Should Google be broken up? DOJ's monopoly suit against the tech giant | The Excerpt
On a special episode (first released on November 7, 2024) of The Excerpt podcast: The Department of Justice is accusing the tech giant of maintaining an illegal monopoly in its search and advertising sectors. If Google is dismantled, how might that impact the way Americans access information? Florian Ederer, a professor at Boston University's Questrom School of Business, joins The Excerpt to discuss what happens next in the federal case that could lead to an historic breakup.
Hit play on the player below to hear the podcast and follow along with the transcript beneath it. This transcript was automatically generated, and then edited for clarity in its current form. There may be some differences between the audio and the text.
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Dana Taylor:
Hello and welcome to The Excerpt. I'm Dana Taylor. Today is Thursday, November 7th, 2024, and this is a special episode of The Excerpt.
Is Google just too big? The US government seems to think so. The Department of Justice has initiated antitrust proceedings against Google, accusing the tech giant of maintaining an illegal monopoly in its search and advertising sectors. This marks the most significant attempt to dismantle a major corporation since the breakup of AT&T back in the 1980s. If successful, this could drastically alter how millions of Americans access information and use online services. How is Google responding and what could a Google breakup mean for you?
Here to wade through all of this is Florian Ederer, professor at Boston University's Questrom School of Business.
Thanks for coming on The Excerpt, Florian.
Florian Ederer:
Thank you very much for having me, Dana.
Dana Taylor:
First, help us understand why the Department of Justice going after Google. What are the primary reasons?
Florian Ederer:
This is a lawsuit and a trial that's long in the making. This is not a super-recent development. This is actually a lawsuit that started in 2020, so it's everything in antitrust moves relatively slowly. The antitrust lawsuit alleges that Google has monopolized the market for online search. That's a violation of Section 2 of the Sherman Act, which is one of the key parts of antitrust law in the United States. It claims that in this lawsuit that Google has anti-competitively monopolized this market to the detriment of consumers and has stifled competition such that consumers do not get the benefits of competition that would otherwise emerge if we had more competition in this market for online search.
Now, Google has a market share of about 90% in online search, and that makes it a very, very dominant player that allows it to raise prices for the placement of search ads. It allows it to extract surplus from consumers, and that's against the law. That, therefore, the reason for this lawsuit that was brought in 2020 and has come to now almost to a conclusion in the last few months.
Dana Taylor:
So Google, yes, has an empire of products and services from its search engine that many of us use daily to having the lion's share of market dominance, as you've said. What specific aspects of Google's business practices are being scrutinized in this antitrust case? What is it specifically that they're doing?
Florian Ederer:
The case is not just about all of Google. It is a very specific part of Google. It looks really just at online search. Now, in this particular case, the allegations are that Google has used anti-competitive practices such as exclusive contracts that shut out competitors from getting to consumers. So it has payment arrangements with Apple, it has payment arrangements with browser providers such as Mozilla that make Google search the default engine. Now, that means it is very hard for consumers to switch away or never even experience what it would be like to use a different search engine, such as Microsoft's Bing. It is a very, very dominant 90% market share player. That then in turn means that it can raise prices, it can privilege its own products, it can privilege its own placement of its own products. That in turn is the issue that this lawsuit is trying to address, to introduce more competition in this market because the anti-competitive practices such as these side contracts make it very, very difficult for other competitors to come into the market.
Dana Taylor:
Florian, what has Google said in response to the allegations?
Florian Ederer:
Its main arguments is saying that it's being punished here for just being the best possible product. Google says they have a 90% market share because it is simply the best product out there. It provides the best quality for consumers. So it is very important to understand that there's a very big difference in antitrust law in the United States. So it is not a crime to be a monopolist. If you become a monopolist on the merits, if you just have the best product out there that is superior to everybody else's product and you then achieve a very, very large market share of say 90%, then that's not a crime in itself. What is a violation of the law is, however, if you use anti-competitive measures to get to that type of market share, or if you abuse your dominant market position then to extract more surplus from consumers or harm these consumers.
Dana Taylor:
At first glance and clearly too the Department of Justice breaking up Google's empire seems like a good thing. But how could it negatively impact customers?
