The complaint filed by the U.S. Department of Justice against Google on October 20, 2020, represents a new chapter in U.S. antitrust enforcement in technology markets. But the European Commission (Commission) started writing its version of the story a few years ago, fining Google a total of €8.25 billion for abusing its dominant position.
Ironically, U.S. antitrust enforcers have appeared skeptical of the more aggressive stance taken by the Commission against technology markets. For example, in the Microsoft saga, the then-Assistant Attorney General for Antitrust Thomas O. Barnett reacted to the judgment of the General Court of the European Union by saying that “the standard applied to unilateral conduct . . . rather than helping consumers, may have the unfortunate consequence of harming consumers by chilling innovation and discouraging competition.” And, in 2013, the Federal Trade Commission closed a two-year investigation against Google stating that it had found no evidence supporting search bias allegations. Yet the present complaint against Google is very closely aligned with the approach taken by the Commission. Does the new complaint against Google mean that the DOJ has become European?
In this article we compare the DOJ’s filing with the Commission’s Google Android decision and consider how the two agencies analyze the issues at play. We show that, at a high level, the two actions are fairly similar, but a closer look reveals some intriguing differences. We explain what these differences are, why they arise, and their significance. Granted, it is somewhat unfair to compare a final decision of the Commission with the DOJ’s complaint which, at this stage, is but the first salvo in what promises to be a long dispute. However, by exploring the similarities and differences that emerge even at this early stage, it is possible to point to how closely the two jurisdictions are aligned and the scope for mutual learning.
In Google Android, the Commission concluded that Google had infringed Article 102 of the Treaty on the Functioning of the European Union (TFEU), the European equivalent to Section 2 of the Sherman Act, after having engaged in several practices to consolidate its dominant position in the market for general internet search services.
The first practice was illegal tying, whereby Google tied its Google Search app to the Play Store. This meant that Original Equipment Manufacturers (OEMs) could pre-install the Play Store on their Google Android devices only if they got the license and pre-installed the entire bundle called Google Mobile Services (GMS), a bundle that included the Google Search app. Pre-installation is key for search engines because of consumers’ predisposition to use what is already loaded on their devices. Moreover, it was impossible to uninstall the Google Search app. Google was already dominant in the market for its Android app store, and given that rival search engines could not survive through other distribution channels, the Commission concluded that this granted Google a significant competitive advantage.
Google also tied the Google Search app and the Play Store with Google Chrome, an internet browser. The Commission considered this practice an illegal tie as well. Unless OEMs pre-installed Google Chrome, they could not pre-install the other two apps; and users could not obtain these apps without obtaining Google Chrome simultaneously. Likewise, the Commission concluded that non-OS specific mobile web browsers could not offset the competitive advantage that Google was gaining thanks to this practice, which allowed Google to maintain its position in the market for general search services and deterred innovation. In defense of both tying practices, Google argued that users could download competing apps, but the Commission was unconvinced. The fact was that the number of downloads of competing apps was far lower than the use of pre-installed apps, and OEMs were also unlikely to pre-install competing apps.
The second practice was that Google allowed Android device manufacturers to pre-install the Play Store and the Google Search app only if they accepted anti-fragmentation or anti-forking obligations. In software development, forking consists of taking the code of an open source program (e.g., OS Android) and creating different versions of it. According to the Commission, these forks constituted a credible competitive threat to Google because the investment required to develop an Android fork is much lower than the investment required to develop a completely new OS for smartphones. Apps also can adjust more easily to run on Android forks than to run on a new OS. Thus, the anti-forking obligations prevented developers of Android forks from finding other distribution channels. The existence of other distribution channels would have enabled a rapid scaling up of developers’ operations and would have allowed the development of apps running on Android forks, like general search engines. That would have constituted a serious threat to Google. And thus, the Commission concluded that this practice helped Google maintain its position in the market for general search services. Given that Android device manufacturers could not distribute Android forks, consumer choice and innovation were also affected.
