Bloomberg Tech TV interview 14 August 2024

“Google is a Monopolist: What next?”

Speaking notes – Interview with Bloomberg Tech TV, Caroline Hyde and Ed Ludlow, 14 August 2024

The outcome – Judge Mehta’s opinion of 5 August –  is historic, monumental, AAG Kanter described it as a “Mount Rushmore of antitrust” – given where US antitrust enforcement was only 5 years ago, this is apt.

Europe started the battle against Google 15 years ago but did not get anywhere.  The expectation for the US was that EVEN IF antitrust enforcement has taken a progressive antimonopoly turn with the Biden enforcers, in the end judges would not find against a US Big Tech company because they have been indoctrinated to believe that tech monopolies are efficient

But here we are: after a lengthy trial a Judge that had frustrated many for being meticulous and inscrutable has come out with a spectacular opinion which is going to be very difficult to overturn.

It’s detailed, it’s thoughtful, it’s not speculative but meticulously sifts through the facts and the arguments.  Nothing fancy, no ambitious legal theory. A “straight in the middle” story that Google has bought exclusive default positioning by bribing device manufacturers to adopt Google Search as the default. And it could pay these sums because the data it obtained from searches by users of these devices was monetized massively through targeted ads. Microsoft could not pay enough (20bn over 5 years) and with 20bn Apple stayed out of making its own search engine.

So the case is super straightforward: these exclusive contracts are illegal because they cement a monopoly – no one else stands a chance to challenge. That’s it.

What’s the answer? Remedy trial just starting over.

Obvious would be to strike down the anticompetitive exclusivity clause. But so what? Suppose Judge said cannot have payment for exclusive. Very well, Google can no longer pay Apple or Samsung, they miss out/ Will they go build a search engine? Of course not. And Judge cannot tell Apple not to preinstall Google Search. So Apple would lose the 20bn but it would not give up on Google and perhaps they can find a way of sharing ad revenues. This does nothing for competition. Don’t create a competitive market by redlining a contract.

Could impose a choice screen? But it cannot impose one on APPLE, and European experience shows they cannot work.

But the REAL question is what will be the appetite of the Judge for doing something bolder and MUCH more ambitious: break up Google – or at lease mandate access to its data.

THIS is the question. The judge no doubt gets the source of the monopoly power is the ECOSYSTEM, the connection between the different businesses and the DATA ADVANTAGE Google has – even though it couched the legal theory as a straightforward illegal contract. He also knows just redlining a contract wont create competition from thin air.

The question is going to be to what extent he feels he has the courage and the opportunity to take a leap forward  and REALLY take a significant decision to prize apart the components of the monopoly ecosystem in a way that creates opportunities for competition.

Chrome – Google’s browser – is the crucial link between Google’s advertising business and its other online services, particularly Google Search and YouTube – the two most visited websites in the world.  If Search is no longer part of the same ecosystem that also owns the operating system and the browser, and the advertising complex, then there is  less of an incentive e.g. to force device manufacturers to take Google Search to generate data that directly feeds the ad machine.  So one possibility is separate Google Search from Android and Chrome.

There is history of these breakups and they work. There are precedents in the US. Standard Oil, AT&T. They unleashed waves of competition.

This is the time for antitrust to be bold. Europe failed by being timid. If we don’t use these pivotal moments like this momentous judgment to really push for solution that stands a chance, this would be showing the world that once again the huge monopoly problem that exists around Google and Big Tech cannot be addressed. This cannot be so.

Could say more on the potential for a data disgorgement remedy in the age of AI. Bottomline: the judge gets it, but the whole question is to what extent he feels he can and should pursue something this is broader than directly addressing the specific conduct.

The DOJ will make this case, we’ll see if there is appetite. But this is potentially a huge moment.

Is it punitive? Unclear. Breakups often end up generating value also for the company which is broken up. In any case this is not the issue. The issue is what value is created overall as  a result of greater competition. YES antitrust should be thought of as industrial policy not just narrow intervention on narrow little bits of conduct.