorado, Iowa, Nebraska, North Carolina, Tennessee, and Utah will finalize their own investigation into Google in the coming weeks.
In a statement, the Justice Department laid out how it plans to make its case against Google, alleging that it maintains an illegal monopoly over search and search advertising by:
“Entering into exclusivity agreements that forbid preinstallation of any competing search service.
Entering into tying and other arrangements that force preinstallation of its search applications in prime locations on mobile devices and make them undeletable, regardless of consumer preference.
Entering into long-term agreements with Apple that require Google to be the default – and de facto exclusive – general search engine on Apple’s popular Safari browser and other Apple search tools.
Generally using monopoly profits to buy preferential treatment for its search engine on devices, web browsers, and other search access points, creating a continuous and self-reinforcing cycle of monopolization.”
As a result, the Justice Department alleges, Google is harming both competition and consumers through reduced innovation and competition.
Increasing scrutiny from lawmakers and agencies
Google has faced scrutiny from lawmakers, and federal and state agencies in the U.S., as well as regulators overseas, for some time. In the U.S, the firm has been under investigation by the Justice Department, the Federal Trade Commission, and state attorneys general over concerns that its search engine and digital advertising businesses may operate as illegal monopolies.
In July, Alphabet CEO Sundar Pichai, along with the CEOs of Amazon (AMZN), Apple (AAPL), and Facebook (FB), appeared before a hearing of the House Judiciary Committee’s Subcommittee on Antitrust, Commercial, and Administrative Law to answer to questions probing if it abuses its market power to stifle competition by favoring its own products in search results and by dominating the services that control the online advertising industry.
The Justice Department began investigating Big Tech firms in July 2019 in a move that put the full weight of the federal government’s powers into determining if some of the wealthiest companies in the world were operating as illegal monopolies. In recent months, reports emerged that Attorney General Bill Barr was aiming to file a lawsuit against Google by the end of September.
Google’s digital advertising business has faced scrutiny due to its unrivaled size and volume. The company controls some of the most important links in the online advertising chain, centrally its Google Marketing Platform, formerly DoubleClick, a premier tool for online publishers, helping them create, manage, and track online marketing campaigns.
Acquired in 2007, DoubleClick was cited by Senator Elizabeth Warren (D-MA) as one of the major acquisitions Google should be forced to unwind to improve competition in the advertising space.
Critics of Google’s dominance of the online ad industry point to the fact that their web traffic would take a severe hit if they left the company’s platform as proof that it is too powerful.
Google, and competitor Facebook, have also been lambasted for the impact their massive share of the online advertising market has had on the media industry. With Google competing directly with online publishers for digital ad space, publishers have been forced to significantly cut back newsroom staff, sell themselves off, or close down entirely.
As of June, Google controlled more than 90% of the world’s search traffic market share, according to StatCounter.
Critics, most notably, Yelp, accuse Google of favoring its own products in search results. In 2013, the FTC declined to take action against Google after investigating its search business. A year earlier, Google paid a $22.5 million fine to settle charges that it violated an FTC settlement agreeing not to place “cookies” on and serve targeted ads to users of Apple’s competing browser company Safari.
But that hasn’t stopped scrutiny of the firm.
In July, a Wall Street Journal investigation found Google’s search algorithm favored its own YouTube videos in search results over those from competing video streaming services.
The company has already been fined roughly $10 billion (8.6 billion euros) by the European Commission, the European Union’s antitrust watchdog. Those fines result from three separate violations alleged by the Commission.
Alexis Keenan is a legal reporter for Yahoo Finance and former litigation attorney. Follow Alexis Keenan on Twitter @alexiskweed.
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