Awkward.
EU antitrust chief Margrethe Vestager -- who formally has charged Google with abusing its search monopoly, and who also is formally investigating Google’s alleged contractual tying of its monopoly search app to create a monopoly Android operating system -- speaks Friday at the ABA antitrust spring meeting in D.C. on a panel with DOJ antitrust chief William Baer and FTC Chairwoman Edith Ramirez, at the awkward juncture when the EU is escalating its antitrust prosecution of Google while America’s DOJ and FTC apparently are ignoring the obvious antitrust case they know they have against Google.
In a nutshell, the obvious antitrust case against Google is this: the DOJ and FTC have long established Google is a monopoly demanding antitrust vigilance; U.S v. Microsoft settled that a licensed OS market definition excluding Apple is reasonable and that tying a monopoly OS to a strategic app harms consumers and innovation; Google’s contractual tying of its monopoly search to a nascent Android OS is a mirror image of what DOJ already proved monopolistic in U.S. v. Microsoft; Google apparently has monopolized mobile search and search advertising and prompted its only competitors, Yahoo and Microsoft Bing, to give up seriously competing with Google; and now the potential harms to consumers and innovation are escalating as Google is attempting to extend its Android mobile OS monopoly economy-wide to monopolize the Internet of Things.
(For a more detailed summary of this obvious Google-Android antitrust case with links to evidence, please see the appendix at the end of this post.)
Spotlighting this obvious Google antitrust case and supporting evidence exposes the sad facts that it is the DOJ/FTC that have changed their historical standards for antitrust enforcement, not the EU; and that it is the U.S. that is being protectionist, not the EU, in ignoring its duty to prosecute obvious illegal monopolization by Google.
Remember the EU and the DOJ/FTC long cooperated closely in prosecuting Microsoft’s illegal OS-browser tying, and in 2010 they cooperated closely in permitting the normally verboten combination of #2 and #3 competitors (Yahoo & Microsoft) to try and create a search and search advertising competitive alternative to Google’s monopolies.
The EU has clearly recognized reality that the Microsoft-Yahoo search competition experiment failed miserably creating now unfettered monopolies in Europe. Meanwhile the DOJ/FTC apparently are in total denial, ignoring the obvious facts before them that the little real competition that Google faced before, has largely collapsed, and that Google’s predatory tying of its monopoly search app with Android OS has enabled Google’s monopolization of the mobile search and search advertising markets.
As a result, America’s antitrust authorities appear AWOL to the world in ignoring what is obviously the biggest antitrust threat and case of the 21st century, i.e. Google’s global monopolization of much of the way that the world discovers information and monetizes that discovery of information.
If information is indeed power then Google monopolies over how the world’s information is collected, stored and indexed for immediate discovery, and then monetized, may be more monopoly power than the modern world has ever seen.
With antitrust authorities’ representatives from 55 countries attending the ABA antitrust spring meeting, it is not lost on antitrust authorities around the world, that America’s antitrust authorities have de facto forfeited global antitrust enforcement leadership to the EU and other countries, in large part because of their apparent disinterest of late in holding Google accountable to U.S. antitrust law.
Tellingly decisions by companies around the world to file their antitrust complaints against Google with the EU and other countries than the U.S. reflect conventional wisdom about the political reality that the DOJ and FTC are not receptive to monopoly complaints about the Administration’s top corporate political ally and economic national champion Google.
Conclusion
If the DOJ and FTC continue to ignore the obvious Google-Android antitrust case before them and the overwhelming evidence that Google has anticompetitively extended its search monopoly to a monopoly mobile operating system and a dominant browser, to the detriment of consumers, competition, and innovation, expect the EU and other nations to enforce their antitrust laws against Google undeterred by the national champion special antitrust pass that the DOJ and FTC apparently now are giving Google.
Also don’t forget that America’s state law enforcement authorities are unlikely to look the other way concerning Google like the Federal Government has.
Interestingly, a 2016 bipartisan letter to the FTC from the Attorney Generals of Utah and the District of Columbia said: “We encourage the commission to consider new information and developments that have become available both domestically and internationally since closing its Google [antitrust] investigation.”
It is important to note that State AGs consider Google-YouTube to be among their top consumer protection law enforcement problems given Google’s economy-wide reach and breadth of service and the sad fact that many Digital Citizens Alliance investigative reports have been able to copiously document how Google and YouTube routinely profit from the promotion and advertising of a variety of illegal products and services that can harm consumers and minors.
