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U.S. says Google breakup may be needed to end violations of antitrust law

Business | 2020-10-20 18:48:06
U.S. says Google breakup may be needed to end violations of antitrust law
The U.S. Justice Department filed an antitrust lawsuit against Alphabet Inc's GOOGL.O Google on Tuesday, claiming the $1 trillion company uses its market power to fend off rivals and said nothing was off the table, including a breakup of the internet search and advertising company.

The lawsuit, which was joined by 11 states, marks the biggest antitrust case in a generation, comparable to the lawsuit against Microsoft Corp MSFT.O filed in 1998 and the 1974 case against AT&T which led to the breakup of the Bell System.

The lawsuit claims that Google acted unlawfully to maintain its position in search and search advertising on the internet. It states that “absent a court order, Google will continue executing its anticompetitive strategy, crippling the competitive process, reducing consumer choice, and stifling innovation.

The complaint says that Google has nearly 90% of all general search engine queries in the United States and almost 95% of searches on mobile.

“Google is now the unchallenged gateway to the internet for billions of users worldwide ... For the sake of American consumers, advertisers, and all companies now reliant on the internet economy, the time has come to stop Google’s anticompetitive conduct and restore competition.”

“Ultimately it is consumers and advertisers that suffer from less choice, less innovation and less competitive advertising prices,” the lawsuit states. “So we are asking the court to break Google’s grip on search distribution so the competition and innovation can take hold.”

When asked on a conference call what specific action should be taken, a Justice Department official said, “Nothing is off the table but a question of remedies is best addressed by the court after it’s had a chance to hear all the evidence.”

Google, whose search engine is so ubiquitous that its name has become a verb, called the lawsuit “deeply flawed,” adding that people “use Google because they choose to - not because they’re forced to or because they can’t find alternatives. We will have a full statement this morning.”

Republican Senator Josh Hawley, a vociferous Google critic, accused the company of keeping power through “illegal means” and called the lawsuit “the most important antitrust case in a generation.”

The Microsoft lawsuit was credited with clearing the way for the explosive growth of the internet since the antitrust scrutiny prevented the company from attempting to thwart competitors.

Tuesday’s federal lawsuit marks a rare moment of agreement between the Trump administration and progressive Democrats. U.S. Senator Elizabeth Warren tweeted on Sept. 10, using the hash tag #BreakUpBigTech, that she wanted “swift, aggressive action.”

Coming just days before the U.S. presidential election, the filing’s timing could be seen as a political gesture since it fulfills a promise made by President Donald Trump to his supporters to hold certain companies to account for allegedly stifling conservative voices.

Republicans often complain that social media companies including Google take action to reduce the spread of conservative viewpoints on their platforms. Lawmakers have sought, without explaining how, to use antitrust laws to compel Big Tech to stop these alleged limitations.

Shares of Alphabet rose nearly 1% after news the government lawsuit was imminent. There was some doubt in the markets that Washington lawmakers will actually come together and take action, according to Neil Campling, head of tech media and telecom research at Mirabaud Securities in London.

“It’s like locking the proverbial door after the horse has bolted. Google has already got the monopolistic position, has invested billions in infrastructure, AI, technologies, software, engineering and talent. You can’t simply unwind a decade of significant progress.”

The 11 states which joined the lawsuit all have Republican attorneys general.

More lawsuits could be in the offing since probes by state attorneys general into Google’s broader businesses are under way, as well as an investigation of its broader digital advertising businesses. A group of attorneys general led by Texas is expected to file a separate lawsuit focused on digital advertising as soon as November, while a group led by Colorado is contemplating a more expansive lawsuit against Google.

The lawsuit comes more than a year after the Justice Department and Federal Trade Commission began antitrust investigations into four big tech companies: Amazon.com Inc AMZN.O, Apple Inc AAPL.O, Facebook Inc FB.O and Google.

Seven years ago, the FTC settled an antitrust probe into Google over alleged bias in its search function to favor its products, among other issues. The settlement came over the objections of some FTC staff attorneys.

Google has faced similar legal challenges overseas.

The European Union fined Google $1.7 billion in 2019 for stopping websites from using Google’s rivals to find advertisers, $2.6 billion in 2017 for favoring its own shopping business in search, and $4.9 billion in 2018 for blocking rivals on its wireless Android operating system.

Reuters
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