How the Google Antitrust Ruling May Influence Tech Competition

Steve Lohr

In 2000, a ruling in a U.S. antitrust case against Microsoft helped set the rules of competition for the digital giant of its day. At the time, a federal judge said Microsoft had abused the monopoly power of its Windows operating system and ordered that the company be split up. A breakup was reversed on

appeal, but key legal findings were upheld. And Microsoft was prohibited from forcing restrictive contracts on its industry partners and ordered to open some of its technology to outsiders  preventing the company from single-handedly controlling the internet.

More than two decades later, a ruling in a Google antitrust case similarly promises to shape new rules for the tech industry. Judge Amit P. Mehta of U.S. District Court for the District of Columbia found on Monday that Google had violated antitrust laws by stifling rivals in internet search to protect its monopoly.

Google’s loss could have major ripple effects for competition today. U.S. regulators have also accused Apple, Amazon and Meta of violating antitrust laws by advantaging their own products on the platforms they run and acquiring smaller rivals. The Google ruling, and potential remedies to be decided by Judge Mehta, are likely to weigh heavily on those cases, including a second lawsuit against Google over ad technology, which is scheduled to go to trial next month.

Judge Mehta’s ruling is “a predictor of what other courts might do,” said Rebecca Haw Allensworth, a Vanderbilt University law professor who studies antitrust. “You can also expect other judges to read this opinion and be influenced by it.” The influence of the Microsoft antitrust case was, in fact, apparent in the Google decision. In Judge Mehta’s 277-page judgment, Microsoft appeared on 104 pages, both as an aspiring rival to Google and as a legal precedent. Google has said it will appeal the ruling.

After years of little enforcement, antitrust activism has taken off over the past few years, first under the Trump administration and then under President Biden’s. The heads of antitrust enforcement at the Justice Department and the Federal Trade Commission, Jonathan Kanter and Lina Khan, have sued the other tech giants over allegations that they are monopolies engaged in illegal corporate behavior.

All of those cases hinge on the 19th-century Sherman Antitrust Act, which makes it illegal for a monopoly to engage in corporate conduct to thwart competition. But that law, designed for companies like Standard Oil, faces the continuing challenge of being applied in a different industrial environment to the new technology of its day. And both agencies have sought to test the old law by applying new legal arguments when it comes to the tech giants.

Without major cases, “the law will stagnate,” Kanter said in a speech in 2022. “Congress designed antitrust law to play out in the courts.” In the 1990s, Microsoft was the ruling digital platform, with its Windows software controlling the experience of users on more than 90 percent of personal computers.

Today, Google has a comparable grip on internet search.

That changed for Microsoft after a judge ruled it was a monopoly. Regulators had brought the suit after the software giant waged a campaign to try to crush an upstart, Netscape, the pioneering commercial browser company. Microsoft bullied PC makers with contracts that effectively stopped them from offering the Netscape browser. Ultimately, Microsoft was prohibited from restricting, in its contracts, the freedom of PC makers to offer other software, and was forced to open up some of its technology. The time, money and management attention spent, as well as the adverse public scrutiny, some antitrust experts say, did have a deterrent effect, moderating the company’s behavior.

That prevented Microsoft from controlling the development of the internet, said Fiona Scott Morton, an economics professor at the Yale University School of Management. “The goal is to open a path for future innovation,” she said. On Monday, Judge Mehta found that Google had broken the law through its exclusive deals with Apple, other device makers and browser companies to make Google’s search engine the automatic selection.

Judge Mehta praised the company for its engineering skill and investment in search. “But Google,” he wrote, “has a major, largely unseen advantage over its rivals: default distribution.” The Google ruling is significant because “it applies to big tech platforms the notion that while you can be dominant, you can’t abuse that dominance,” said Bill Baer, a former top antitrust official in the Justice Department. Unlike Microsoft, Google is a pure internet company with a very different business model, relying mainly on advertising rather than software licensing.

In the Google case, as in Microsoft’s, the court found that contracts illegally excluded rivals. But Google’s were more carrot than stick, offering industry partners generous payments rather than threats. Google paid smartphone companies and browser makers more than $26 billion in 2021, according to court testimony, to set its software to automatically handle all search queries. In the Google case, data was described as a vital asset. The more user queries that flow through a search engine, the more data that is collected and then harnessed to improve search results, attracting still more users and generating more data.

“At every stage of the search process,” Judge Mehta wrote, “user data is a critical input that directly improves quality.” Google’s multibillion-dollar default deals ensured that the company had a huge data advantage in search, the government claimed. It also presented studies in behavioral economics that concluded people rarely switched from the automatic settings, even if doing so was not a daunting technical task. Consumer behavior was not forced but strongly steered by the power of defaults.

In his ruling, Judge Mehta pointed to “the power of defaults.” He cited and agreed with an expert witness for the government, Antonio Rangel, a professor of neuroscience, behavioral biology and economics at Caltech, who testified that the “vast majority” of searches were done by habit. In court, Google countered that its search engine was the leader because it was a superior product; that data was important but clever software was its real advantage; and that its contracts were deals freely entered into by its industry partners.

But Google struggled to credibly explain why it paid so much to get preferred distribution if its search software was clearly the best technology. Those payments made sense, the government insisted, to ensure that Google was the winner, with its monopoly entrenched. “That’s how the government told the story, and it’s a pretty convincing story,” said Herbert Hovenkamp, an antitrust expert at the University of Pennsylvania’s Carey Law School.

Judge Mehta will now decide what remedial steps he should order to open the search market to greater competition and new innovators. Even before his ruling, antitrust experts offered a flurry of recommendations. They run the gamut from prohibiting Google from striking exclusive deals for search distribution and sharing its search data with competitors to splitting off Google’s Chrome browser or its Android mobile operating system.

“This is the first significant monopolization case against one of the dominant digital companies  it’s super-important in that sense,” said Nancy Rose, an economist at the Massachusetts Institute of Technology.