Now that Google has been deemed an illegal monopolist, DOJ, judge have thorny challenge in crafting remedies

8 August 2024
By Khushita Vasant

Google is an illegal monopolist, a US judge has found, but that ruling only brings the case partway to a conclusion.

The government must now propose suitable remedies that a court can impose to dismantle the tech giant's monopoly — a task other global regulators have attempted with mixed results, but one that has historically been accomplished with industrial giants in the US.

The euphoric reactions from rivals to the watershed US ruling Monday have given way to serious discussion about the pending remedies phase of the trial, which has yet to begin.

Competition enforcers from the EU and other jurisdictions — who took swings at the tech giant before the US and have tried various remedies — still haven’t gotten the formula right.  What remains is frustration from third parties and rivals, with some now wiped out of the market.

Antitrust enforcers at the US Department of Justice, however, will have the benefit of learning from mistakes made by EU enforcers in probes involving Google shopping services and its Android operating system. Both investigations uncovered conduct and facts that closely mirrored allegations in the DOJ and US states’ landmark monopoly lawsuit. Remedies were implemented in both cases after Google was found abusing its dominant position, but third parties and rivals didn’t find them to be completely effective.

Injunction against exclusivity deals

It's almost inevitable that the judge will issue an injunction against Google, banning it from entering any kind of exclusivity agreements to make its search service the default setting on phones and browsers. That would include banning pre-installation deals of Google products like Chrome on mobile phones and prominent placement of the Google search widget on Android devices.

This makes sense. As Mehta noted in his order, “Google’s near-complete control of the most efficient search distribution channels is a major barrier to entry.”

Banning exclusivity search-default contracts also means Apple will have to say goodbye to the billions of dollars it was receiving to make Google Search the default engine on the Safari browser.

In 2021 alone, Google shelled out $26.34 billion to business partners to snare the default search-engine status on browsers and mobile phones. This was a nearly three-fold jump in the amount it paid in 2014, according to evidence unveiled at the trial. Apple is said to have received a major chunk of this money.

Choice screens; sharing of APIs

Third parties and rivals hurt by Google’s conduct also want fair access to Google’s search and ad Application Programming Interfaces, or APIs.

“Google Search benefits from immense distribution and scale advantages, which no competitor could have access to in a reasonable time frame, so market entrants should have access to it and the ability to make changes for privacy, ranking, etc.,” said Kamyl Bazbaz, senior vice president for public affairs at privacy-centered search engine DuckDuckGo.

Users should be offered “choice screens” for browsers and search engines on their devices in the US, similar to a remedy Google was forced to adopt in the EU. Choice screens would force Google to let users decide whether they want Google Search and Chrome to be their go-to tools or a rival.

Users overwhelmingly use Google through preloaded search access points, thanks to default bias, or the “power of defaults,” Mehta wrote in his order.

Internet users often don’t know that they can switch the default search engines and browsers that are pre-loaded on a device, and what benefits they can get from switching.

However, the implementation of choice screens in the EU has been marred by criticisms, including complaints by at least one rival that the remedy was rigged in favor of big companies with intentionally ad-heavy search results. 

In 2021, three years after it was sanctioned and first implemented choice screens, Google continued to tweak the remedy. Earlier this year — and six years after its was sanctioned — Google continues to change choice screens as part of its compliance obligations under the EU’s Digital Markets Act.

Mehta could order Google to show choice screens to users periodically, unlike in the EU where they are only shown once.

Rivals also want a prohibition on dark patterns, which hasn’t been enforced in the EU.  This means Google would be banned from placing popups that ask the user to switch back.

During the trial, the government showed it took a user 10 steps to switch to a default search engine and browser.

During the remedy phase, rivals can be expected to urge Mehta to impose easy ways to change the default when a user downloads a competing search app. This, again, is a remedy not yet enforced in the EU.

Mere behavioral remedies won't topple Google's monopoly

Aside from the “power of defaults” that gave Google an unfair advantage over rivals, the tech giant also had a disproportionate “scale” advantage.

Google understood early on that the information from user queries and click activity could be used to deliver superior results. Greater query volume means more user data, or “scale.” At every stage of the search process, user data is a critical input that directly improves quality, Mehta found.

Banning Google’s exclusivity deals with Apple, Samsung, Verizon and others will only stop the additional and improper maintenance of a monopoly. It's not likely to restore competition.

Google has such scale and is so powerful in general search and general search text ads that even without those illegal contracts, its monopoly would persist for quite a while. After all, it won the “scale” unfairly, so simple relief won’t be effective.

