HUELSKAMP: The Google Bust Up Begins

Google (Credit: Shutterstock/pixinoo)

Tim Huelskamp Contributor
Font Size:

Don’t look now, but Google is in trouble. The end of 2020 has brought with it a flurry of lawsuits targeting the tech giant’s allegedly unlawful business practices.

In late October, the Justice Department pursued antitrust charges for  “[using] anticompetitive tactics to maintain and extend its monopolies in the markets for general search services, search advertising, and general search text advertising,” according toThe Wall Street Journal.

This month, two separate coalitions of attorneys general from dozens of states have also filed suits for similar reasons. The question now is if prosecutors can win their antitrust cases.

There are two parts to winning a modern antitrust case: proving that there is a monopoly and proving that the monopoly in question unfairly harms the market and came about through predatory means.

No one can deny that Google is a monopoly. It has an 87-percent share over the mobile operating market87-percent of internet search engine traffic, and takes in nearly a third of all digital advertising spending. So, the only question here is the latter, not the former.

Anyone who looks at all the facts and data objectively should agree that Google’s weaponization of its market power against consumers and competitors is as equally clear-cut as the existence of its monopoly.

Google May Have Stolen Coding to Bolster Its Mobile, Search, and Advertising Monopoly  

It’s only fitting to start with where much of this story begins: Google’s building of Android, its mobile operating system.

After the turn of the century, mobile searches and advertisements quickly surpassed their desktop counterparts’ value. Google didn’t have a mobile operating system at the time, and it needed to act swiftly to get its feet in the market.

The company bought Android Inc. for $50 million. Then, after initially asking for licensing terms, it reportedly took 11,500 lines of Oracle’s coding to complete Android rather than paying for its authorized use.

Google claims that this copy didn’t violate copyright law. Both the Obama and Trump Department of Justice have expressed disagreement. So too has former Senate Judiciary Chairman Orrin Hatch. In an op-ed for The Washington Times, he wrote, “I was serving in the Senate when Congress…[passed] the Computer Software Copyright Act of 1980. At the time, Congress did not carve out any subset of software from copyright protection.”

It certainly appears that Google stole this coding just to bolster its mobile, search and advertising monopolies — and within the next few months, the Supreme Court may come to a definitive answer on this issue vis-à-vis Google v. Oracle, the ongoing legal case surrounding this issue. From an antitrust perspective, it certainly won’t bode well for Google if the nation’s highest court suggests that its current monopoly all hinges upon a competitor’s IP.

Google Has Used Its Market Share to Raise Prices  

Given that Google now controls 87% of the smartphone marketplace, thanks to this coding, the Google Play Store is the only real option for developers hoping to get their products in front of customers using Android phones. If someone wants their app to reach the 130 million Android users in the U.S., they have no choice but to use Google’s Play Store and its supporting services. Google knows this and has appeared to leverage its position to raise costs on consumers and developers.

The company charges an insane 30% commission on all its app store transactions. Meanwhile, transactions on platforms like PayPal only cost users 2.9%.

While excessive prices from monopolies aren’t themselves illegal, the Department of Justice has made clear that when those conditions arise because of unlawful activity, that becomes grounds for an antitrust suit. Quoting the circuit court decision from U.S. v. Aluminum Co. of America, the Department wrote:

“[T]here can be no unfairness in preventing a monopolist that has established its dominant position by unlawful conduct from exercising that power in later years to extract an excessive price. After all, it is only a pristine ‘origin,’…that may save a monopoly so long as it continues to refrain from anticompetitive activity from the condemnation of § 2 [of the Sherman Act]. The taint of an impure origin does not dissipate after four years if a monopolist continues to extract excessive prices because of it.”

Thus, if Google gained its monopolistic position by illegal means (which the Google v. Oracle case almost certainly demonstrates), it’s also unlawful to implement the market powers that only a monopoly may wield (like price gouging).

Google Pays Offs Competitors to Get Ahead in Search and Advertising

With Android — in many respects, Google’s 21st-century gateway to digital monopolization — complete, Google next had to find ways to get customers to pick their products over the rest of the marketplace. It appeared to decide on using some of the money and power it amassed through its past predatory business practices to buy out its rivals.

Google has avoided search engine competition by buying out competitors, like Apple, to ensure that their monopoly stays intact. Despite being a competitor, Google remains the default search engine on every iPhone in the country. Apple makes billions a year with this deal and Google avoids losing out on lucrative business.

Google’s digital advertising monopoly follows a similar storyline. As highlighted by a recent court filing by a coalition of state attorneys general, Google bought out the ad marketplace of its closest competitor, Facebook, to ensure that much of their business continued to flow to Google and its parent company.

This is practically the definition of collusion, and it is very much outlawed by the Sherman Act. The DOJ has explicitly stated so:

“Proving such a crime does not require us to show that the conspirators entered into a formal written or express agreement. Price fixing, bid rigging, and other collusive agreements can be established either by direct evidence, such as the testimony of a participant, or by circumstantial evidence, such as suspicious bid patterns, travel and expense reports, telephone records, and business diary entries.”

In this case, the government does appear to have evidence of formal agreements, making the case even stronger.

Consensus Against Google Is Growing 

If you’re keeping score at home, we have a company that operates a monopoly, which may have stolen the coding needed to create that monopoly, and which wields its growing power to increase prices, stifle competitors, and gauge consumers.

The antitrust case against the company has never been more apparent. Just look at the global trouble that Google now finds itself abroad.

The European Union filed similar antitrust charges, which resulted in a $5 billion fine back in 2018. EU Commissioner Margrethe Vestager stated that “Google [had] used Android as a vehicle to cement the dominance of its search engine [and that] these practices have denied rivals the chance to innovate and compete on the merits.”

While America’s courts don’t always see things the same way that Europe’s do, these case studies indicate that Google’s behavior has crossed a line.

Here’s hoping that judges and juries here in the U.S. take similar umbrage with the company’s practices. Competition, innovation and freedom in the digital square are counting on it.

Tim Huelskamp, Ph.D., was a member of Congress for Kansas’s 1st congressional district from 2011–17. He also served in the Kansas Senate from 1997–2011, where he served as Chairman of the Joint Committee on Information Technology.