OP-ED: Google is getting the antitrust treatment it deserves

Tae Kim
Bloomberg Opinion (TNS)
A sign is posted on the exterior of Google headquarters on January 30, 2014 in Mountain View, California.  (Justin Sullivan/Getty Images/TNS)

The government's quest to rein in Big Tech just took a major step forward. Two weeks after the House antitrust subcommittee issued its landmark report outlining the anticompetitive abuses of the top players, the Department of Justice made its long-awaited move against Google.

The DOJ's antitrust division announced Tuesday that it is suing Google parent Alphabet Inc. over antitrust law violations surrounding its search engine, saying the company has become "the monopoly gatekeeper of the internet." The landmark case alleges Google abused its market-dominant position and stifled competitors, specifically citing its exclusionary distribution agreements with Apple Inc. and other technology companies that made its search engine the default option on mobile devices and browsers.

Google, in a blog post rebuttal, called the suit "deeply flawed," adding consumers choose to use its free search engine because they prefer it. Eleven Republican state attorneys general signed on to the case.

For months now, we've known that the DOJ has been preparing an antitrust case against Google. What we didn't know was how far-reaching it would be. There was speculation that regulators would rush out a half-baked complaint to meet a political deadline. It turns out, the government is pursuing the tech giant full-on by targeting the company's crown-jewel Google search engine. That's good, because the situation demands it.

This initial step is a savvy move. First, the government is focusing on the most pertinent issue with the largest impact — Google's search engine dominance. It's a higher priority than the company's ad-serving technology platform, which, while powerful, accounts for a smaller portion of Alphabet's earnings and wouldn't have been as significant for the technology industry at large. Second, the lawsuit zeroes in on Google's most egregious behavior, including the large cash payments it makes to partners to maintain its search share. This will pay dividends as the focus helps crystalize what's at stake and may sway public opinion and politicians to support further action.

Earlier this summer, I wrote how Google's practice of paying for platform placement was blatantly anticompetitive and should be banned. That view still stands. Bernstein estimates the internet giant pays Apple roughly $8 billion a year to make its search engine the default option for its hardware devices. A number that large for Google, which already has a monopoly-type position in the search market, is indefensible. Prohibiting such agreements that clearly suppress competition would allow smaller companies to have a chance.

The government can do more, though. While specific remedies will come later in the proceedings, other issues ought to be addressed on top of these payment practices. First, Google's use of scraping data off of third-party websites should be restricted. The act of taking other websites' proprietary content without permission to keep users on Google's properties doesn't seem fair. Second, the internet giant's practice of ranking its own services higher on its search results pages even when they are inferior should be scrutinized. The lawsuit, while a good start, is only the opening salvo in a legal battle that will extend well into the next administration, regardless of the winner of next month's presidential election.

Notably, no Democratic state attorneys generals have signed on to this DOJ lawsuit, but that's likely because they want to file a broader complaint later. The DOJ signaled as much on a press call Tuesday, adding that the attorneys' hesitation to join the suit wasn't for lack of support of the arguments. Unlike the large divergence between Republicans and Democrats on social media regulation, the two parties' positions on Google's overreach and the need for antitrust remedies aren't far apart.

Where do things go from here? I expect a growing bipartisan consensus to form against Google, with concrete actions to curb some of the aforementioned practices. Democratic Representative David Cicilline has said he is preparing legislation based on the proposals in the recent House antitrust final report. And some Republicans have already said there are portions of the House report they can support, meaning the DOJ may conceivably get more tools to curb Google's market power — and that of the other Big Tech behemoths such as Facebook Inc., Apple and Inc. — from congressional action next year as well.

This process won't be easy. But the likelihood of the government achieving effective restraints on Google's anticompetitive abuses shouldn't be underestimated.

— Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron's, following an earlier career as an equity analyst.