The third practice concerned the exclusivity payments granted by Google to OEMs and Mobile Network Operators (MNOs) if they did not pre-install a competing general search service within an agreed portfolio of devices. The amount paid by Google could not be matched by competitors, principally because the payments were based on a portfolio-based revenue share from Google, so competitors would have needed to compensate OEMs and MNOs for the loss of all Google’s payments across its entire portfolio of Android devices. Given Google’s strong position as a default browser, competitors were unable to offer an equivalent amount of payments. The Commission concluded that the exclusivity payments deterred innovation because competitors did not have incentives to develop innovative features and therefore infringed Article 102 TFEU.
Under the case law of Article 102 TFEU, a demonstration that there are objective justifications or efficiencies that justify the unilateral conduct will result in a finding of no liability. Google, indeed, raised some procompetitive justifications but all of them were rejected by the Commission. For example, Google argued that the anti-forking agreements were necessary to preserve the Android ecosystem and to prevent free riding, among other points. However, the Commission disagreed and concluded that Google had not provided enough evidence showing that fragmentation could undermine the integrity of the Android ecosystem. Furthermore, it also observed that Google had offered at some point an alternative arrangement to anti-forking clauses called “Android Compatibility Commitment” that gave OEMs some leeway to produce incompatible Android devices for third parties and supply components. This meant that Google was able to offer less restrictive obligations than anti-forking agreements, and therefore its justification for the conduct could not be sustained.
In sum, these practices constituted a single infringement of Article 102 TFEU, and a quick reading of the DOJ’s complaint against Google shows some similarities. Both agencies argue that Google’s practices have an exclusionary effect that impedes competitors’ abilities to find distribution channels for their search engines and compete against Google. However, a closer look at the approach of both agencies reveals a number of significant differences between the two.
While the European Union and United States converge in considering that the principal harm occurs in the market for general search, the two agencies identify different markets on which to build their analysis. The Commission defined markets in the licensing of smartphones for operating systems, app stores, general search, and non OS-specific web browsers. The DOJ focuses instead on general search, search advertising, and general search text advertising. Thus, there is only one market where the two overlap. This difference means the DOJ has designed its case in a manner that is quite different from the Commission, even though the conduct at play is similar and the essential theory of harm is very close.
The Commission placed its focus on Google’s tying practices and tested them against the standards set for tying under EU antitrust law. The DOJ, however, puts the emphasis on the two ways by which Google’s practices foreclose access to competitors in general search.
First, the DOJ asserts that competing search engines are denied access at scale on devices running Android due to several agreements. In particular, Google has kept control of the Android ecosystem by imposing anti-forking clauses on OEMs to prevent them from developing or distributing Android forks. Moreover, Google has entered into revenue-sharing agreements provided Google Search is the default search engine. Apple, one of the most important distribution channels for search engines, is among the OEMs included in these agreements, which has made entry of a competing search engine into the Apple ecosystem impossible.
Second, the DOJ asserts that competing search engines are denied the capacity to raise revenue via advertising because they cannot grow to such an extent to provide an attractive prospect for advertisers. Noting that the exclusionary conduct is facilitated by the revenue generated in the advertising market because of a lack of competition, the DOJ claims that the monopolization of the search and advertising markets are closely linked. This approach allows the DOJ to explore competitive harm on both sides of the market: the consumer side and the advertising side, and it explains why the DOJ has taken a close look at the advertising markets. The DOJ’s concerns about the impact of platforms on advertising are not central in the EU’s case.
The question then becomes why the DOJ adopts what seems to be a more holistic approach. Three reasons seem most likely: precedent, institutional structure, and the approach to assess the effects of anticompetitive practices. Regarding precedent, one potential reason is that the Commission relied on its well-established case law, particularly when constructing the tying claims. Under U.S. antitrust law, however, tying cases are murkier and precedent is less clear on whether a rule of reason or a quasi per se rule approach is required. Conversely, the analysis of exclusivity agreements is more well-established under U.S. law.
