Google is a very strange monopolist

The Justice Department sued Google nearly four years ago for maintaining an illegal search engine monopoly, allegedly by paying web browsers and device manufacturers such as Apple to be featured as their default search engine. Judge Amit Mehta agreed, but with some paradoxical findings.

As a preliminary problem, the judge narrowly defined the market in which Google allegedly boasts a monopoly as “general search text advertising." This excludes competing social media platforms, online retailers and “specialized vertical providers" such as Yelp that backed DOJ’s lawsuit.

The judge says 90% of search queries are run on Google, and its only major general search competitor is Microsoft (now valued at $3 trillion). However, the judge concedes that Microsoft was slow in adapting its search engine for mobile devices, causing it to lose ground.

“Google has not achieved market dominance by happenstance. It has hired thousands of highly skilled engineers, innovated consistently, and made shrewd business decisions," Judge Mehta writes. “The result is the industry’s highest quality search engine, which has earned Google the trust of hundreds of millions of daily users."

So what’s the antitrust problem? The judge says Google’s advertising revenue-sharing payments to Apple, Mozilla and others for default placement have made it harder for potential startups and Microsoft to compete.

Yet users can switch to other search engines if they want. And Judge Mehta notes that Apple and Mozilla have “promotional deals" with other search engines. Microsoft pitched Apple “on making Bing the default multiple times." Startup Duck Duck Go also “made a bid to be the default for private browsing mode searches on Safari," but neither it nor Microsoft “succeeded in part due to their inferior quality."

This makes for a very strange monopolist—one that does better by consumers because its search engine is superior. “Google’s partners value its quality, and they continue to select Google as the default because its search engine provides the best bet for monetizing queries," the judge explains, adding that Google “has continued to innovate in search."

The judge nonetheless holds this against Google by saying it has leveraged its search dominance to collect more data, which it uses to improve search quality and ad targeting. This “network effect" has entrenched its monopoly, the judge says.

No doubt this isn’t good for Google’s search competitors. But antitrust law isn’t intended to punish companies that win in the marketplace. The law is supposed to protect consumers from a monopolist that uses its power to raise prices or restrict choices.

There’s no denying that Google has market power, which it doesn’t always use for the public good, and its algorithms have discriminated against conservatives. But unclear is how its alleged monopoly has harmed consumers—which has been the standard for violating antitrust laws for 40 years. The DOJ lawsuit and Judge Mehta’s ruling strike us as backing King Kong in a fight against Godzilla.

Monday’s ruling doesn’t stipulate a remedy, which the judge will consider after a hearing in September. Remedies could include barring Google from making payments to Apple and others, spinning off its Chrome browser and forcing Google to share its data with competitors. How any of this would help search users, as opposed to Google’s competitors, isn’t apparent.

Google says it will appeal, and by the time the case is resolved, the evolution of technology and the search market may have made the point moot. OpenAI recently unveiled a SearchGPT prototype that aims to compete with Google, which was late to AI and fumbled the rollout of its Gemini tool.

Meanwhile, if you’re looking for more antitrust paradoxes, the Federal Trade Commission is now investigating OpenAI and its largest investor—which happens to be Microsoft. Will the real monopolist please stand up, or is every large tech company a monopolist now?