Why a big antitrust case hits close to home. Plus: A Foxconn update and a win in South Carolina.
|Pat Garofalo||16 hr|| 2|
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The Justice Department on Tuesday released the long-teased details of an antitrust case against Google. The lawsuit alleges that Google used several anti-competitive measures — including exclusive payments to Apple to make Google the default search engine on iPhones, as well as preventing users from deleting Google on phones running Google’s own Android operating system — to entrench and maintain its dominance as the country’s number one search engine.
“Google is now the unchallenged gateway to the internet for billions of users worldwide. As a consequence, countless advertisers must pay a toll to Google’s search advertising and general search text advertising monopolies; American consumers are forced to accept Google’s policies, privacy practices, and use of personal data; and new companies with innovative business models cannot emerge from Google’s long shadow,” said the complaint, filed in federal court in Washington, D.C. It relies on Section 2 of the Sherman Act, which you can read more about here.
The case was joined by 11 state attorneys general, all Republicans. Attorneys general in several other states are also reportedly planning to file an additional case or cases over other aspects of Google’s dominance, including its power over the advertising technology industry. (I’ll examine those cases more in depth if and when they happen.)
There’s obviously some politicking at work here: The Justice Department wants to show it is taking on big tech right before the election, at a moment when lots of conservatives are complaining about the “bias” tech platforms supposedly have against them. (That charge is nonsense, and the antitrust case, of course, has nothing to do with anything “bias”-related.)
It’s also a narrow case, going at just one aspect of Google’s overall digital market dominance. But it’s still very important, and is one more indicator — along with the recent report produced by the House antitrust subcommittee — that big tech is no longer the belle of the ball in D.C. and will face serious bipartisan scrutiny in the coming years.
So why should this matter to you? Who cares if Google used some exclusive deals and leveraged its other properties to dominate the search market?
Well, as I detailed recently in this report (and talked about here on NPR), Google likes to portray its search engine as a disinterested arbiter of the internet, sending you to exactly the information you seek, with as little friction as possible. Just check out these television ads it’s been running, presumably as a prebuttal to this very case: Google claims to simply be a conduit between you and the stuff you need in your neighborhood.
But that’s not how it actually works.
Instead, when Google has a product it wants to promote, it short-circuits its search algorithm to preference that product instead of what its algorithm would naturally provide. So you’re not necessarily getting the best information available when you search on Google: You’re often getting results that do the most to boost Google’s bottom line. And that hurts both your ability to access good local information and the ability of local businesses to connect with customers.
Here’s how the short-circuiting happens: When you search, say, “Thai restaurant near me,” you’ll get sent to Google’s restaurant reviews, even if Yelp’s or TripAdvisor’s are more comprehensive. Or you’ll get sent to Google Maps, even if some other mapping company has better info on your local area. Google’s business listing box will pop up, even if some other site has more up-to-date menus and contact information.
At the moment, more than 80 percent of the U.S. search market belongs to Google, and the number is even higher, more like 95 percent, when it comes to searches on mobile devices. And less than half of those searches result in the searcher clicking away from Google.
Google likes it that way, because Google makes money by selling ads. More time spent on Google properties, rather than elsewhere on the internet, means more ad impressions, which means more profit for Google.
The sheer size of Google renders its products less useful for finding local information, because Google’s ability to focus on any one locale or type of local search is virtually zero. Two academic studies — here and here — have found that users prefer what Google’s algorithm would naturally produce from local searches than what it produces when Google preferences its own products. Google is literally degrading its search in the name of selling more ads and driving you to other Google properties.
But because it’s so dominant — it’s the default on your phone and computer, which most people never bother to change — very few users ever abandon it for other search engines, or even know that the degrading is happening. The fact that you use Google to “Google” everything wasn’t the result of natural competition, but of Google using its size and power to bully everyone else out of the market. And thus, we have the antitrust case.
Google’s size also makes it a haven for misinformation and scammers trying to steal customers from local businesses. In the paper, I tell the story of a locksmith in Florida whose business name was stolen by a scammer on Google, who then used that name to hijack the locksmith’s customers, charging them several times what the locksmith usually charged. The scammer used the locksmith’s home address, with a picture of his front door, as the “business address.”
The locksmith spent $115,000 on Google ads trying to combat that and other scammers, to no avail. So both a local business and local customers were harmed by the intersection of Google’s dominance and its inability to police its products.
Many other businesses wind up in that same perverse position: Having to pay Google to buy ads to combat the scams and other nonsense that Google permits. So even trash listings were good for Google.
This also matters when it comes to local resources. Google’s power makes it easier for it to extract tax breaks and other giveaways from local communities, because it is one of the largest and most recognizable corporations in the world, and thus is able to promise jobs and investments for its community “partners” desperate for economic development linked to big tech. It has received about $882 million in taxpayer giveaways dating back to at least 2005. Recently, Nevada okayed $25 million for a new Google data center.
But as readers of this newsletter hopefully know well, those promises are empty: The jobs and investment promised don’t actually materialize. Google is also one of the pioneers of the use of shell companies and non-disclosure agreements to hide its interactions with local officials, which is terrible for local democracy.
Those abuses occur, at least in part, because Google is powerful enough to push around politicians who dare not offend such a massive company. Google entrenches its economic power via anticompetitive measures that hurt your community, and then leverages that dominance into political power, extracting resources from taxpayers, who can’t act to hold it or local officeholders accountable.
It’ll be a long time before this case actually arrives at a conclusion. Future administrations will have to decide whether or not to continue it, or join the other efforts from state attorneys general.
But while it all may seem wonky and legalese-y, the case shows how Google became the de-facto search engine in the U.S. — with its name now synonymous with the act of searching the internet — which has big consequences for your ability to access information about the world right outside your door, as well as for how your local resources are allocated. As an opening salvo, I’ll certainly take it.
EVENT: If you’re interested in the Google case and other big tech antitrust issues, my shop, the American Economic Liberties Project, is hosting an online event tomorrow (Wednesday, 10/21) with House Antitrust Subcommittee Chairman David Cicilline and a bunch of other great guests. RSVP here.
UPDATE: Here and elsewhere, I’ve written about Foxconn, the manufacturer that received a big subsidy package from Wisconsin — celebrated early and often by President Trump — and then proceeded to break nearly all the conditions of the deal.
Last week, the state formally denied Foxconn its tax credits, citing those unfulfilled obligations (though some local money has already been expended that local taxpayers will never get back). This is more evidence that accountability measures when it comes to corporate subsidies are super important.
Trump, predictably, tried to blame Wisconsin’s current Democratic governor, Tony Evers, for the debacle. The response below is both accurate and hilarious.
ONE MORE THING: A judge in South Carolina ruled that the state’s Commerce Department has consistently been violating the state’s Freedom of Information Act by refusing to divulge details about which corporations are receiving what sort of subsidies. Here’s a good editorial about why it’s an important ruling.
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— Pat Garofalo