You don’t have to read far into the filed documentation in the case of the United States of America v Google LLC. You get the big picture by page 4: Google is a monopolist.
The History:
In 2020, two separate lawsuits had been filed against Google, specifically one by the US Department of Justice and another by the State of Colorado. But that’s not to say that every antitrust watchdog, every state’s Attorney General and a raft of legislators and regulators were not already deep into proposed complaints and actions against the search and advertising giant.
The lawsuits alleged that Google had violated Section 2 of the Sherman Act that makes it unlawful for any person to “monopolize, attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States or with foreign nations…” The section continues to define Monopolization requirements specifically as “(1) monopoly power and (2) the willful acquisition or maintenance of that power as distinguished from growth or development as a consequence of a superior product, business acumen or historic incident.”
While discovery in the case began in late 2020, the bench trial itself did not kick off until September 2023 with closing arguments in May 2024. Throughout the plaintiffs alleged that Google held and illegally maintained a monopoly in three markets (General search services, search advertising, and general search text advertising) by entering into exclusive agreements to secure default distribution on desktop and mobile devices.
The Ruling:
Judge Amit Mehta ruled that Google was a monopolist, but more specifically, Google acted as one to maintain this monopoly in two product markets, general search services and general text advertising, and entered into distribution agreements that are exclusive and have anticompetitive effects in these markets. The court also found that Google exercised its monopoly power by “charging supracompetitive prices for general search text ads” allowing “Google to earn monopoly profits.”
While portions of the full ruling do come down in favor of Google, excluding search advertising as a relevant product market and noting that Google was not required to work with or create deals with specific competitors or vendors in markets, the words are in literal black and white that Google is a monopoly with general search and text ads, resulting in a marketplace where Google has created and maintains its status as the only viable game in town despite the supposed availability of competitors.
Analysis:
For those who have been playing along with the bench trial and the release of evidence packages, this has all felt more like the boring draft of a Succession script than what is typically a rather boring straight forward case of antitrust arguments and evidentiary exchanges. From text exchanges about toggling speeds and results to convince market watchers new programs were designed to “help the little guys” while not making any substantive changes to the results or the ability for the “little guys” to beat out large advertisers in text ad auctions to the public airing of grievances between giants like Apple and Microsoft, this case has been bingeworthy and cringeworthy all at the same time.
It is of note that Google has consistently increased prices of their solutions, especially the text-based advertising units, while conversion rates have continued to decrease. In a 2024 report from LocalIQ’s investigation into search advertising benchmarks, while average conversion rates had dipped from 7.85% in 2022 to 7.04% in 2023, cost per lead (CPL) had increased by about 25%, click thru rate (CTR) had increased by about 5% and cost per click (CPC) had increase by 10% across all industries. In their report findings, the question was asked as to what Google could possibly be “tuning” to “keep finding ways to justify higher prices despite not delivering equally greater returns.”
While guilty headline of this case is a whopper, the reality here is that this trial was about liability, not about consequence or remedies. That phase of proceedings could bring anything from slaps on wrists and demands to stop doing naughty things to requirements to break-up the search business entirely. But it will certainly not bring the end to Google.
The bigger news here is that this is just ONE case…and an early one that will likely serve as precedent for multiple antitrust cases the DOJ has lined up against Google and many others. Next up for Google is the massive advertising technology case that is set to kick off in September, 2024, United States of America v Google, LLC, in which the DOJ alleges Google monopolized multiple digital advertising technology products via serial acquisitions and anticompetitive auction manipulation to subvert competition. Amazon, Apple and Meta are all facing their own lawsuits from the government as wel, making this ruling an important guidepost for how these cases may be defined and adjudicated in the future.
But What About AI?
The crux of Googles defense was that competitors in each market has had the opportunity to compete and innovate. AI and especially the power of generative AI holds and its possible shakeup in the world of search was brought up several times in evidence and at trial. However, the court and the experts brought forward by the government said that while AI has made leaps and bounds, the standard bearing technology and processes deployed in search specifically have not made any meaningful impact or improvement in results.
“Despite these recent advances, AI has not supplanted the traditional ingredients that define general search…And it is not likely to do so anytime soon. Importantly, generative AI has not (or at least, not yet) eliminated or materially reduced the need for user data to deliver quality search results.”
In other words, yes, AI and generative AI is a massive search opportunity...but as of the time of this ruling that oppportunity is more of an experiement wrapped in a wish than anything that could have subtantively aided the competition to make any gains against Google.
Does This Matter?
As for immediate backlash or impact on Marketers, this is a wait and see moment. The ruling has a long way to go before it actually DOES anything to Google, its business or how advertisers buy and do business with Google let alone its competitors. The biggest impact the case may have is in how an Act passed in 1890 is applied to how antitrust and market monopolization is addressed a distinctly twenty-first century digital world.
Google for its part has already shared its intention to appeal the decision, stating that they should not be penalized for making the best search engine available. So now, we hold on until the remedy phase of the proceedings…and of course all the additional legislation that could not just change the digital advertising and marketing landscape forever. Keep an eye open for how acquisition rumors spread as these cases progress...especially those rumors where both supply and demand sides of markets become intertwined (yeah...looking right at you Hubspot acquisition rumors) and how these upcoming cases could bring the lengthy dance with cookies is entered into evidence. All of these moves could also apply new and interesting pressure to the non-advertising revenue drivers of business at Google to start to answer the hypothetical question of what comes next after a breakup? Where will the next massive wave of revenue come from?
Image Credit: Image has been AI generated using Adobe Firefly Image 3 model.
