The antitrust war against Google fails consumers

Opening arguments began yesterday in the Department of Justice’s (DOJ) major antitrust lawsuit against Google alleging that the tech giant used illegal tactics to maintain the dominant market position of its search engine and digital advertising services. 

The key issue is whether Google’s multibillion-dollar deals to secure itself as a default search engine with smartphone manufacturers like Android and web browsers like Firefox illegally exclude competing search engines. Besides potential fines and bans on future search distribution deals, a ruling against Google could force it to restructure its operations.

The larger question is, or at least should be, whether all of this would protect consumers. It could instead leave us worse off while undermining innovation and the development of helpful new technologies.

Antitrust law makes it illegal to engage in conduct that substantially reduces competition and which tends to create a monopoly. However, courts draw a distinction between actions that gain and maintain a company’s market share through honest competition and increased efficiency — business practices that deliver better products to consumers — and actions that inefficiently exclude rivals who could provide their own competition, thereby harming consumers.

The DOJ’s central argument is that Google’s search engine is dominant not because of product superiority but because Google pays companies to make it the preloaded, default search option and consumers are not prone to deviating from it. This allows Google to receive millions of additional search queries and harvest data without necessarily bettering its service. Thus, it is argued that Google may harm consumers by degrading search results or compromising users’ privacy without losing market share to its rivals.

However, this theory is speculative and doesn’t hold up to scrutiny. Despite “default bias,” switching search engines takes just a few clicks. Default bias wasn’t enough to ensure the survival of Internet Explorer even though that browser’s pre-loaded default status on PCs landed Microsoft in antitrust court in the 1990s. Consumers eventually left it for alternatives like Firefox and Chrome, forcing Microsoft to retire it last year.

The search engine market is competitive. Although it handles more than 90 percent of all search queries, Google faces competition from alternatives like Microsoft’s Bing and DuckDuckGo. The latter has created its own niche by branding itself as the privacy-focused option. It collects less data than Google and offers less targeted advertising with its results. Some consumers may still prefer Google precisely because greater data collection enables more personalized advertising that’s calibrated and relevant to each individual.

Studies show that over half of consumers don’t mind companies using their data if they receive a benefit in return, while a further quarter of consumers are entirely unconcerned about the use of their data. Conversely, surveys find that consumers would have to be paid $17,500 to give up search services for a year.

Google’s competitors can also bid to be the new default search engine in the same smartphones and browsers. Browser and phone companies may still prefer the market leader that offers a popular, well-regarded product. Google’s larger user database, which compiles data from both searches and various applications and services (including Maps and YouTube), allows for personalized results and integration of real-time information on subjects like traffic conditions that may be relevant to search queries. These are competitive, and not necessarily monopolistic, advantages.

Punishing Google for maintaining its user base size would destroy the very things that consumers value when choosing a search engine. The same user base advantage enables Google to provide more calibrated services to advertisers, especially smaller businesses without brand recognition that rely on reaching potential customers through targeted ads. Google’s economies of scale have contributed to a 40 percent decrease in digital advertising costs since 2010, making it more affordable to reach consumers.

So, even if default search engine agreements advantage Google over competitors, they deliver significant benefits to its enormous and diverse customer base. It’s a vigorous form of competition that antitrust regulators shouldn’t inhibit.

Besides helping to refine algorithms, a large base of user data is crucial for future innovation, such as training artificial intelligence and machine learning models.

The lawsuit’s prospects appear doubtful after the DOJ antitrust division’s recent string of court losses based on untested theories of harm like this one. However, it could still deter innovation and waste taxpayer funds as antitrust suits are notoriously costly and take years. A regulator tasked with upholding competition and protecting consumers is best off directing its energy elsewhere.

Satya Marar is a visiting postgraduate fellow at the Mercatus Center at George Mason University, specializing in competition law, innovation and governance.