UNIDENTIFIED PERSON, BYLINE: This is PLANET MONEY from NPR.
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KENNY MALONE, HOST:
For years now, as the big tech companies turned into really big tech companies and then into really, really big tech companies, there has been this looming question - will the United States government take these companies to court?
JACOB GOLDSTEIN, HOST:
Will the government use antitrust law, the part of the law that covers competition, to try to prevent these newly really, really big companies from shutting out competitors in a way that hurts consumers, in a way that hurts everybody else, in a way that hurts us?
MALONE: And yesterday, the government answered that question.
GOLDSTEIN: The answer was yes.
MALONE: The answer was yes. Yesterday, the United States Department of Justice dug out its copy of the Sherman Antitrust Act of 1890 and filed a lawsuit, possibly the biggest antitrust lawsuit the government has brought in the 21st century. And it is against Google.
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GOLDSTEIN: The United States of America v. Google LLC.
MALONE: It's not U.S. v. Alphabet?
GOLDSTEIN: Nope. I've got the complaint right here. It's Google.
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GOLDSTEIN: Hello, and welcome to PLANET MONEY. I'm Jacob Goldstein.
MALONE: And I'm Kenny Malone. Today on the show, how exactly did Google violate antitrust law, at least according to the government?
GOLDSTEIN: And how will the world change if Google loses the case?
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MALONE: One quick thing before we get into the meat of this case - there is a political subtext here. This is a major antitrust suit two weeks before a presidential election.
GOLDSTEIN: There were reports earlier this year that the attorney general was pushing the Department of Justice to bring the case before the election. And also, the federal government, the DOJ is joined in the case by attorneys general from 11 states. And all of those attorneys general are Republicans.
MALONE: And so far, it seems like Democratic attorneys general agree with the general arguments the government is making in this case against Google. But they reportedly may also want to bring their own even-bigger case.
GOLDSTEIN: So, OK, that is the political subtext. Now, let's get to the text. Let's get to the case itself.
MALONE: And as is the PLANET MONEY custom, when going deep into antitrust, we called up professor Eleanor Fox. In fact, we called her yesterday right after the government had filed this big lawsuit.
GOLDSTEIN: So this is a big day for you?
ELEANOR FOX: Yeah, it's a big day.
MALONE: Eleanor is a law professor at NYU, expert in antitrust law.
GOLDSTEIN: What was, like, the first moment in the complaint when something grabbed you?
FOX: Actually, I think the complaint is very well-written. And I think those introductory paragraphs that summarize the kind of conduct are grabbing.
MALONE: So this is a - that's a positive review of the complaint.
FOX: That's right.
MALONE: But is there a sentence in particular you would point to and say, OK, here's where we should start?
FOX: I mean, if you're doing it methodically, you really have to start on, do they have monopoly power?
GOLDSTEIN: In order to win this case, the government is going to have to clear a series of hurdles. Hurdle No. 1 is prove that Google has a monopoly. There's no strict numerical definition of monopoly. But Eleanor says, typically, it applies when a company has at least 70 or 80% of a market.
MALONE: But what market are we talking about here? And this question - what is the relevant market or markets? - is a surprisingly interesting, contentious question in antitrust in general and in this case in particular.
GOLDSTEIN: This question comes up in the very first sentence of the complaint the government filed yesterday. The government says Google has, quote, "monopolies in the markets for general search services, search advertising and general search text advertising."
MALONE: So the government is arguing that Google has monopolies in three separate markets - one for general search, like, you know, whatever, Internet searching - right? - like what we think of when we think of searching.
GOLDSTEIN: And then they're saying the company also has monopolies in two other markets for advertising on-search results. If you want to buy an ad on a general search result, according to the government, you're pretty much stuck buying it from Google.
MALONE: But the government's case largely focuses on that first market, the market for general Internet searches.
GOLDSTEIN: Google hasn't filed its formal response to this case yet. But in a statement yesterday, the company said the relevant market here is not general search. It's all kinds of online searches. And Google says when you think of all kinds of online searches, we, Google, don't have a monopoly. You know, when people want to buy something, they usually go to Amazon and do a search there. When they want to travel, a lot of the time, they go to Kayak or Expedia, do a search there.
MALONE: And in the past, Google has made very similar arguments about advertising markets. The relevant market isn't search advertising, it's all advertising. People who want to buy ads can buy them from Google or from Facebook, or they could buy ads on the radio or on TV or on billboards.
