Through laudable competition on the merits, Google achieved a usage share of nearly 90% in “general search services.” About a decade later, the government alleged that Google had maintained its dominant share through exclusionary practices violating Section 2 of the Sherman Antitrust Act. The case was tried in U.S. District Court in Washington, D.C. last fall, and the parties made post-trial filings this year.
The case focuses on Google’s partnerships with browser developers—especially Apple—and major players in the Android world. These partnerships do not block rival search engines, but they give Google an advantage: Google Chrome and the Google Search app are prominently placed on Android phones, and Google Search is the default search engine not just in Chrome, but also in Safari and Firefox.
U.S. search advertising generates more than $80 billion in annual revenue, all of which is collected by search-engine developers. Browser developers and other participants in the distribution chain partner with search-engine developers to get shares. In exchange for a share of its search-advertising revenue, these partners increase a particular search engine’s usage, especially by making it a default.
The government contends that Google violated the Sherman Act by sharing search-advertising revenue in exchange for default status. The government argues that Google should have shared this revenue without asking for anything in return, or it should not have shared it at all. The government does not explain how the former makes business sense, and the latter cuts browser developers off from their major revenue source.
The government further contends that a search engine’s quality is tied to usage, or “scale,” and that the quality benefits of scale are inexhaustible. The government asserts that “scale is vital for search quality and necessary to compete.” The government further argues that: “By controlling search defaults, Google ensures that it has—and will always have—more scale than any other general search engine. This scale gives Google an impenetrable advantage…”
But if operating at a much smaller scale than Google makes rival search engines uncompetitive, their fate was sealed when Google achieved a dominant share. The government posits no scenario in which any rival search engine could have substantially closed the scale gap.
Nature performed a telling experiment. Only Microsoft’s browser, with Microsoft’s Bing set as the default search engine, has been preloaded on Windows PCs, and yet just 14% of the searches on such devices from 2013 to 2021 were made using Bing. Google Search accounted for 78%. With Bing having the advantages of placement and default status, it was unable to achieve a scale comparable to that of Google Search.
Regulators in Europe performed another experiment by requiring browser users to go through choice screens, and to select default search engines. The aggregate usage share of Google’s rivals remained much lower than in the United States. The government’s economic expert testified that the European experiment indicates that use of choice screens in the U.S. would reduce Google’s share by just 10 share points.
If the government’s scale contentions are fully credited, the conduct that is at the heart of the case did not maintain Google’s dominant share. And any conduct that could not have maintained dominance most likely served a legitimate purpose. One way or another, the elements of the monopolization offence cannot be established under the government’s view of the facts.
Quoting the 1966 Grinnell decision, Microsoft held that the…
…offense of monopolization has two elements: “(1) the possession of monopoly power in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.”
Element (2) in the Grinnell formulation incorporates distinct ends and means concepts. The ends are the “acquisition” and “maintenance” of monopoly power, while the means are “willful” conduct distinct from “a superior product, business acumen, or historic accident.” Element (2) presents the ends and means together, because neither has significance without the other.
The Sherman Act makes it unlawful to “monopolize,” i.e., to acquire or maintain monopoly power through exclusionary conduct. The Sherman Act does not prohibit the acquisition or maintenance of monopoly power through competition on the merits, nor does it prohibit conduct that can be exclusionary when it does not, in fact, create or maintain monopoly power.
The Microsoft decision articulated element (2) in a manner that described the requisite ends and means, as well as the essential causal relationship between them:
A firm violates § 2 [of the Sherman Act] only when it acquires or maintains, or attempts to acquire or maintain, a monopoly by engaging in exclusionary conduct.
The U.S. Circuit Court of Appeals for the D.C. Circuit held that many of Microsoft’s practices were exclusionary. The court then addressed whether the government “established a causal link between Microsoft’s anticompetitive conduct … and the maintenance of monopoly.” Although causation was essential, the court adopted a “rather edentulous test.”
The court held that the exclusionary conduct must be “reasonably capable of contributing significantly to a defendant’s continued monopoly power.” Thus, the government had to prove that the threats to Microsoft’s operating-system monopoly were real, but not that they likely would have succeeded. The government’s burden is similar in Google.
The government’s proposed conclusions of law in Google quote the Grinnell elements. And its post-trial brief asserts that the conduct complained of “allowed Google to maintain its monopoly power in violation of Section 2 of the Sherman Act.” But the government does not contend that rival search engines ever posed a real threat to Google’s monopoly. Indeed, it claims to have proved just the opposite.
When the subject of causation came up at the summary judgment hearing in Google, government counsel asserted, “Microsoft basically says that we don’t have to show causation.” But Microsoft’s edentulous test does have bite in the Google case—both because of what the government has argued and because of what it has failed to argue. Causation should be revisited in the upcoming closing argument.