Further, the two enforcement authorities have different institutional structures, which may explain the DOJ’s approach. The Commission, unlike the DOJ, is both fact-finder and judge. This means that it investigates the case and issues a decision addressed to the affected entity. During this procedure, the mission of the Commission is to explain to the entity concerned why its conduct infringes the law. If the entity appeals, the EU courts will review aspects, such as the compliance of procedural requirements or lack of reasoning in the Commission’s decision, but they will not undertake a new, comprehensive investigation of the case. Instead, the prosecutorial enforcement model of U.S. antitrust is that the court decides between two competing stories. The DOJ, thus, is pleading to a court and must provide the judge with a convincing explanation of how the market works and how the conduct at hand affects the market. It is true that understanding the functioning of markets is important for the Commission as well. However, in order for the DOJ to increase its chances of success in the U.S. setting, identifying a convincing theory of harm that accounts for the economic logic of the conduct at play is more important than in the European Union.
Finally, both agencies present different approaches to assess the effects on competition. Generally speaking, it seems fair to say that the Commission has a tendency to frame the case so it fits within the four squares of a particular antitrust category, while in the United States there is perhaps greater emphasis on the impact of the conduct than on finding the right pigeonhole for it. This is not to say that one agency protects competitors and the other protects competition, but that they take different approaches when it comes to constructing a case: the Commission tends to infer the effects from the antitrust category, whereas the DOJ attempts to be more explicit in this regard. This may explain why the Commission focuses more on showing that the tying practices of Google fit within the category of illegal tying and why the DOJ tries to show the impact of Google’s practices on the market by taking a more holistic view.
In relation to the last point, the Commission versus the DOJ approach to the foreclosure effects of Google’s practices on the market is illustrative. In Google Android the Commission elaborates its arguments to show that Google’s practices constitute illegal tying prohibited under Article 102 TFEU and that the market is foreclosed as a consequence. The DOJ, however, goes a step further, attempting to measure the foreclosure effect by looking at the coverage of Google’s agreement. For example, with respect to the years-long agreement with Apple where Google’s search engine must be the default option for Safari, Siri, and Spotlight, the DOJ observes that this arrangement covers 36 percent of all general search queries in the United States. Moreover, almost 50 percent of Google’s search traffic in 2019 was directed through Apple devices. This means that access to an important distribution channel for competing search engines was foreclosed significantly for a long period of time.
Likewise, the way in which the DOJ considers harm not only on the side of consumers but also on the side of advertisers is of interest. Google’s strength on search means that advertisers pay more for placing their advertisements than if the search market were competitive. One might argue that this is not relevant since U.S. antitrust law does not recognize excessive pricing as monopolization. However, the DOJ might be suggesting that the higher prices are the effect of the exclusionary conduct. The DOJ’s recognition of the harm to both sides of the market is yet another instance where the analytical framework is very attentive to the economic consequences of Google’s practices.
We have mentioned that the DOJ complaint is more focused on measuring the foreclosure effects of Google’s practices, but there is an intriguing point regarding whether the effects took place in the past or will affect the future of digital markets. On the one hand, both agencies consider the past and analyze how the conduct in question served to exclude rivals. For example, the Commission presented elaborate research on the fate of Amazon’s OS Fire to demonstrate how Google’s anti-fragmentation obligations can exclude Android forks. The DOJ also mentions this example and constructs a very similar argument in this regard.
On the other hand, the Commission made passing reference to the impact that the conduct may have on innovation, but the DOJ’s appraisal is more precise on the likely future effects. It considers the likely impact that this conduct could have on potential rivals like DuckDuckGo, which has a different business model that protects user privacy, as well as another new entrant with a subscription-based search engine. The DOJ also looks at the possible impact that this foreclosure can have on the availability of alternative search engines in new devices in the Internet of Things (e.g., smart TVs, digital personal assistants and automobiles). Google’s strategy, according to the DOJ, is clear: by conquering new distribution channels for its search engine, Google will keep its solid position in the market for search services.
