Prudence and Precedent Counsel Modest Remedies in Google Search Case

Cite this Article
Asheesh Agarwal, Prudence and Precedent Counsel Modest Remedies in Google Search Case, Truth on the Market (October 07, 2024), https://truthonthemarket.com/2024/10/07/prudence-and-precedent-counsel-modest-remedies-in-google-search-case/

Later this fall, the U.S. District Court for the District of Columbia will hold hearings to determine the proper remedy in the Google search case. Among other options, the court could restrict Google’s ability to sign exclusive distribution contracts, force it to share data with competitors, or even break Google apart into two or more companies. Precedent and policy, however, favor a more modest course that would allow Google to continue to operate as an integrated company, albeit with some limits on its ability to sign exclusive deals. Such a remedy would comport with past cases, minimize any harm to innovation, and allow the market, rather than the government, to shape the future.

In the liability phase, the court largely ruled for the U.S. Justice Department (DOJ) and the states against Google (note that a separate antitrust trial, involving Google’s advertising technology, is still ongoing). The court found that Google has monopoly power in the markets for general search services and text ads, that Google enhanced that power via exclusive agreements that set Google as the default search engine, and that those agreements led to higher ad prices. Google has pledged to appeal the liability ruling, but regardless, the remedy hearings will begin in November.

Precedent suggests a measured result. In the last major monopolization case in the technology sector, U.S. v. Microsoft (2001), the U.S. Court of Appeals for the D.C. Circuit observed that a remedy should have a “sufficient causal connection” with the anticompetitive conduct. In this case, the court acknowledged that short-term exclusive contracts often promote competition, but found that Google’s lengthier arrangements improperly restricted competitors’ ability to vie for placement as the default search engine. As a result of this finding, the most natural remedial order would cabin Google’s ability to pay for default status, such as by limiting the duration of any exclusive contracts or perhaps forbidding Google from paying for default status at all—at least for some time. This type of remedy would give Google’s competitors more opportunities to compete for default status and would seemingly resolve Google’s problematic conduct.

More aggressive types of relief could run afoul of prior cases. For instance, some observers have suggested that the court should order Google to share its data with competitors, both to level the data playing field and, arguably, to remediate the data advantages that Google received from signing exclusive contracts in the first place. Although plausible, such relief runs into tension with longstanding guidance from the U.S. Supreme Court, which the district court recognized, that companies have no general duty to deal with or to assist their competitors.

The most aggressive remedy, divestiture, seems unlikely. Since the Supreme Court ordered Standard Oil’s dissolution more than a century ago, the government has almost never asked for—and courts have almost never ordered—divestiture in a case that centered on alleged anticompetitive conduct, rather than a merger. Forced divestiture is an extraordinary remedy; it is “hard to imagine a greater interference than an order requiring an entity to give up part of its operations.” In Microsoft, the appeals court reversed the lower court’s divestiture order, and in the early 1980s, AT&T broke apart into multiple companies via a consent order. As the Microsoft court explained, absent “a significant causal connection between the conduct and creation or maintenance of the market power … the antitrust defendant’s unlawful behavior should be remedied by an injunction against continuation of that conduct.”

In this case, the court found Google’s exclusive contracts problematic, not its integration. And even then, Google’s contracts likely played only a small part in its market leadership; the court found that Google had built the best search engine and invested earlier than its competitors in mobile search. As a remedy, divestiture would appear decidedly disproportionate.

Moreover, from a policy standpoint, a measured remedy is more likely to help consumers. In general, consumers benefit from a range of options, including startups, midsize firms, and larger, integrated companies. Smaller companies, for instance, often stress privacy, local connectivity, or specialized search capabilities to consumers who value these features. As a brand name, Google touts its reliability and security. At a White House meeting on cybersecurity, for instance, Google committed to invest $10 billion to secure software supply chains. Plus, like other large companies, Google combines complementary assets in ways that improve efficiency and productivity. Call it a blessing of bigness.

Large companies also help to promote innovation. With a reservoir of capital and technical expertise, established companies can afford to take risks and to provide startups with the necessary resources to innovate and grow. As one example, these companies are spending tens of billions of dollars on artificial intelligence (AI), quantum computing, and other advanced technologies, with uncertain payoffs. Indeed, in recent months, European policymakers have begun to advocate that the continent move closer to America’s light-touch antitrust regime to promote innovation. Long a bastion of aggressive antitrust enforcement, Europe now wants more big technology companies, rather than fewer.

Hovering over the entire technology sector floats the specter of China and the role that U.S. companies play in preserving America’s global technological leadership. China has announced plans to become the world’s dominant technological power and has invested $1.4 trillion to achieve global leadership on a slew of technologies. Through investment, subsidies, and outright intellectual-property theft, Chinese companies are challenging and by some measures even surpassing American companies in technical capabilities.

Of course, the United States must enforce the antitrust laws in an evenhanded and measured manner against all companies, including our largest technology companies. In so doing, however, we should consider whether we would serve our nation’s interests by kneecapping our most successful and innovative companies in ways that appear uneven, unnecessary, and virtually unprecedented. As a Supreme Court justice once observed, the Constitution is not a suicide pact. Neither is the Sherman Act.

Finally, a measured remedy would allow market dynamics, rather than the government, to shape the future for consumers. Competition and innovation are already changing the way that consumers search for information online. For example, OpenAI has launched a new search engine, “SearchGPT,” an eventual complement to its wildly popular ChatGPT service, while Perplexity has developed an AI search engine designed to share revenue with publishers. Over the next few years, or even months, this natural competitive process should improve the search experience for consumers and provide them with more options.

On the other hand, a divestiture order would place the government in the role of dictating market structures. The court would determine whether various Google subcomponents—such as its Chrome browser and Android operating system—could and should operate as independent businesses, whether they should be sold to other companies, and whether those subcomponents would face limits on how they conduct business with Google. For instance, could a newly independent Chrome choose Google as its default search engine? As compared to market dynamism and natural evolution, the court system seems poorly suited to restructure a vast swath of the U.S. economy.

The court’s remedial order will have historic consequences for consumers, global markets, and competition policy writ large. Precedent, policy, and principles of proportionality all favor a measured remedy that relies on markets to shape the future of the technology sector.