August 6, 2024 - 11:55am
The first antitrust judgment of the internet era has ruled that Google abused its monopoly position in two markets: search and online advertising.
By maintaining an illegal monopoly, Judge Amit Mehta concluded in a 286-page ruling, Google could raise prices at will and discourage potential challengers from emerging. For example, Apple had considered creating its own internet search engine, but Googleâs payments to browser companies discouraged such ventures. Google paid $26 billion in 2021 alone to be the default search engine, the bulk of which went to Apple.
The decision may be a milestone for a second Gilded Age, in which giant technology companies, shielded from scrutiny, accrued vast wealth and flexed their political and cultural influence.
If so, then this was a success story created from regulatory neglect, not to mention policymakersâ utopian belief in technology. Within weeks of Barack Obama commencing his second presidential term in early 2013, US federal agencies had either dropped or settled their outstanding competition cases into Google â in some cases, we now know, against the wishes of their staff. Microsoft had been a noisy critic of Google with its âScrolledâ campaign â but that too was buried.
As a result, Google and Meta â which operates Facebook â could grow unhindered. In 2012 the quartet of Google, Facebook, Apple and Microsoft were worth $1 trillion; today, their combined value is $9 trillion. Over that period, the only challenger to emerge has been Chinaâs ByteDance, which owns TikTok, and which US companies are keen to ban. If the judgment represents a crisis for the political and policy intelligentsia, itâs even more of a blow for the classical liberal economic class.
Today, two-thirds of all online advertising spending is taken up by Google and Facebook, with the two giants matching buyers and sellers. In the words of scholar Dina Srinivasan, they âoperate the largest unregulated exchanges in the worldâ. Without competition, a middleman is able to drive up prices, which Judge Mehti noted was significant in his ruling. In essence, private organisations usurped the role of the open marketplace, controlling both supply and demand â something that Soviet planners could only dream of doing.
Whatâs more, there is suggestion of collusion between the two key players, which upcoming antitrust cases will examine. Apple currently keeps 36% of the search revenue from iPhone traffic, according to the trial, in an arrangement designed to keep everyone happy. Yet the classical liberal think tanks abandoned their historic role defending markets, and instead went out to bat for the big new monopolies. Challenging them has required a bipartisan consensus: the Google case was started by Donald Trumpâs former attorney general Bill Barr. Republicans, and not just populists, have a visceral belief in markets and this proved decisive.
Publishers are the primary injured party of the second Gilded Age, and small businesses are particularly vulnerable, lacking the funds to raise their profile through traditional offline means. Without Google or Facebook, they are invisible. In 2019 the Competition and Markets Authority estimated the UK paid ÂŁ200 more than it needed to per household each year in this invisible tax, a figure which has since doubled.
Nominally âfree-marketâ think tanks have been happy to look the other way, and many swung their lobbying muscle behind the tech monopolies despite competition and consumer concerns. As Matt Stoller notes, the Google decision is not an outlier: rather, it is part of a broader backlash against greedy and complacent big business. In the battle for competition regulation, it appears that neoliberal wonkdom has lost.
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SubscribeExcelkent news. More pleasr. The playing field must be levelled. That news has made my day in a trying week.
When the grip that the corporate world has on the internet does collapse – if indeed it does collapse – it will be interesting to see how the dynamics of communication change.
One thing I find very disturbing in contempoary society is how quickly some phrasal prescription or framing of an issue proliferates down from the top. To give a recent example, in light of the UK riots, Keir Starmer describes the events as ‘far-right thuggery’ and from there all the other organs of the state begin churching out the same phrase from the Twitter accounts of government departments to virtually every major news network and, then, the average Joe. That perspective – valid or not – is then permanently etched into the stone fabric of the internet through headlines and articles which are subsequently used by Wikipedia as sources, solidifying that narrative.
This, to me, is the most dangerous aspect of the corporate worlds domination of the internet coupled with the collusion between state, media and corporations. A narrative is formed, it’s is accepted at the outset and then seeped down to the masses.
Another example is Kamala Harris. Is it not weird how within a few days how so much of the internet and individuals went from apprehensive and hesitant supporters of Kamala Harris to, upon Joe Biden’s resignation, enthusiastic and emboldened fanbase? Instantly memes were created and slogans proliferated.