From an EU perspective, this difference is interesting because nothing impeded the Commission from conducting a similar appraisal. In the end, in order to apply Article 102 TFEU, the Commission need only demonstrate that the unilateral conduct may potentially restrict competition (no need for actual effects). This provides the EU with some leeway about what type of effects must be shown to establish a case. The Commission, however, did not go as far as the DOJ.
The DOJ, thus, is bolder than the Commission in this aspect. What explains this difference? It may be a matter of approach. The DOJ focuses on Google’s conduct, which leads to looking at the natural expansion of Google’s practices to “newish” distribution channels. Meanwhile, the Commission’s focus was on the specific form in which the conduct took place. This necessarily puts some limits on the scope of the case the Commission can make. At the same time, the institutional structure of each antitrust system appears to work in favor of the Commission. Given that it controls the steps of the investigation and the timing of the decision, nothing impedes the Commission from opening another case in the coming years involving, for instance, the Internet of Things. The DOJ, on the other hand, manages the initial investigation but later it must rely on the timing of a prosecutorial system, so it may make sense to raise a point about the future of digital markets in the present complaint.
More prosaically, the difference may be one of timing. Today we have a better understanding of how the market is developing beyond smartphones than at the time the Commission initiated the investigation of Google Android in 2013. Smart voice assistants, for example, were not available back then. Amazon only launched its intelligent personal assistant, Alexa, incorporated within its smart speakers called Eco, in June 2015, without much popularity until 2017. Alexa’s main product rival, Google’s Home, was released in 2016 and only available in the UK in 2017.
At the same time, the difference may reveal a different approach to designing remedies: these have to be sustainable as markets evolve—a high fine might deter, but injunctive relief to ensure there is no further monopolization as the market develops is likely a more valuable remedy. In Google Android, the Commission has accepted the insertion of a choice screen with the hope that it will open up competition in the search engine market, as it allows users to choose their default search engine. However, this remedy is tailor-made for this case in particular. By looking into the future, the DOJ is attempting to put itself in a favorable position to design remedies that impede Google from expanding its ecosystem into new devices and foreclose future distribution channels. Thus, the fact that the DOJ is pointing at the future of digital markets might influence the way in which the remedies are designed and stimulate creativity in this regard.
Another interesting aspect of divergence is the connection that the DOJ makes between the reduction of consumer choice and the degree of data protection and privacy. The argument flows as follows: the fact that Google’s services become the only choice for users lowers the degree of privacy and data protection since users are required to accept the terms imposed by their only choice of search engine. Conversely, had there been competition, users would have been able to choose a search engine on the basis of which one better matched the value they place on privacy. And had there been the opportunity to compete, new entrants would likely have introduced different products. This is echoed in the U.S. House of Representatives Committee on the Judiciary’s investigation into competition in digital markets released just a few days before the DOJ lodged its action: companies such as Google that offer low data protection can harvest more data that will allow them to cement their dominant position.
The Commission mentioned private data in Google Android to explain Google’s business model but went no further. Instead, its general approach to data protection and antitrust is comparatively conservative. In the Microsoft/LinkedIn merger, for example, the Commission considered whether the transaction raised concerns about the combination of data post-merger, but it discarded such concerns altogether because in 2018, two years after the merger decision, the General Data Protection Regulation (GDPR) was going to enter into force.
It would be short-sighted, however, to say that the DOJ considered privacy issues simply because there is no U.S. federal data protection regulation comparable to the GDPR. The scope and aim of the GDPR, which intends to protect natural persons regarding the processing of their personal data, differs from the argument that the DOJ makes. Rather, the DOJ sees privacy as an element of competition: even if Google were complying with data protection laws, the anticompetitive concern is that there is no competitive process by which users are afforded the choice among different services where their data is handled differently. Of course, one might argue that not every user will give their privacy the same value, and therefore evaluating the state of the competitive process on this basis is flawed. But one might also say that the value of one dollar is not the same for two consumers because it depends on their willingness and capacity to pay for a particular product, so one conduct can be harmful for certain consumers because they cannot afford to pay a higher price for the same good while not harmful at all for others. In any event, the DOJ’s argument is to be welcomed as it can enrich the construction of exclusionary cases involving privacy issues.
