Google Violated Sherman Act by Maintaining Monopolies in Search Services and Ads via Exclusive Agreements, Rules US Dist. Court

Case Details: United States of America v. Google LLC - [2024] 165 taxmann.com 394 (USDC)[05-01-2023]

Judiciary and Counsel Details

• Amit P. Mehta, United States District Court
• Alex Austin, Neil Barrett-Bowen, Chris Barton, Ryan Booth, Joan Braddi, Patrick Chang, Eddy Cue, Arjan Dijk, Jerry Dischler & Jennifer Fitzpatrick for the Appearing Parties. & Others.

Facts of the Case

The U.S. Department of Justice, supported by 11 States (Plaintiffs), filed lawsuits against Google in October 2020, accusing the company of violating Section 2 of the Sherman Act. The case focused on allegations that Google unlawfully maintained its monopoly in three product markets viz. general search services, search advertising, and search text advertising

After a trial that lasted over nine weeks, the Court found that Google held a dominant position in these markets, supported by significant barriers to entry and had engaged in anticompetitive practices via exclusive agreements.

Finding of US District Court of Columbia

It was noted that Section 2 of the Sherman Act makes it unlawful for a firm to ‘monopolize’. Further, the parties agreed that the US is the relevant geographic market. The Court observed that Google held a substantial market share in the ‘general search services’ market, with a dominance of 89.2%, increasing to 94.9% share on mobile devices.

The Court identified significant barriers to entry, individually and collectively, that protect Google’s market dominance in general search. These include high capital costs, control over key distribution channels, substantial brand recognition, and Google’s scale. Therefore, it was concluded that Google monopolised the ‘general search services’ market.

The Court acknowledged that Google and its advertisers recognize search text advertising as a distinct product sub-market. The Court also took note of the plaintiff’s submission, stating that Google has maintained a large and durable market share in this market, further safeguarded by significant entry barriers.

Further, the Court highlighted that the exclusive agreements Google secured for default distribution on nearly all desktop and mobile devices effectively slow the competition. Due to the lack of viable competitors, these agreements solidified Google’s monopolistic hold on the ‘general search services’ market.

Google’s monopoly in general search has shown remarkable durability over time. The company’s market share, nearly 80% in 2009, grew to approximately 90% by 2020. This historical consistency in market dominance supports the conclusion that Google’s competitive practices have effectively hindered other players from gaining a significant market presence.

Foreign Court Held

The Court held that Google had violated Section 2 of the Sherman Act by unlawfully maintaining its monopoly in general search services and general search text ads by entering into exclusive agreements to secure default distribution on nearly all desktop and mobile devices in the United States.

Further, the Court also found that Google had exercised its monopoly power by charging competitive prices for general search text ads, which has allowed Google to earn monopoly profits.