It’s truly bizarre.
Okay, the average British household is paying ÂŁ400 a year Google tax. Presumably the average American household (me) is paying the equivalent $500 per year. For that I get an indefatigable assistant who roams the world to bring me information I would never have the time to get myself.
In addition, I can get directions to anywhere (Google Maps) see the world from above, from my own subdivision to the remotest reach of Outer Mongolia (Google Earth), send and receive mail (Gmail, which I don’t actually use) and, I suppose, multiple other services, all for no extra fee.
I am satisfied with this. How will the decision benefit me? Will some of the services go away? Will I get any money from the states’ win? Doubtful, since Georgia wasn’t a party to the suit. Will I get any money from the Federal win? Have I ever, from any Federal victory?
Sometimes monopolists actually serve the public.
The figure of ÂŁ200 was the estimated inflated extra paid by households for Google’s ad services. You could have had all the same services for less if Google wasn’t abusing its monopoly.
None of Google’s services are free. Google isn’t a charity and none of its services operate without cold hard commercial logic. When you use Google Maps, Gmail and Google Earth you’re sharing a little or a lot of useful information that Google uses to sell the ads you then see. In fact, you’re Google’s product. They’re selling you.
So all those free apps you use aren’t going to disappear or require a fee. Google needs you to use them whether it overcharges ad buyers or not.
Thanks for saying this so I didnât have to. The opinion Mr Wagner shares is widespread and is one reason why big tech has gotten away with what they have.
US and other governments have benefited as well. FANG drove most of the growth in our de-industrialized west – nothing to see here, see all the $! And of course, the ability of leftist govtâs to control information flow in the Information Ageâs attention economy is worth way, way, way more the a few measly billions.
If you had bought a just a couple of Google / Alphabet shares a few years ago, you could have got the money back.
Good. And long overdue.
The correct test in anti-trust of course is not whether it’s bad for big business (the headline here) but whether it was bad for consumers and customers. The two need not be mutually exclusive.
The article fails to note the far greater crime of big tech companies – the industrial scale tax avoidance by hiding their profits in Ireland where they – falsely – claim that most of their IP (intellectual property) was created. And yet again, governments and regulators are complicit in this fraud.
These business would still be profitable and serve customers well if they dropped their anti-competitive practices and started paying their taxes.
The really sad thing about all this is that so many people still think that many of these big tech companies are the good guys. When they’re likely worse than the robber barons who triggered the US anti-trust laws over a hunderd years ago.
This verdict will no doubt be appealed and the whole business drag on for another decade. It usually does.
There are such things as natural monopolies. Two Googles would probably not make sense. The solution to natural monopolies is not ad hoc antitrust prosecution with fines, but rather ongoing price regulation, as is done with public utilities like gas pipelines and electricity distribution suppliers.
Good points. But how do you do price regulation for a company that does not charge the users of its products? Google isn’t even close to being a utility company.
Last Friday I sent off a draft of the chapter in my upcoming book that has a few paragraphs about the antitrust cases pending against Big Tech. My take was that these cases won’t amount to anything. They are just the latest in a long line of antitrust cases that are a lot like the war in Ukraine, a lot of fighting over years if not decades that chews up people but changes nothing.
Robert Bork even referred to the antitrust case against IBM as the âJustice Departmentâs Vietnamâ because it became a prolonged, costly, and ultimately unsuccessful endeavor for the Department of Justice. The case dragged on for nearly 13 years, from 1969 to 1982, consuming vast resources and yielding no decisive victory, much like the Vietnam War for the United States.
Robert Borkâs analogy highlighted the futility and the burdensome nature of the case, and it applies to all antitrust cases. Full of sound and fury, signifying nothing.
With this decision coming down in the Google case I decided to revise my draft to reflect it. But then I thought again. Jonathan Kanter and his fellow hipster antitruster Lina Khan aren’t breaking any new ground here. Any remedy they can get a court to impose is not going to change anything. I’ll just leave my draft the way it is. No need to change a thing.
I agree with the ruling, but I seriously doubt it will have any actual resulting effects. Same as it ever was.