No doubt the design of remedies is one of the most critical tasks for antitrust authorities in markets that are affected by rapid socio-technical change. In this regard, what is surprising from the DOJ is that it asks the court to implement structural remedies. On the one hand, the request makes sense. As noted above, the DOJ focuses on the connection between search and advertising and how monopolizing one market impacts the other, suggesting that dividing these up may be a solution the DOJ could request should the court find an infringement. On the other hand, it may be complicated to press for structural separation when the theory of harm is based on a set of contracts between Google and OEMs. It may be that simply modifying these contracts might suffice to remove the risk of further harm.
One element the Commission and DOJ share is the view that consumers are unlikely to switch search engines when one is set as a default on their devices. The Commission used this insight to favor the introduction of a choice screen so that a user is affirmatively asked to select a search engine upon purchase. This technique was also used in the second case against Microsoft in 2004, where the Commission found that the company had tied its browser Internet Explorer to the OS Windows. The Commission accepted the commitments offered by Microsoft where, among other points, Microsoft agreed to distribute a choice screen software so that users would get the opportunity to choose the default web browser. Likewise, Google announced in 2019 that it would implement a choice screen in new Android devices to give users the same opportunity to choose a default search engine. These default search engine choices are the winners of an auction. Google recently announced the auction winners for the first quarter of 2021, which included Bing in several countries of the European Union, but DuckDuckGo only in Android devices sold in Belgium. However, early signs suggest that the design of the choice screen may not achieve the results the Commission hoped for, and Google’s rivals have sent a joint letter to the Commission asking it to reconsider the remedies. The choice screen concept appears useful at first, but its effectiveness may depend on how the auction is designed.
The DOJ case against Google is aligned with the Commission, but it is not fair to say that the U.S. agency is European just yet. In particular, the DOJ is more attentive to the commercial context, highlighting the role of the advertising side of the market. Furthermore, its assessment of effects places more emphasis on measuring foreclosure as well as examining the impact on emerging devices where internet search will increasingly occur. The inclusion of privacy as an antitrust concern, even if just noted briefly in the DOJ complaint, is encouraging and it could be a source of inspiration for the Commission. These elements are likely to make the case in the United States more complex to litigate but ultimately reveal a more comprehensive consideration of the economic and technological issues at play. The fate of this litigation will also prove instructive for the Commission as it considers the design of alternative remedies.
Yet even those who support the DOJ will see this action as coming fairly late in the game. More generally, antitrust enforcement frequently moves rather slowly so that by the time the decision is issued the market has changed. This is why some take the view that what matters is that the antitrust proceedings serve to distract the defendant from competing in the market. In this way, the result of the litigation may be less about what happens in the market, and more about the distracting effect of litigation.
Less cynically, it is argued that there is a need for speedier intervention. Recently, the Commission began to revisit interim measures in an attempt to accelerate proceedings. A related issue to speed is that securing open markets as technology evolves requires well-calibrated remedies that can function best if designed in cooperation with the firms involved. The recent proposal for a Digital Market Act in the European Union serves as a possible model for a regulatory design that promises to be speedier (by determining ex ante which firms hold sufficient power in certain markets), and more flexible by affording the space for the co-creation of remedies that address the concerns of the Commission.
It remains to be seen whether, now that the United States appears to have incorporated aspects of an EU antitrust approach, it may also consider upgrading its regulatory toolbox by borrowing from the Commission’s proposals.
For its research on competition, standardization, and innovation, TILEC has received funding from Qualcomm Inc. The research on which this article is based was conducted in accordance with the rules set out in the Royal Dutch Academy of Sciences (KNAW) Declaration of Scientific Independence.
