This story is part of a Recode series about Big Tech and antitrust. Over the last several weeks, we’ve covered what’s happening with Apple, Amazon, Microsoft, Meta, and Google.
There’s a new Big Tech antitrust bill in town, and this one is especially painful for Google.
A group of lawmakers led by Sen. Mike Lee (R-UT) introduced the Competition and Transparency in Digital Advertising Act on Thursday. This bipartisan and bicameral legislation would forbid any company with more than $20 billion in digital advertising revenue — that’s Google and Meta, basically — from owning multiple parts of the digital advertising chain. Google would have to choose between being a buyer or a seller or running the ad exchange between the two. It currently owns all three parts, and has been dogged by allegations, which it denies, that it uses that power to unfairly manipulate that market to its own advantage.
“This lack of competition in digital advertising means that monopoly rents are being imposed upon every website that is ad-supported and every company — small, medium, or large — that relies on internet advertising to grow its business,” Sen. Lee said in a statement. “It is essentially a tax on thousands of American businesses, and thus a tax on millions of American consumers.”
Apple and Meta, Google is potentially in more trouble than any other Big Tech company. State and federal governments have filed four antitrust cases, all within a year of each other. In October 2020, the Department of Justice and 14 state attorneys general sued Google over alleged anti-competitive practices to maintain its search engine and search ad monopoly. That December, 38 other state attorneys general filed a separate, similar case. If you combine the two lawsuits, every state except Alabama, plus Puerto Rico, DC, and Guam, is suing Google over its search business.
Last July, another 37 state attorneys general sued Google over the Google Play mobile app store. And another set of 17 attorneys general is suing Google over the ad business that Lee’s bill targets; that suit was filed just a day after the state AGs’ search case. There are also lawsuits from Epic Games and Match Group over Google’s app store and the possibility of more cases from the DOJ to come. Oh, and there’s also a wave of Big Tech-focused antitrust laws and regulations around the world to contend with.
It’s too early to say how likely it is that Lee’s bill will go anywhere. But we do know that two bipartisan antitrust bills are very close to becoming law, likely by the end of the summer. Both of them would forbid Google from giving its own products preference on the platforms it owns and operates: The Open App Markets Act would force the Google Play app store to follow certain rules, while the American Innovation and Choice Online Act bans self-preferencing on platforms that Big Tech companies own and operate. Google wouldn’t be allowed to give its own products prominent placement in Google search results, for instance, unless those products organically earned that spot.
This all speaks to Google’s ubiquity and power. What was once a humble search engine company has become so deeply ingrained in everything we do online that it’s difficult to imagine how the internet would function without it. But that power may have been obtained and maintained unfairly, in ways that have hurt competitors and consumers — even as many of Google’s products remain popular and free.
It wasn’t always like this. Google was once seen as an industry-changing upstart that was a vast improvement over the slower and easily gamed search engines produced by Yahoo and AltaVista. Its motto was “Don’t be evil,” its algorithm returned better results, and it quickly became the market leader. Then it transformed the market again by putting ads on search results that were specific to what people were searching for — an idea the company got from a little-known and now-defunct search engine called GoTo. Google’s search ads were so successful that, even now, this business is Google’s biggest revenue generator. In 2021, search ads pulled in nearly $150 billion. That’s more than every other Google revenue source combined.
Many attribute Google’s success in the ad business to its 2007 acquisition of DoubleClick for $3.1 billion. This merger was scrutinized by the Federal Trade Commission, but the agency ultimately approved it. (At least one of the commissioners who voted to approve the merger, William Kovacic, has said he regrets the decision in hindsight.)
The FTC turned its gaze to Google again a few years later, in 2011, and opened an investigation into the company’s alleged anti-competitive behavior in search and ads. Though a leaked FTC staff report indicated that agency staffers felt the FTC had a case against Google, the commissioners chose not to pursue one, instead either getting agreements from Google to change some business practices or deciding that Google’s actions were justified because they improved Google’s services and its users’ experience. That decision has been blamed, in part, on the Obama administration’s good relationship with the company.
You could also argue that the government has consistently underestimated just how big Google would become if left to grow unchecked. But Google isn’t the same company it was 10 years ago, nor is it viewed the same way. Its antitrust reckoning finally seems to be coming. What remains to be seen is just how bad it will be.
How Google allegedly hurts competition
For Luther Lowe, the senior vice president of public policy at Yelp and longtime Google critic, this moment is the culmination of over a decade of work trying to convince legislators and enforcers that Google has illegally entrenched its own power and profited by hurting companies like his. Lowe’s self-interest here should be obvious: His company found itself competing with Google when Google rolled out its own version of user-provided business reviews. Google puts its reviews at the top of its own search engine results, above Yelp’s organic results.
“Yelp is a great example of the type of service that can be undermined when a gatekeeper chooses to put its hand on the scale,” Lowe told Recode.
