Google Under Fire in US for Predatory Monopoly Practices
The US Department of Justice has filed a lawsuit against Google-Alphabet (Alphabet is Google's parent company) for a range of anti-competitive practices using its monopoly power in the search market. This is the only major action in the US against tech monopolies in recent years, the last one being the 1998 action against Microsoft. Eleven state attorney generals have joined the Department of Justice suit, with more expected to follow.
Google currently has a market share in online searches globally of more than 92%, which rises to more than 98% in countries like India. The only market in which it has virtually no market share is China, where it shut shop for its search engine in 2010.
The four major tech companies—Google-Alphabet, Facebook, Amazon, and Apple—are globally on the radar for their monopoly power and their ability to drive out competition. The recent hearings in the US Congress on these Big Four were followed by a staff report of the Committee which recommended to Congress appropriate legislative action to break-up or limit these companies.
Facebook has additionally come under the scanner for being an instrument of hate speech, helping the formation of violent militias, and promoting conspiracy theories, including COVID-19 conspiracies. A Delhi Assembly Committee—Committee for Peace and Harmony—is investigating Facebook’s role in Delhi's communal violence early this year (full disclosure: I also deposed before this committee).
The charges against Google are the following:
- creating a web of exclusionary and interlocking business agreements to shut out competitors
- paying mobile phone manufacturers and web browsers to make Google as their preset, default search engine
- controlling the online ad market with its selling and buying tools to ensure that web publishers are locked in
- using its control over the Android operating system to position its Chrome web browser and search engine as the default for mobile platforms
Much of these charges sound like legalese and beyond our ability to understand what Google is doing. The simple issue is that Google uses it monopoly over the search engine and its other Google properties to grab over 30%—$103.73 billion in 2019—of the global digital ad revenue pie. Facebook has a little over 20%, but today's story is Google and not Facebook.
Google and Facebook have one similarity. Neither generates any content; they show you content generated by others. Their entire business model is capturing eyeballs so that we, or our attention, can be sold to advertisers. Those who create content may get a small fraction of the ad revenue that Google generates, but the bulk of the digital revenue is appropriated by Google as the major gatekeeper of the digital world.
We may ask, how does Google get so much of the ad revenue? Does its search engine not show other sites, which the person searching on Google would also visit? And, therefore, would not these sites also get a share of online advertisements?
Visiting other sites via Google searches is decreasing year after year. Rand Fishkin (tech entrepreneur and a leading search engine optimisation or SEO expert) quotes the letter of Cicillline, the Chair of the Judiciary Committee, to Google: “In 2004, Lary Page, the co-founder of Google had stated in an interview, ‘We want you to come to Google and quickly find what you want...We want to get out of Google and to the right place as fast as possible.’ ” This is not the case anymore; if it ever was. The majority of searches on Google lead today to no further clicks on the links in the displayed search pages (zero clicks); if links on the search pages are clicked, they lead primarily to other Google sites.
In the desktop market, around 51% of searches generate zero clicks on the search result page links. If clicks do occur, a significant share of such outgoing clicks is only for other Google sites, such as YouTube, Google Maps, etc. Clicks on search pages leading outside the Google universe are dwindling every year.
The situation is much worse in mobile searches, where Google has an even more dominant position. We might think that Apple mobile phones should be independent of Google and, therefore, people might fare better in Apple’s ecosystem of iPhones, iPad, etc. It is not. Google pays more than $10 billion every year to Apple to carry its search and maps as its default.
These figures are of search engine outputs and the resulting clicks. What about the proportion of web traffic referrals that sites receive, meaning when sites are visited from other sites, where do they come from? As much as 70% of such web referrals on any site come from Google properties. Annoy Google and your site will fall into a deep black hole, which only the faithful will visit.
The result: if we want our sites to be visited, we have to configure the site in a way that Google can catalogue all our content easily. If Google makes changes, so have we; otherwise, our sites will not show up on Google searches, Google Amp pages, and Google News. If we want our videos to be viewed, our only realistic option is YouTube. And there is no way we can fight with Google even if our share of ad revenue dwindles; Google holds all the cards!
How does Google ensure that most search queries on Google lead to zero clicks or lead to other Google properties? Zero clicks happen because Google increasingly curates the results of the queries, displaying the required information on the search result itself that most searchers do not go further. Even Wikipedia is worried, as its clicks from Google are dwindling.
The second is that it promotes its own sites, or content on its properties, e.g., YouTube videos on the search page, such that people do not visit the world outside Google. The rules of ranking that it imposes on others, do not apply to Google properties and sites, which have consistently higher rankings on Google searches than searches on other search engines, like DuckDuckGo, Bing, etc. According to Fishkin, the rules of ranking are only for outsiders! As Fishkin puts it, the answer to the question of how to be ranked number one on a Google search is an easy one: be owned by Google!
The European Union regulators have penalised Google on occasions, but Google has been happy to pay the fines, as the monopoly it has achieved through its anti-competitive action cannot be reversed. It is like license fees that telecom companies pay to secure the airwaves! In India, too, Google has been fined, but the amount of the fine was a paltry $21 million, which does not even count as a rap on the knuckles for Google.
These tech monopolies are also facing action in the EU and Australia and even in the UK. In the UK, the Monopoly and Mergers Commission (now renamed as the Competition and the Markets Authority) was replaced with a weakened Competition Commission in 1999, a step which India quickly copied in 2002.
Even with this weaker regulatory framework than the earlier anti-monopoly regulations, UK's Competition and the Markets Authority stated in its recent report that these companies “are now protected by such strong incumbency advantages – including network effects, economies of scale and unmatchable access to user data – that potential rivals can no longer compete on equal terms...We need a new, regulatory approach.”
India has been charting a very different course. Not only has the government and its regulatory agencies sheltered Reliance Jio in becoming the national telecom monopoly, it has also 'blessed' huge investments from Google and Facebook of $4.5 billion and $5.7 billion, respectively, helping cement all three of their monopolies. While all other technology partners bring in their technology tools and platforms, Jio's key to success is its old fashioned monopoly over India's telecom network. India is slated to be the world's biggest market after China in the coming decades.
The global anti-monopoly actions show that what we are witnessing is a tectonic shift in the way big tech and their owners are being viewed. Not as libertarian icon Ayan Rand's imaginary captains of industry who, through super-manlike powers, are creating a new world, but simply as venal and predatory monopolies.
Even in the fractured politics of the US, there seems to be a bipartisan consensus that monopolies are inherently dangerous to consumers and competitors alike. Otherwise, why would a Justice Department under Donald Trump file a case against Google-Alphabet, in which, according to its spokespersons, nothing—presumably even breaking up the monopolies -- as advocated by Senator Elisabeth Warren—is off the table.
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