Lawsuit Against GoogleApprox Read Time: 5 min
- The US Department of Justice (DOJ) has filed an anti-trust lawsuit (case) against Google.
- As per the DOJ, Google has unlawfully maintained a monopoly in internet search, that harms competitors and consumers.
- Other major technology companies including Apple, Amazon and Facebook are also under investigation by the Justice Department.
Markets, Monopolies and Antitrust laws:
About: Free Market Economy
- Any economy runs on the fundamental system of transformation in which all unused goods are transformed into usable products.
- In a free market economy the systems of transformation is built around the core principles of competition and cooperation.
- Further unrestrained competition ensures best allocation of resources, lowest price, high quality, maximum goods produced and social equity.
- As a result the goal of free market economy is maximum welfare.
- A monopoly refers to a situation when a company and its product offerings dominate a sector or industry.
- The term monopoly is often used to describe a company that has total or near-total control of a market.
- For example, Google controls most of the online search market, while Amazon dominates the e-commerce market.
- For many years, Microsoft Corporation had a monopoly on the software and operating systems that are used in computers.
- Monopolies have an unfair advantage over their competitors, since they are either the only provider of a product or control most of the market share or customers for their product.
- With their monopoly power, they can make choices that can hurt competition, customers and markets, and even the economies of countries.
About: Antitrust laws
- Antitrust laws (also referred to as competition laws) are laws developed by governments to protect consumers from unjust business practices and to ensure fair competition.
- They are to primarily to deter a ‘trust’ (large business house) from adopting steps to stifle competition
- They are restraints put by the State to check the overarching power of the private businesses that seek to monopolize and control the market.
- Antitrust laws are applied to a wide range of questionable business activities, including market allocation, bid rigging, price fixing, and monopolies.
- The goal of these laws is to provide an equal business environment to similar businesses that operate in a specific industry, while preventing them from gaining too much power over their competition.
- If these laws didn’t exist, consumers would not benefit from different options or competition in the marketplace. Furthermore, consumers would be forced to pay higher prices.
Allegations against Google:
- The DOJ claims Google holds 88% of the U.S. search market, with 94% of mobile searches occurring on its services.
- According to the lawsuit, Google has used its monopoly power to keep competitors out of the internet search market, through various deals.
- Google pays Apple billions of dollars a year to keep Google’s search engine as the default option on iPhones and other devices.
- Google also has contracts with smartphone makers that use Google’s Android operating system.
- These contracts require the smartphone manufacturers to install Google’s search engine as the default search engine.
- The Justice Department has also investigated Google’s behaviour and acquisitions in the overall market for digital advertising, which includes search, web display and video ads.
- The department claims Google’s conduct has harmed consumers by lowering the quality of search services and reducing choice by hurting the competition.
- It said that Google’s monopolistic practices can close the market to rivals.
- Google has argued that although its businesses are large, they are useful and beneficial to consumers.
- It shared that its services face decent competition and have led to innovations that help people manage their lives and have helped to keep the prices of smartphones low.
- Consumers choose to use Google’s services because they want to, as consumers can switch away from services like Google Search even if it’s the default option.
- Moreover, consumers use plenty of specialized search engines like Expedia for travel and even platforms like Twitter to seek information outside of Google’s services.
- Google claims that the lawsuit will do nothing to help the consumers.
- In fact, it will help low quality search alternatives, raise phone prices and make it harder for people to get the search services they want to use.
- Unless the government and Google reach a settlement, a trial would likely begin late next year.
- The Justice Department has to show that Google is dominant in the internet search market and that Google’s deals with Apple and other companies restrict competition in the search market.