The Scene
The US Department of Justice is in court this week, making the case for the second time this year that Google’s parent company Alphabet is operating an illegal monopoly. Fresh off its win against the company’s search practices last month, the Justice Department is now taking aim at its dominance over online advertising.
Unlike merger challenges or collusion rings, cases that paint a single company as monopolistic are tougher to win, though they’re the ones that end up on antitrust’s Mount Rushmore — think Standard Oil, AT&T, Microsoft — and can result in seismic reorderings of entire industries.
Semafor caught up with two former government antitrust cops who disagree about the strength of the government’s case. Tim Wu, a former staffer at the Federal Trade Commission and a member of Joe Biden’s National Economic Council, and Alden Abbott, the FTC’s general counsel under Donald Trump, break down key pieces of Google’s likely defense.
Know More
1. Google’s services are popular because they’re good.
Google made a similar argument in the case it recently lost over its search practices, but the government pointed to its deal with Apple, which Google paid $20 billion per year to be the iPhone’s default search engine. “If people like Google better, what’s with these exclusionary practices?” Wu said.
2. Online advertising is competitive.
Google points to competition from tech rivals like Microsoft, media and retail giants like Disney and Walmart, and ad-tech startups, and says that publishers using its auction system keep a higher share of revenue than the industry average. “The cost of advertising online has come down and volume has expanded,” Abbott said. “That’s not really the signature of a monopolist.”
But “Google is still arguing it’s this fresh-faced young company and ‘competition is just a click away,’” Wu said, repeating the company line that helped convince regulators in 2013 to close an antitrust investigation into its search practices. “Nobody really believes that anymore.” Practices locking customers into Google’s ecosystem have hardened in the decade since, he said, and “no one thinks it’s easy to just ignore Google and choose a competitor.”
3. The government is stuck in the past.
Google says the market it’s accused of illegally dominating — “open web display” advertising — is a relic of a pre-smartphone, pre-streaming video world and doesn’t reflect how ad buyers spend their budgets. “It does seem to be a definition created by the government to prosecute this case,” Abbott said. Google tried that argument in its search case earlier this year, arguing that Amazon and TikTok were emerging destinations for users to find answers to their questions, and it didn’t work.
What to watch for: These arguments are technical (“WTF is ‘header bidding?’” asks the industry’s leading trade, Digiday) and hanging over the trial are political views about corporate power and mistrust of Silicon Valley. “Most Americans think the most powerful companies need oversight and attention, particularly Big Tech,” Wu said. Government cases are piling up against Apple, Meta, and Amazon, too.
Google’s courtroom strategy appears to reflect that: It fought successfully (and creatively) to have the case heard by a judge instead of a jury, an acknowledgement of the public’s mistrust of big tech companies. Verdicts handed down by judges are also easier to appeal because they lay out their legal reasoning.