GOLDSTEIN: These are all classic antitrust arguments. The government argues that a company has a monopoly in some particular market. And then the company says, no, no, no, you're defining the market all wrong. We actually have lots of competitors.
MALONE: And it's going to be up to the court to decide what is the relevant market here? If it's the market for general Internet searches, Google has, like, 90% of that market, according to the complaint. That is a monopoly. But if the relevant market is all searches on Google and Amazon and Kayak, then maybe Google does not have a monopoly.
GOLDSTEIN: Say the court does find that Google has a monopoly in search, despite Google's arguments to the contrary, is that enough for the courts to say that Google did something wrong?
FOX: It's enough to start to ask the question...
FOX: ...Did Google do something wrong?
GOLDSTEIN: OK. Is it illegal to have a monopoly in America?
FOX: Oh, no. Absolutely not.
GOLDSTEIN: OK. What is the next question the court has to answer?
FOX: OK. The next challenge for the government is to say what exactly they claim Google did that was anti-competitive.
GOLDSTEIN: So if the government clears that first hurdle, proving that Google has a monopoly in the relevant market, then the next hurdle is this - prove that Google has done things that have squashed competition in a way that is bad for consumers.
MALONE: Now, for all of the criticisms people may have about Google, the Department of Justice has really honed in on one particular practice here. It's a strategy, really, and that is for Google to create a world where anywhere you turn to search the Internet, you are going to be using Google. For example, Siri...
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MALONE: ...What is Apple's default search engine?
SIRI: Here are your results.
MALONE: And here we have a bunch of Google search results telling me that Google is Apple's default search engine.
GOLDSTEIN: And to become Apple's default search engine, Google pays Apple something like $10 billion a year, according to the complaint.
GOLDSTEIN: B-I-L-L-I-O-N is a lot of money even for a company as rich as Google or as Apple. $10 billion is almost 20% of Apple's total annual net income, basically their profit. This money from Google is about one-fifth of Apple's annual profits.
MALONE: And in exchange for all this money, Google is not only the default search engine for Siri, but also for the Safari Web browser on your iPhone and your MacBook. And when you search on your iPad and your CarPlay and basically on any Apple product, the default Internet search is going to be a Google search.
GOLDSTEIN: On the other hand, if you are using products not made by Apple, Google is probably also the default search. Google makes the Android operating system that lots of phones use. It also pays phone makers that use Android to make Google the default on that operating system, also enters into a lot of deals that require companies to do things like put the Google search app on the homepage of the phone and make the app undeletable. Google also pays Firefox, the browser, to make Google the default search there. Google created its own browser, Chrome, as the default search there.
MALONE: Between Google's own products and then these deals it makes with other companies - the government calls these exclusionary deals - Google has managed to be the default search engine for 80% of the search market, according to the complaint. A lot of that other 20%, by the way, that comes from computers and tablets that run Microsoft Windows, where the default search engine is Microsoft's search engine, Bing.
GOLDSTEIN: So if you step back, you see the broader story the government is telling here. Google makes all this money because it has a monopoly selling ads against general Internet searches. And then, it takes a big chunk of that money and gives it to Apple and these other companies in order to keep other search engines out. Here's a quote from the complaint - "Google aggressively uses its monopoly positions and the money that flows from them to continuously foreclose rivals and protect its monopolies." After the break, what Google says about all this.
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GOLDSTEIN: So the government's case is basically that Google is paying all this money to be the default search engine and that doing that stifles competition and harms consumers.
MALONE: Google's response to this so far comes from this statement that they posted online yesterday where they make a few arguments. The first one is, it is easy to change your default search engine if people want to do that. In fact, they include in their, like, blog posts or whatever, all of these gifts that show you, like, step by step, how to change your default search engine.
So why is the government making such a big deal about it? People can change it if they want to. Their second point is that paying to become the default, it's not so different from this practice that we see in, like, retail. Maybe the Kellogg Company will pay for premium shelf space at the grocery store.
GOLDSTEIN: Yeah, this is a classic thing. Food companies pay money to get on the, like, good shelf at the grocery store.
MALONE: But the Department of Justice says, well, first of all, nobody actually changes their defaults. This is why, I don't know, maybe a company like Google would want to pay billions of dollars to be the default. Clearly, being the default matters to them. And then they also argue that, like, these deals Google makes are different than the deals that, like, Kellogg's might make because a key difference between the search business and the cereal business is that in the search business, being bigger actually helps you make your product better.
FOX: Their huge network effect. So it's very hard for someone else to get into the market because there are good aspects...
FOX: ...Of having a network.
