What’s Next? Google Found Liable In Search Monopolization Case with Remedies Phase To Come

What Happened?

On Monday, Judge Amit P. Mehta of the United States District Court for the District of Columbia issued a 277-page opinion finding Google liable for monopolizing the general search services and general search text ads markets. Google used exclusive agreements to lock up half the market for search and nearly half the market for general search text ads.[1] The complaint was originally filed by the U.S. Justice Department’s Antitrust Division in 2020, and a nine-week bench trial was held in September 2023 on liability. 

Judge Mehta found that Google had monopoly power in these two relevant markets, and Google’s use of exclusive contracts with major browser developers, major equipment manufacturers of Android devices, and major wireless carriers foreclose 50% of the general search services market by search query volume, have deprived rivals of scale, and have reduced incentives to invest and innovate.[2] The court also found that the exclusive agreements foreclose a substantial share of the market for general search text advertising, allow Google to charge supracompetitive prices for text ads, have allowed Google to degrade its text ad quality, and have capped rivals’ ad revenue.[3]

Notably, the court previously granted the parties’ joint request earlier in the litigation to bifurcate the liability and remedies phases, so the opinion only addresses Google’s liability for monopolization under Section 2 of the Sherman Act. The court has directed the parties to meet and confer and provide a proposed schedule regarding remedies proceedings by September 4, and it is still uncertain exactly what remedies the DOJ will seek.

The court focused its analysis on Google’s use of exclusive contracts with respect to search access points, which require third parties to give Google’s search engine default access to certain search access points such as the search bar integrated into web browsers (e.g., Apple Safari and Mozilla Firefox) and search widgets on Android device home screens. 

Key Takeaways from the Opinion

• The court found persuasive the testimony of a former Google executive, who said the reason why Google pays billions in revenue share agreements when it already has the best search engine is because the payments provide an incredibly strong incentive for the ecosystem to not do anything and effectively make the ecosystem exceptionally resistant to change—their net effect being to basically freeze the ecosystem in place.[4]
• The court relied on the Brown Shoe practical indicia in accepting Plaintiffs’ market definitions for general search services and general search text ads, noting that while Brown Shoe may indeed be “old school” antitrust, the practical indicia still bind the court.[5]
• The court rejected Google’s proposed market definition of query responses, instead finding a market of general search services.[6]
• The court recognized that scale greatly impacts a search engine’s quality and allows a search engine to obtain more user data to improve search, which in turn attracts more users and improves monetization. This attracts more advertisers and higher ad revenue, which enables the search engine to expend more money on acquiring traffic—all effectively resulting in network effects that reinforce the high barriers to entry in the industry.[7]
• The court noted that Google had the ability to raise prices for text ads incrementally over the years and has done so. The profitability of such price increases was due in part to the lack of any meaningful competition in the submarket for text ads, where Microsoft is its only true competitor.[8]

What’s Next?

The remedy phase of this case presents a significant challenge for the court and the parties. The United States v. Microsoft monopolization case from the early 2000s[9] highlighted the difficulty of using a divestiture as a remedy in a Section 2 monopolization case.[10] The court has instructed the parties to submit a proposed schedule for remedies proceedings by September 4.

DOJ Antitrust could attempt to get creative with its requested relief – at a minimum we expect the court will enjoin use of the exclusive contracts, but it could go much further in requiring a range of behavioral relief. 

Some commentators have suggested that the court may require Google to utilize choice screens, increased interoperability, or potentially discontinue self-preferencing of the full range of Google products. The court could also potentially require Google to share its user data with rival search engines Bing and DuckDuckGo to allow them to achieve the same scale and better compete in the marketplace.

Whatever relief the court imposes will need to account for the causal connection between Google’s exclusionary conduct and its position in the general search services and general search text ads markets. The fall of the exclusive agreements alone may have market-wide impacts. Moreover, Google is also subject to several monopolization suits regarding its advertising technology business, one of which is headed to trial this fall in the Eastern District of Virginia.

The Mintz Antitrust Practice continues to monitor major FTC and DOJ Antitrust litigations, including those against technology companies. If you have a question about activity in this space, please contact one of the attorneys listed above or your regular Mintz contact.

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