It is even more important to note that Google is the only company in the U.S. that has successfully blanket-challenged the legality of state’s law enforcement’s jurisdiction to investigate Google for any violation of any state law. To shut down one state subpoena from Mississippi Attorney General Hood to investigate Google violations of MS state law, Google managed to get a sweeping Federal Court decision to block a state subpoena to investigate potential criminal wrongdoing by Google, under the novel new theory that Federal Section 230 provides Google blanket preemptive immunity from state law enforcement investigation.
An appeal to the Fifth Circuit Court of Appeals backed by 41 State Attorneys General, and other interested parties, is expected to produce a decision any day. If the Fifth Circuit rules, as expected that states still have the law enforcement jurisdiction to investigate violations of state laws like they have enjoyed for the twenty years that section 230 has been Federal law, State law enforcement will resume state investigations of Google violations of state consumer protection laws, potentially including state antitrust laws as well.
Note: Harvard Business School Associate Professor Ben Edelman's award-winning paper on this subject is an outstanding and highly recommended read on this important subject.
Please click: Does Google Leverage Market Power Through Tying and Bundling?
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Appendix:
Summary of the obvious antitrust case against Google with links to public evidence
(1) DOJ and FTC have long determined Google has monopolies in U.S.
It is obvious from public evidence that: both the DOJ and FTC already have concluded Google has monopolies in search and search advertising and have also publicly promised repeatedly to be vigilant in antitrust oversight and enforcement of Google.
The DOJ was the first globally to rule Google an anticompetitive monopoly in 2008 in blocking the proposed Google-Yahoo ad partnership, and the 2012 FTC staff report’s in-depth investigation confirmed that Google still commanded “monopolies in search and search advertising.”
The DOJ and FTC have long determined Google has market/monopoly power and the incentive to abuse it to harm, consumers, competition and innovation. In many years from 2007 to 2012, the DOJ/FTC either publicly promised to be vigilant in antitrust oversight and enforcement against Google and/or determined Google commanded monopolies in search and search advertising. See: 2007 FTC Google-DoubleClick; 2008 DOJ Google-Yahoo; 2009 DOJ Google Book Settlement; 2010 DOJ Microsoft-Yahoo; 2010 Google-AdMob; 2011 DOJ Google ITA; 2012 DOJ Google-Motorola; and 2012 FTC Google staff report.
(2) The relevant market definition of licensed OS is largely legally settled.
It is obvious from public evidence that the U.S. v. Microsoft precedent largely settles that the market definition of the “licensed operating system market” (that excludes Apple’s iOS because it is not available to competitors via a license) is reasonable, which means Google Android’s mobile licensed OS commands a >90% monopoly market share in the U.S.
The established antitrust precedents here are the well-known Microsoft antitrust cases in the U.S. (United States v. Microsoft Corp.), and in the EU (Microsoft v. Commission), which concluded that Microsoft abused its dominance of the antitrust relevant market of operating system software licensable to original equipment manufacturers (OEMs), by tying in Microsoft-OEM licensing agreements that licensees of Microsoft’s OS had to load Microsoft’s browser as the default browser.
In the seminal DOJ and EU antitrust cases against Microsoft, Apple’s Mac computers were excluded from the relevant operating system antitrust market because Apple did not license their Mac operating system to OEMs; Apple kept it as an exclusive proprietary software operating system. The only small share OS competitor to Microsoft at that time was Linux.
Android is a licensed mobile OS monopoly because Apple iOS will not be part of the relevant antitrust market for the Android investigation because Android and iOS do not compete directly in the marketplace for the following reasons.
Different customers: Android licenses to OEMs; Apple sells to consumers.
Different product: Android licenses software; Apple sells hardware.
Different economic model: Android is a wholesale model; Apple is a retail model.
Different monetization model: Android harvests data for its advertising revenue model; Apple sells hardware for a premium price to consumers.
Different monetization engines: Android’s customers are advertisers which makes consumers the product that Google sells to advertisers; Apple’s customers are only the consumers to which they sell their products.
Different cost model: Android is licensed for free (no licensing fee); Apple iOS is a feature consumers pay for as part of the Apple integrated hardware/software product.
Different customization model: Android is a stand-alone product in the marketplace that is then intended to be customized by OEMs before offered to customers in a differentiated way; Apple iOS is totally-integrated internal software that optimizes Apple hardware and software in one way only.
Different business approach: Android is a commercially and freely available universally in the marketplace; iOS is exclusive to Apple.
