Does Google Have Trust Issues?

July 29, 2019

Google is the quintessential search tool of this era, delivering vast amounts of information in just seconds at the press of a button. However, this tech giant is not just as a search engine. Its dominance in other industries, such as e-mail, cloud computing, software, and advertising, to name a few, has led to a governmental investigation to ensure Google is compliant with antitrust regulations.

There’s History

The Federal Trade Commission (hereinafter “FTC”) shares jurisdiction over antitrust cases with the Department of Justice in the United States.  The FTC already has a long history with Google. In 2011, the FTC brought a case against the tech giant for implementing tracking cookies in the Apple Safari browser, resulting in a settlement of 22.5 million dollars. Later, in 2013, Google faced another FTC investigation, which ended anticlimactically with no action. This time around, the FTC is deferring responsibility for the antitrust investigation to the Department of Justice, which is the only one of the two that is capable of obtaining criminal sanctions.

United States’ government agencies are not the only ones keeping an eye on Google. The E.U. has conducted three distinct antitrust investigations into Google’s competitive practices since 2010. In 2010, the European Commission began an investigation after it received several complaints suggesting Google was favoring its own products in search results. Seven years later — to give an idea of how long an investigation may take — Google was found guilty and fined 2.7 billion dollars. In July 2016, the EC issued a Statement of Complaints regarding Google AdSense, which referenced Google’s controlling rules for partners using AdSense, including requiring permission from Google before making changes to how ads through competitors were displayed. Fines related  to this case were in excess of 1.89 billion dollars. In 2015, yet another investigation ensued after a series of complaints, including one by app store “Aptoide”. This complaint asserted that Google was flagging it as harmful and preventing downloads, effectively squeezing out the competition. In 2018, Google was fined 5 billion dollars.

What is Antitrust Law?

Google has faced several investigations over anticompetitive practices, but what is antitrust law and how did it come about?

In 1863, John D. Rockefeller created Standard Oil, which soon became the largest oil refinery business in the world. After close to a decade in business, Rockefeller used the fortune amassed by his company to buy up all of the competition. In 1882, Rockefeller’s colleague, Samuel Dodd, came up with the idea of a trust, meant to help manage all of the entities Standard Oil had acquired. In a trust, stockholders in many different companies transferred their shares to one set of trustees in exchange for a portion of the earnings of the companies. Essentially, several companies come together to become powerful enough to run competitors out of business, discouraging competition and leading to higher prices and less innovation. With Standard Oil paving the way for other trusts to emerge, anticompetitive business practices became a serious concern, leading to the enactment of antitrust law. The first antitrust law passed by Congress was the Sherman Antitrust Act of 1890, which outlawed trusts and gave the Federal Government power to dissolve them. After a long battle, Standard Oil was declared a monopoly and broken up in 1911 (Standard Oil Co. of New Jersey v. United States).

In 1914, the Federal Trade Commission Act established the Federal Trade Commission. The Act outlaws unfair acts, practices, and competition. The commission was granted a series of powers including the ability to create regulations for trade, investigate businesses engaged in commerce, and enact monetary penalties against them when necessary.

Additionally passed in 1914 was the Clayton Act.  The Clayton Act defines unethical business practices and functions to strengthen previous antitrust legislation. The 26 sections of the Act cover price discrimination, price cutting, and predatory pricing, along with monopolies, mergers and acquisitions, and more.

Two Sides

Antitrust laws are meant to “protect the process of competition for the benefit of consumers, making sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up” (The Antitrust Laws). However, there are Constitutional restraints on how far they can go. In fact, the Supreme Court has decided in the past that pure possession of fairly acquired monopoly power is legal.

“The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system. The opportunity to charge monopoly prices—at least for a short period—is what attracts “business acumen” in the first place; it induces risk taking that produces innovation and economic growth. To safeguard the incentive to innovate, the possession of monopoly power will not be found unlawful unless it is accompanied by an element of anticompetitive conduct”

This means that in order for a company to be guilty of violating antitrust law, it must have engaged in anticompetitive activity. Simply holding monopoly power is legal and the acquisition of it is a main motivator for people to start and maintain businesses.

The interesting question is whether Google should face penalties just because it has a large market share in several markets. The government must prove that Google has engaged in  anticompetitive tactics in order to penalize it. It has been suggested that Google monopolizes advertisement placement, prioritizes its own products in search results, and dominates advertisement sales. The answer lies cryptically at the end of a years-long investigation that may have a monumental impact on the way the United States addresses business giants in a tech-centered era. Concurrently, the European Union will be conducting an antitrust investigation into Amazon.

Read more about Constitutional restraints on Antitrust law at Heritage and learn more about Google’s potential charges at The Verge.