By Rob Copeland and Keach Hagey
A set of sweeping antitrust lawsuits against Google this fall
essentially grapple with one central question: Is Google good?
For most of its 22-year history, the search giant has enjoyed an
enviable public reputation as an omnipresent yet benevolent force.
As its parent, Alphabet Inc., morphed into a trillion-dollar
conglomerate -- more than five times as large as a decade ago --
top executives stuck to their line that Google's market dominance
is simply because consumers choose to use its products. Chief
Executive Officer Sundar Pichai said this year, "I'm really focused
on giving users what they want."
The antitrust lawsuits from federal prosecutors and separate
coalitions of states allege nefarious activities. They say Google,
through secretive, interlocking agreements with other technology
giants including Apple Inc. and Facebook Inc., muscles out
competitors and sells out the users it claims to protect. "The
halcyon days of Google's youth are a distant memory," says one of
the state lawsuits, led by Texas. "Its modus operandi is to
monopolize and misrepresent."
Here is a look at the dueling narratives.
Why are there multiple lawsuits in the first place?
Federal and state prosecutors undertook separate, overlapping
investigations over the course of roughly a year and a half. The
federal suit, filed in October, focused on Google's flagship search
business, which accounts for most U.S. queries. The government said
the status quo effectively left no room for competition.
One collection of state attorneys general, all Republicans,
chose to target Google's digital advertising. Their lawsuit
reflected years of complaints from publishers and other advertisers
that Google's system was opaque at best.
Another set of state attorneys general -- 38 in total --
followed with a third lawsuit adding additional allegations about
internet search. These states said they would attempt to link up
with federal litigation.
How does Google make so much money?
Alphabet, its parent, made $34 billion in profits last year, up
nearly 12% from the year before. Nearly all of that comes from
digital advertising, both on Google-owned platforms such as YouTube
and external sites. Google sucks up about one in every three
dollars spent on digital advertising and generated nearly $135
billion in total ad revenue in 2019.
The Texas-led state attorneys general say Google isn't just
profiting from traffic. They laid out a complicated series of
agreements that give the company a cut of every aspect of ad
buying. In one instance, the lawsuit states, "Google was able to
demand that it represent the buy side, where it extracted one fee,
as well as the sell side, where it extracted a second fee, and it
was also able to force transactions to clear in its exchange, where
it extracted a third, even larger, fee."
The lawsuit also alleges that Google colluded with Facebook in
an agreement in which the social-media giant would curtail its
competitive moves in return for guaranteed special treatment in
Google-run ad auctions.
In a blog post responding to competition concerns, Google said
it operates "across many highly competitive sectors where prices
are free or falling and products are constantly improving."
Google hasn't responded in detail to the state lawsuits, though
it has called the claims meritless. A Google representative said,
"We've invested in state-of-the-art ad tech services that help
businesses and benefit consumers." Facebook didn't comment.
Why should most people care?
It isn't just advertisers who are harmed, prosecutors say. The
state attorneys general write that Google's dominance is
essentially a tax on American business, one borne by consumers
through higher prices on the goods and services those businesses
sell. "Google's internal documents belie the public image of brainy
Google engineers having fun at their sunny Mountain View campus
while trying to make the world a better place, " the state lawsuit
says.
The Texas-led state lawsuit identified new potential victims:
viral YouTube content creators. Because Google confines YouTube
advertisers to using certain company tools to purchase video
advertisements, the lawsuit says, Google restricted potential
advertisers from bidding and thus lowered demand and revenue for
content creators, who earn a cut of advertisements sold.
A YouTube spokeswoman declined to comment.
What role does Google's technology play in displaying ads across
the web?
In automated online advertising, there is a chain of
intermediaries between the companies who want to buy ads and the
websites -- say, news sites or blogs -- that are putting their ad
space up for sale. Google owns the dominant product at each link of
that chain. The company became a major player in this area after
its 2010 acquisition of the ad tech company DoubleClick and has
expanded over time.
Now, Google's tool allowing publishers to offer up ad space for
sale has more than 90% market share, according to U.K. competition
officials, while its product that serves ads on behalf of
advertisers has more than 80% market share, and its exchange --
where auctions between buyers and sellers happen in a fraction of a
second -- has more than 50% market share.
Google argues in its blog post that the online advertising space
is "famously crowded" with competitors.
What about all the data Google collects on users?
Mr. Pichai, the Google CEO, rarely speaks publicly, but when he
does, it is often about privacy. He is quick to point out that
Google offers so-called incognito mode in many of its products, and
that users can opt in or out to some of the company data-storing
practices. "We strongly believe that privacy and security are for
everyone, not just a few," Mr. Pichai said at a company event last
year.
The Texas-led state lawsuit presents a radically different view.
"Google's entire business model is to collect comprehensive data
about every user in the service of brokering targeted ad sales,"
the lawsuit states.
The lawsuit takes a dim view of a touted Google effort to
eliminate third-party cookies, or data trackers. When announcing
the move, Google described it as an effort to build a "trustworthy
and sustainable web together." The state attorneys wrote, "The
planned elimination of third-party cookies from Google's dominant
browser, Chrome, is also justified on privacy grounds, but the
effect is to increase information asymmetries between Google and
its competitors."
In its October lawsuit, what did the Justice Department lawsuit
allege about Google's dominance in search?
The Justice Department alleges that Google is illegally
maintaining its monopoly in search through exclusionary contracts
with distributors such as mobile-phone makers, wireless carriers
and web browsers to make Google their default search engine. As a
result of these agreements, which involve Google paying out
billions of dollars to distributors each year, Google owns or
controls search distribution channels accounting for about 80% of
the general search queries in the U.S., according to the
government's complaint.
These agreements thus prevent competitors from being able to get
any kind of meaningful foothold, the government argues.
Google's chief legal officer said in a statement that the suit
was flawed and that consumers use Google because they chose to, not
because they are forced or lack alternatives.
Write to Rob Copeland at rob.copeland@wsj.com and Keach Hagey at
keach.hagey@wsj.com
(END) Dow Jones Newswires
December 17, 2020 19:14 ET (00:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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