Different intellectual property model: Android alleges to be an open platform model; iOS is prideful about it closed walled-garden platform model.
Different data model: Android is a data-driven business; Apple is not.
Different data protection models: Android as a wholesaler does not control the ultimate security and privacy of consumers’ data by design; Apple as a retailer by design has an interest to protect the privacy and security of their consumer-customers and their data.
Given Apple iOS is not part of this market for antitrust purposes, Gartner stats per Statista show Google-Android commands ~97% market share of 2015 global smartphone shipments, a monopoly position by most reasonable measure. (The calculation: 100% - Apple iOS 15.9% share = 84.1% non Apple share; Android’s 81.6% share / 84.1% total non Apple share = 97% Android share of the global smartphone shipments.)
(3) The relevant tying harms involved here are largely legally settled.
It is obvious from public evidence that U.S. v. Microsoft also legally settled that tying a free browser (Explorer) to a monopoly Windows operating system was illegal monopolization behavior that harmed consumer welfare and innovation.
The central decision that was upheld in United States v. Microsoft Corp. was that Microsoft-OEM licensing agreements requiring that licensees of Microsoft’s monopoly Windows OS had to load Microsoft’s browser as the default browser specifically was found to be an anticompetitive predatory strategy that created a market barrier to competitive entry.
(4) Google’s tying is highly analogous to Microsoft’s illegal tying.
It is obvious from public evidence that Google Android’s contractual tying behavior is highly analogous to what U.S. v. Microsoft ruled illegal monopolization behavior because it involved Google contractually tying of its dominant search app to the use of its free Android operating system and its free Chrome browser operating system, resulting in >90% share of the licensed mobile OS market and a dominant position in the browser market.
Google-Android’s contractual tying of its monopoly search app to its nascent free Android mobile operating system and its nascent Chrome browser operating system is an eerie mirror image of the illegal Microsoft contractual tying of its monopoly desktop Windows operating system with its nascent Internet Explorer browser. They are highly analogous in products tied and how they are tied via the OEM contract.
See here for the evidence of the Android contract tying.
Android, with a unique >1.5 billion monthly active users, is now the only viable licensable mobile operating system globally, uniquely licensed by a critical mass of 400 OEMs, >550 carriers, and ~4,000 distinct devices -- per Google.
In addition, Google now commands the world’s leading browser-based operating system, Chrome, with >1 billion users and 57% market share globally, which is 3.5 times the share of the next competitor, Microsoft Explorer, per StatCounter.
Google plans to consolidate Chrome with Android in 2016 per the WSJ.
(5) Google’s monopolies apparently are expanding due to Google’s contractual tying.
It is obvious from public evidence that in the three years since the FTC closed its search and Android investigations January 3, 2013, Google has extended its original desktop search and search advertising monopolies to mobile monopolies; extended its search dominance to YouTube, Maps, Play, and Gmail apps; created an Android licensed mobile OS monopoly; and created a dominant chrome browser operating system.
Google’s monopolies have only grown in scale, scope and reach since DOJ’s determination in 2008 and the FTC staff’s conclusion in 2012 that Google has “monopolies in search and search advertising.” See the supporting statistics here and here.
Specifically in about three years from 2012 to 2015, Google has augmented at least the following seven product verticals by the following number of users: translation by ~300m; maps by ~400m; video by ~600m; email by ~650m; app store by ~750m; operating system by ~750m; and browser by ~800m. See here for chart and links to the sources.
Please see this sourced, one-page, chart of “Google’s Dominance Consolidation.”
Note that these are not normal organic competitive market outcomes.
They could only be the synthetic results of exceptional leveraged market power and powerful inter-network effects. For example, via Android tying/bundling these apps/services listed above on the home screen of Android devices via manufacturer contracts called Mobile Application Distribution Agreements (MADA). Another example, via Google’s forcing integration of a new unified privacy policy without user consent and increased Google mandates for users to sign-in to a Google omni-account in order to use or to interact with many of Google’s most popular services, like those listed above.
(6) Core competition to Google search and search advertising has collapsed.
It is obvious from public evidence that Google’s only previously material U.S. competitors, Microsoft and Yahoo have conceded the mobile search and search advertising markets to Google; and that the market is concluding that Microsoft, Nokia, and Blackberry are irrelevant competitive ecosystem alternatives to Google and Apple.
When the DOJ and the EU approved Yahoo outsourcing its search engine and ad engine technologies and business to Microsoft’s Bing, real competition in search and search advertising in the U.S. went from 2 competitors to Google, Yahoo and Microsoft, to only one competitor to Google, Microsoft Bing.