But, Lowe stresses, he isn’t the only person arguing that Google’s dominance makes it impossible for anyone else to compete. Google says it has competitors in all of its markets, but it also has the majority market share in most of them. Google wouldn’t provide its own numbers, but in search engines, it’s estimated to have about 90 percent of the global market. In web browsers, Google’s Chrome has about 65 percent. In mobile operating systems, Google’s Android has about 70 percent worldwide (in the United States, Android is just 40 percent, and Apple’s iOS has almost all of the rest). And, of course, there are Google’s other products, many of which lead in their own categories: YouTube, Gmail, and that display ad business.
Google spends so much to be the default search engine because it makes so much more than that off the ads on its search results. Less directly, Google’s ability to know what so much of the internet is looking for all the time helps inform other parts of its business. After all, it is a company built on data.
DuckDuckGo is a rival search engine that doesn’t collect user data — privacy is one of its selling points — but it has just a fraction of the market that Google does. That’s partly because, DuckDuckGo says, it’s hard for users to switch their browsers’ default engine, which is almost always Google. The ability to switch default search engines is usually buried in user settings, and it assumes the user even knows that switching is an option.
“People don’t decide to use Google, that decision is made for them,” Kamyl Bazbaz, DuckDuckGo’s vice president of communications, said. “What’s best for Google is to keep people using Google so they can gather behavioral data, and use that data to keep people using Google in a vicious cycle that keeps users tethered to their products.”
That’s not how Google sees it.
“People use Google because they choose to, not because they’re forced to or because they can’t find alternatives,” Kent Walker, the company’s president of global affairs, said in a statement about the DOJ’s lawsuit. “This lawsuit would do nothing to help consumers. To the contrary, it would artificially prop up lower-quality search alternatives, raise phone prices, and make it harder for people to get the search services they want to use.”
Walker also pointed out that Google wasn’t the only company to make such deals, and that it competes with Microsoft’s Bing search engine over them.
Then there’s the lawsuit targeting the Google Play Store. It’s similar to the accusations levied against Apple over its App Store, but while Apple has always only allowed one App Store on its own devices, Google’s Android devices permit alternate app stores and the ability to download apps directly from developers’ websites.
But, the lawsuit claims, Google doesn’t make it easy for those alternatives. It pays off developers and manufacturers not to create or use alternate stores, and it pays or requires them to pre-load Google apps on the phones they sell. Devices that use Google’s version of Android must also come with the Play Store already loaded. Android devices even slap security warnings on apps downloaded outside of the Google Play store in order to discourage users from getting their apps from them.
The result: 95 percent of Android apps in the US are downloaded from the Google Play Store, according to app intelligence firm Sensor Tower. That makes it almost as much of a monopoly on Android devices as Apple’s App Store is on Apple’s. Andy Yen, CEO of Proton AG, which makes the encrypted email service ProtonMail and other privacy-focused software, echoes many developers’ complaints about the Play Store.
Yen says it’s “technically possible but practically impossible” to use an alternate app store, and argues that it would be “suicide” if Proton didn’t make its apps available in the Play Store. But going through the Play Store means Proton is using a platform owned by the same company that makes its biggest competitor: Gmail. Proton is also giving money to Google because the company forces apps in the Play Store to use its in-app payments system, which takes a 15-30 percent commission.
Google has maintained that it allows for “more openness and choice” in app markets than other companies (Apple) and that it competes not only with Android app stores but with Apple’s, too. Google also points out that its app store commissions are about the same as those in other app stores.
On top of the app lawsuit and the two search-focused lawsuits, Google is also being sued by a smaller group of state attorneys general over its digital ad and ad tech business. This suit basically targets Google’s display ad business — that is, everything outside of search and YouTube ads — which brought in more than $30 billion last year.
Here’s how it works: When you open a website with ads on it, many of those ads probably come from digital ad platforms and exchanges, where advertisers bid to get their ads placed in front of the viewers most likely to engage with them, based on data that those advertisers or ad networks have on those viewers. The entire process takes fractions of a second, and then you’re seeing ads for the shoes you looked at on another site last week.
The inner workings of the ad tech world are complicated and opaque, but the gist of the argument from the state attorneys general is that Google has the dominant digital ad business, with stakes in every part of the process — the entire ad tech stack. Establishing that dominance is why Google bought DoubleClick 15 years ago, and growing it is why the company has continued to acquire ad tech companies since.
“There are other options, but those other options are typically going to offer even less to either end, the publisher or advertiser, in terms of net value,” Fiona Scott Morton, a professor of economics at Yale, explained. Scott Morton, a former DOJ antitrust official who has studied Google’s ad business and its alleged monopolization of the market, also works as an antitrust consultant for Amazon and Apple.
