The Department of Justice filed an antitrust lawsuit against Google (Nasdaq: GOOG) this week for the company's monopoly in search and preventing competitors' products from being distributed. The suit was joined by 11 Republican state Attorney Generals.
Google's stock didn't have a significant move as it was largely expected. In the filing, Deputy AG Jeffrey Rosen said, "Google is the gateway to the internet and a search advertising behemoth. It has maintained its monopoly power through exclusionary practices that are harmful to competition."
Culmination of Investigation
The DOJ lawsuit is the result of an investigation into Google's business practices. And, it's the largest antitrust action since the DOJ went after Microsoft (NASDAQ: MSFT) in the late 90s for its tactics to have Internet Explorer triumph over Netscape.
The DOJ complaint is centered around Google using its monopoly power to control distribution for search and adjacent markets. An example is Google using Chrome and the Android operating system to promote its products over competitors. Android phones come preloaded with Google apps with Google search as the default. So, many are speculating that divestment of Android and Chrome could be a solution to the DOJ action.
Currently, Google essentially has a monopoly in search with 88% of the market, 94% of mobile searches, and 70% of the search ads market. The antitrust filing alleges that the lack of competition is hurting businesses and consumers. Additionally, they believe that Google's actions are stifling innovation in the market as no new search engines are being given opportunities to grow.
Google also makes generous payments to Apple (Nasdaq: AAPL) to be the default search provider on iOS phones. This is cited as another example of Google preventing other search providers from competing. According to the DOJ, 60% of search overall and 80% of mobile search happens due to people using the default Google option for search.
Google's Statement
Google fired back at the DOJ by stating that its large market share was due to people choosing to use its product and that it delivered much better results than the competition. Additionally, they said that it was able to provide lower-priced phones and PCs to the market because those devices were preloaded with Google Search as the default.
Google also added that the DOJ's contention that consumers won't switch default settings is incorrect. As evidence, it cited that plenty of consumers use competing services for reviews, travel bookings, or shopping which they access through Google.
Next Steps
Many states have been probing Google for antitrust violations, and in 2013, the FTC was on the verge of filing a complaint as well. Many state AGs may join the lawsuit in the coming weeks.
Overall, there's been increased concern about the power of digital platforms to shape politics and influence perceptions and outcomes. Typically, Republicans are opposed to antitrust, but they are fearful of too much power concentrated in Silicon Valley where sentiments lean liberal. Democrats are opposed to the concentration of power which impedes competitions and breeds inequality.