Competition to Google halved again when Microsoft wrote off its signature mobile acquisition, Nokia, Microsoft and tacitly acknowledging defeat in mobile. Since then it has strategically pivoted away from being a “mobile-first” company to being a cloud-first enterprise company. Tellingly, Microsoft is folding its separate mobile OS functionality into its flagship Windows 10 OS.
Confirming that Microsoft and other potential mobile OS competitors are not significant competitors to the de facto Android mobile OS monopoly, Facebook-WhatsApp announced in a blog post that by the end of 2016, WhatsApp Messenger would “focus our efforts on the mobile platforms the vast majority of people use.” Thus it would no longer support the OSs of Nokia, Blackberry or Windows Phone 7.1. This is real world evidence that other mobile operating systems cannot offer developers enough user audience or app store distribution to be worth developers’ time.
Competition to Google is threatened further by Yahoo seeking to outsource about half of its searches that it directs to Microsoft now to Google for monetization in a revenue-sharing agreement. Given that mobile is taking increasing market share relative to the desktop market for which Microsoft still provides competition, Microsoft’s defeat in mobile means Microsoft will be a consistently diminishing competitor in search and search advertising going forward.
Given that Microsoft has never indicated that it has made a profit in search, and has lost an estimated $15b in losses trying to make its search alternative profitable, i.e. sustainably competitive, it could make financial sense in the future for Microsoft to sell or close down its search technologies and business, potentially leaving no direct material competitor to Google long term in the U.S. or the world.
DOJ and FTC staffs who are familiar with these search and search advertising markets understand that there are huge, much under-appreciated barriers to competitive entry in the extraordinary global scale scope and reach in business relationships, infrastructure and resources required to compete.
Simply, Google’s predatory tying strategy is killing off its last remaining search and search advertising competition.
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Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, an emergent enterprise risk consultancy for Fortune 500 companies, some of which are Google competitors, and Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests. He is also author of “Search & Destroy: Why You Can’t Trust Google Inc.” Cleland has testified before both the Senate and House antitrust subcommittees on Google and also before the relevant House oversight subcommittee on Google’s privacy problems.
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Googleopoly Antitrust Series
Googleopoly I: The Google-DoubleClick Anti-competitive Case – 2007
Googleopoly II: Google’s Predatory Playbook to Thwart Competition – 2008
Googleopoly III: Dependency: Crux of the Google-Yahoo Ad Agreement Problem – 2008
Googleopoly IV: Google Extends its Search Monopoly to Monopsony over Info -- 2009
Googleopoly V: Why the FTC Should Block Google-AdMob – 2009
Googleopoly VI: Seeing the Big Picture: Google’s Monopolizing Internet Media --2010
Googleopoly VII: Monopolizing Location Services – Skyhook is Google’s Netscape –2011
Googleopoly VIII: Google’s Deceptive and Predatory Search Practices – 2011
Googleopoly IX: Google-Motorola’s Patents of Mass Destruction -- 2012
Googleopoly X: Google’s Dominance is Spreading at an Accelerating Rate -- 2013
Googleopoly XI: A Satire: Grading Google’s Search Antitrust Remedies in EU Test – 2013
Googleopoly XII: Google-YouTube’s Internet Video Distribution Dominance – 2013
Googleopoly XIII: Let’s Play Pretend, Satire: Google’s 2nd EU Search Remedy Proposal [11-12-13]
Googleopoly XIV: Google’s WorldWideWatch over the WorldWideWeb [9-14]
Googleopoly XV: The GoogleNet Playbook & Zero Pricing – A Special Report [11-18-14]
Googleopoly XVI-A: Google Android has 90% OS share; Apple iOS isn’t direct competitor [5-29-15]
Googleopoly XVI-B: FTC-Created Google Android Mobile Monopoly: Anti-Privacy by Design [6-5-15]
Googleopoly XVII: Google Consolidating its Dominance at Unprecedented Rates [9-2-15]
Googleopoly XVIII: Google Buys Jibe to Force Android as Web’s Default Communications App [10-7-15]
Googleopoly XIX-A: Search + Android + Chrome = Google’s Gatekeeper Inner-net Regime [2-24-16]
Googleopoly XIX-B: The Apparent Androidopoly Antitrust Case [3-3-16]
Googleopoly XIX-C: The Obvious Google-Android Antitrust Case the DOJ & FTC Are Ignoring [4-4-16]