Usually when crafting remedies, judges want to do no harm and so they narrowly tailor the relief. But here, Mehta is dealing with a major monopoly, and a small scalpel may not be enough.

The DOJ and states will push for structural remedies — a possibility that’s been talked about for years now in the EU and it may become a probability.

Standard Oil and the Baby Bells

One idea is to just break up the existing Google into multiple Googles. Immensely profitable products such as YouTube, Chrome and Maps could be spun off into separate companies.

If Mehta ordered that, the new Google spin-offs would get the software, the algorithms and the historical data used for answering search and other related questions, so that every entity starts at the same point. Each company would have its own computing facilities and new, separate management teams would be assigned.

This would be akin to the structural remedy applied in the Standard Oil breakup in 1892, in which the monopoly was broken up into 20 companies across geographies. There was Standard Oil of Indiana, Standard Oil of Ohio, Standard Oil of California and, once they were separated, the different oil companies immediately started competing against one another.

Similarly, AT&T divested its local exchange service operating companies in 1984 which resulted in seven independent Regional Bell Operating Companies, which were known as the Baby Bells.

Each spinoff would have some advantage in its own sphere. While each would have search and other capabilities, they'd have some advantage that sets them apart from the other products to become a unique and important business.

Take Chrome for instance: queries on user-downloaded Chrome make up 20 percent of searches conducted in the US, Mehta said in his order. It is a “reality of control” that Google is the sole default on Chrome.

Though the Google search default on its Chrome browser is not alleged to be exclusionary conduct, “it is a market reality that significantly narrows the available channels of distribution and thus disincentivizes the emergence of new competition,” he said.

Google’s anticipated arguments

Of course, the search giant will argue that a breakup harms consumers rather than benefits them.

When it was being split, Bell Systems had warned that any foreign device attached to its telephone network would lead to harm. Judge Harold Greene, who presided over the divestiture, worried on the day the breakup was effective that phones wouldn’t work, but the service didn’t degrade. As such, it is important to anticipate what could go wrong.

Google could also want to take matters into its own hands — perhaps egged on by parent company Alphabet’s wary board of directors — and try everything in its power to avoid a tragic split.

The California-headquartered company could propose a consent decree, which judge Mehta would need to sign off on. The DOJ and states are highly likely to reject any such proposal.

Mehta may invite public comment

Mehta has asked parties to confer and submit a status report in early September proposing a schedule for the remedies trial. Mehta had bifurcated the trial into liability and remedy phases. Parties will appear in court for a status conference on Sept. 6.

Before a remedy trial even begins, the judge is likely to invite comment from third parties and competitors who were adversely affected by Google’s conduct. But he’s first going to want to see a remedy proposal from the DOJ.

That could lead to a hearing before the actual trial begins. He may even invite testimony from witnesses about the feasibility and the likely effectiveness of the proposed remedies. This includes written submissions and some oral argument from executives at Microsoft and DuckDuckGo to name a couple.

During the Bell Systems break up, Judge Greene, too, invited dialogue from the industry.

If a break-up is really the way Mehta decides to go, he will carefully outline how the divestiture will take place, the companies to be spun off, the duties of the broken companies to one another and to rivals, where manpower will be redistributed, and other issues.

Much like in the Bell System case, the reorganization plan will be detailed, and it will require input from Google.

Likely appeal scenarios

While Google negotiates a schedule with the DOJ for early September, it is also strategizing its appeal.

It is highly likely that Google will go through with the remedy phase before it approaches an appeals court to undo Mehta’s order. That’s because Mehta first needs to enter a final judgment, and that will come only after the remedy trial is over.

The tech giant could file an interlocutory appeal, but the mechanisms that allow such an appeal in a US federal court are generally limited. Google would have to start by asking Mehta to certify an appeal, after which the Court of Appeals for the District of Columbia Circuit would take it up for consideration. But there’s precedent in the DC Circuit for accepting such an appeal when that kind of certification isn’t available.

Google may not be allowed to appeal before the remedy phase is over. The most interesting parts of an appeal will stem from the remedy proceedings, and in any event, it may make more sense for Google to wait some months and take both the liability and remedy portions of the case to an appeals court.

There's also a possibility of Google directly appealing to the US Supreme Court. Under US antitrust laws, a party is allowed to move straight from the trial court to the Supreme Court, but high court justices can decide not to take up the case and can kick it back to the lower court.

While the DOJ and states have the kind of historic ruling they wanted, the real, tricky work of designing a remedy begins now. They can't afford to get it wrong.

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