But it’s not just ad tech competitors who allegedly suffer here. The advertisers and the publishers suffer, too, if Google is manipulating the market. Google’s dominance also lets it profit from the ads its services buy and sell, with little transparency to anyone about how much that take is. That’s been especially bad for media companies that rely on ads to fund their work.
Google says it charges less or equal to the industry average and that it has plenty of competition, and notes that, industry-wise, ad prices and fees have declined over the years. But Scott Morton says that doesn’t take into account what the landscape could look like if Google wasn’t so dominant in all parts of it.
“Would the digital ad world be better in terms of output and price and quality and innovation if there were two or three firms trying to place digital ads?” she said. “I think the answer to that is a clear ‘yes.’”
How Google may hurt consumers
So, how does any of this hurt you, the consumer? After all, many of Google’s products are free, so it isn’t as though the lack of competition is increasing their price. Odds are, you regularly use at least one of Google’s many services, and you probably like it.
But there could be a lot of things you aren’t getting. Google became the most popular search engine because its creators figured out a way to return better and faster results than the competition. We don’t know if Apple could make a better search engine because Google is paying Apple billions of dollars not to, and we don’t know if Google’s search wouldn’t be even better if it had some real competition (despite Microsoft’s efforts, Bing’s share of the search engine market remains very small: just about 3 percent worldwide).
As Google’s search dominance grew, the company also changed its results page from a simple list of links designed to get users away from its platform as quickly as possible, to keeping them on its platform for as long as possible. That’s why, over the years, search results have changed from a list of links with a few ads at the top to a website populated with Google’s own offerings. As a 2020 report from the Markup showed, it’s become harder and harder to find organic search results on Google because so much of Google’s own stuff, including its search ads, may take up all the real estate. (Google says the Markup’s report is “flawed and misleading” and based on a “non-representative sample of searches.”)
Google says these extra features make its search results better. But if Google’s own offerings aren’t as good as the organic results — as the Markup says they sometimes aren’t — then Google is using its power to push you toward an inferior product. You’re getting the best results for Google, but they may not be the best results for you.
You may also be spending more on apps through Google’s Play Store, since apps are required to use Google’s in-app payment system and pay Google a generous cut. Companies have to make that up somehow — maybe that’ll come from you.
“It’s essentially a tax on the internet,” Yen, of Proton, said. “These costs get transferred to consumers because unless you have a 30 percent profit margin, you’re going to have to pass on some of these costs. … Users are going to have to get hit with higher prices as a result.”
Those increased costs may apply to digital ads, too.
“If the advertiser is paying more than a competitive price, it’s paying a monopoly price to get those ads, then the consumer at the end of the day is bearing the cost,” Scott Morton said. “They’re going to be built into the price of the product.”
And if Google is taking a supracompetitive cut of digital ad sales, that means the website those ads are on is getting less for them than it otherwise would have. If the website is providing free content, it can’t charge users more to make up for the loss. Instead, it will just have less money to spend on the content itself — which could lead to lower-quality products.
How Google could emerge relatively unscathed
Google has never faced as much of a threat to its business model and structure as it does today. But lawsuits, especially big antitrust lawsuits, take years to resolve, and it’s never certain they’ll go the government’s way. The DOJ’s case was filed in fall 2020, and it isn’t expected to go to trial until the fall of 2023. And that may proceed without the DOJ’s antitrust head, Jonathan Kanter, because he has represented some of Google’s rivals in the past and may have to recuse himself from this case.
Could all those state attorneys general and the DOJ be wrong about Google? Adam Kovacevich, who was Google’s US head of public policy communications during the FTC investigation, thinks the search lawsuits have no better chance of success now than the FTC would have back in 2013 when it chose not to pursue a case against Google over preferencing its properties over those of competing, specialized search companies like Yelp.
The FTC “acknowledged, frankly, the legal difficulties they would run into if they tried to make the case — which are still true today,” Kovacevich said. To him, the fact that some members of Congress now feel the need to pass new laws targeting some of those issues indicates that Google hasn’t done anything that violates the existing laws.
The bipartisan antitrust bills introduced last summer could be a quicker route to change, though they won’t have as much of an impact on Google’s business model as an unfavorable outcome of a lawsuit would. Kovacevich isn’t a fan of those bills either, by the way. He’s now the CEO of the Chamber of Progress, a tech industry coalition that describes itself as “center-left” and is funded by tech companies, including Google, that would be negatively affected should the bills pass (Kovacevich wouldn’t say how much funding Google provides). He and the Chamber of Progress have been speaking out against the bills since they were introduced, claiming they would forbid companies from offering certain services or force them to introduce security issues to their devices.
But Yen, of Proton, and Lowe, of Yelp, say they think the bills will go a long way toward making the playing field more fair.
“I don’t think I’ll ever see an opportunity again, in my career, to have a legislative response to Big Tech’s overreaching,” Lowe said.
Update, May 20, 5:30 pm ET: This story has been updated to include a comment from Google and a link to the FTC’s statement about its investigation.