GOLDSTEIN: Well, and in this instance, it's also the case, as I understand it, that, you know, Google learns from every search everybody does. You know, every search is information. And they look at what links people click on. So with every search, Google gets better. And so because people are searching so much more on Google, it gets better and better. And it - the gap between Google and its rivals expands, in part because Google is bigger and is gathering more data, which is making it more better.
FOX: Yes. I mean, this is true. And this suit is really - it's saying there is space for other viable, strong, big search engines. And Google's doing everything to block their path and trying to be sure that they won't ever get the scale that can compete with Google.
MALONE: Now, the sort of final hurdle in at least modern American antitrust law is this idea of consumer harm. A judge is going to maybe look at everything we've talked about. And they can decide that, OK, yep, Google has a monopoly and, OK, these are exclusionary deals that makes Google the default everywhere. But the bottom-line question is going to be, is all of this together bad for consumers?
GOLDSTEIN: A judge might look at this case and agree with some of what the government is arguing, but might conclude in the end that Google is good for consumers, that having one giant search engine that gets better and better every day because so many people are searching on it is good. You know, similar arguments apply to other big tech companies, right? Part of the reason Facebook and Instagram are useful to people is because those are the social networks where everybody is. So similarly, the judge might look at this case and say, Google's great, consumers are winning.
MALONE: But Eleanor Fox says there's another reasonable decision a judge very well may come to after looking at this case. They may say, there are all of these other search engines that could exist if only Google were not spending billions of dollars a year just to make sure it's the default search engine everywhere. And the absence of those other search engines, maybe like a search engine that works better or lets users have more privacy or whatever, a judge could very well decide that the absence of choice alone is obviously harming consumers.
GOLDSTEIN: Say the government wins the case. The judge says, OK, Google, you are no longer allowed to pay all that money to be the default search engine everywhere. That is a violation of antitrust law. So, like, how does the world change?
MALONE: Yeah, you can imagine that in the future, maybe, you get a brand-new iPhone. You open it up, and you get a prompt that's like, you know, what language do you want to use? And then another prompt that's like, what search engine do you want? Do you want Yahoo, Bing, DuckDuckGo, Google? There is no default. But, like, lots of people - I'll go out on a limb, and I will say most people probably are still going to pick Google. Google is still going to have a massive market share. So, like, what really is different about that post-antitrust case future?
FOX: It would be different because it's letting in competition and preventing a dominant firm from entrenching itself. And this is hard to explain to people on the street because they don't see a difference immediately. And maybe down the line, a competitor - who knows? It might be...
GOLDSTEIN: Might be some 12-year-old kid, right?
FOX: Yeah, that's right. But this is what competition is. I mean, competition is - it's sort of in the air. It's like free speech, you know. You don't know who's going to say what, but you surely don't want to cut it off.
GOLDSTEIN: So, Kenny, as you mentioned earlier in the show, this is like a really - but pretty narrow case, you know. When you think about all the complaints people have about the power that big tech companies have, this case is focused really pretty narrowly. And Eleanor says, as a result, it means the government might win, which is hard for the government to do in antitrust cases.
MALONE: Yeah. You could think of it as, like, cherry-picking the case that you can potentially win as opposed to, maybe, these reports of Democratic state attorneys general working on something bigger, something more ambitious that would have a bigger impact on companies in the long run. But that is going to be a harder case to win. And so this is the dilemma that the government has been facing with bringing antitrust cases. Narrow - more likely to win. Broad - but more likely to lose.
GOLDSTEIN: There is a third option. Just a few weeks ago, a group of Democrats in Congress released this big report on antitrust law in America, suggested new laws that Congress could pass. So if the Democrats wind up winning big in the elections next month, there's a good chance that next year, Congress might pass, and the president might sign new antitrust laws that would make it easier for the government to sue companies and win.
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MALONE: Full disclosure, just about every company we have named in this episode here is among NPR's sponsors - Google, Microsoft, Yahoo, Samsung, DuckDuckGo, all of them.
GOLDSTEIN: If you have thoughts on that fact or on any other fact or on an opinion, email us at firstname.lastname@example.org. You can also find us on Facebook, Twitter, TikTok, Instagram. We're @planetmoney.
MALONE: Today's episode was produced by Alexi Horowitz-Ghazi and James Sneed with help from Gilly Moon. Alex Goldmark is our supervising producer. Bryant Urstadt edits our show. I'm Kenny Malone.
GOLDSTEIN: I'm Jacob Goldstein. This is NPR. Thanks for listening.
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