Florian Ederer:
So this is a very, very good question, and I think one that is also at the heart of this case. What the case so far has done, we've gotten to the point where Judge Amit Mehta in August ruled that Google is indeed a monopoly and that it has violated Section 2 of the Sherman Act. The ruling of the judge, however, has not made any remedies. It has not said, "We're going to break up Google or we're going to do this to punish Google. We're going to do that to punish Google." We're only now getting to that phase. So what the Department of Justice has done recently, in fact at the beginning of this month, it has said that, "Look, here's a proposal for the types of things we can do to remedy this monopoly position that Google has."
Some of these remedies are indeed measures that include breaking up the company. There's also a second set of remedies which are so-called behavioral remedies that sort of restrict what the company can do or cannot do.
What I expect now to happen is that first of all, there's going to be a detailed proposal that's going to be due on November 20. In that proposal, the DOJ is going to specify specifically what those structural and behavioral remedies are going to be. Now, things that I need on the table are splitting out Google Chrome, the browser, or splitting out Google Android, the mobile operating system owned and run by Google. But it also includes behavioral remedies such as not allowing these types of exclusive contracts that make Google the default search engine or behavioral remedies that include educating consumers about the availability of other search engines.
Now, how is that going to affect consumers? Consumers definitely want to have more competition here. There's an understanding that Google has a very, very good product, but it would be great if there was a little bit more choice, and if consumers were aware of these choices. It's, however, a little early to already say, "We know exactly how this is going to affect consumers," because we don't even know what exactly the remedies are going to be.
Dana Taylor:
Yes, as massive as Google is, it is part of an even larger tech industry. How might a dissolving of Google's expansive operations impact the tech industry and the broader economy?
Florian Ederer:
So I think the impact on the broader economy is going to be relatively limited from this case here. Of course, Google is a big part of the US economy, but I don't think it really has that big of an impact overall. No matter what the ruling finally is in this case on what the remedies are going to be, it's not going to fundamentally change how Google really operates and how that then affects the overall economy. I think it's much more likely that technology advances such as artificial intelligence or generative AI, they are going to have an even bigger impact on online search.
Now, there is another question here, which is how is this going to affect the tech industry as a whole? There I think we have seen a major change already in the last couple of years. So I don't think that the remedies here, which might include these structural remedies, I don't think they're going to be really affecting all that much how other tech businesses operate. But the fact that Google did become designated in this opinion by Judge Mehta as monopolizing the market for online search, I think that certainly has sent some shockwaves through the tech industry. But it is part of a larger development that there's been much more aggressive antitrust scrutiny and aggressive antitrust action against these tech giants in the last couple of years, and that already has changed how they operate.
Dana Taylor:
How could this antitrust case against Google influence future regulatory actions against other tech giants?
Florian Ederer:
I think it will that there are already many lawsuits underway exactly under Section 2 under monopolization. It's true that there's been a change in the overall antitrust environment. I think there would be a little bit of a change in terms of emboldening maybe antitrust authorities if there really was a structural separation here in this case, because it would be such a big change for how we do antitrust policy. It would really be the first time since AT&T that we would have such a structural remedy. But I don't think it's going to be really majorly change. I think that the biggest impact already was that the judge, Amit Mehta, ruled in favor of the government as designating Google as a monopolist.
Dana Taylor:
And then finally, how might this case affect innovation and competition within the tech industry?
Florian Ederer:
This is an industry where innovation plays a major role. Antitrust policy is not just concerned about creating a competitive environment today, but also it has a forward-looking aspect. So we want to have competition in the future too. We want to enable competition. We want to have competition among many, many parties.
Now, how do we get that competition? We usually get this through innovation. We get this through companies coming up with new ideas, with investing in the future, in new products, and these products then going head-to-head against the products of the incumbent. I think here, and that's also one of the key things that the DOJ really cited in its case, is that we are not just concerned about creating here competition right now, but we're also thinking about what is the impact of future technologies in this search market? How can the judgment that we have finally reached in this case, how can that be made future-proof?
Dana Taylor:
Florian, thank you so much for breaking down this very important case. Thanks for being on the show.
Florian Ederer:
Thank you very much for having me.
Dana Taylor:
Thanks to our senior producers Shannon Rae Green and Kaely Monahan for their production assistance. Our executive producer is Laura Beatty. Let us know what you think of this episode by sending a note to podcasts@usatoday.com. Thanks for listening, I'm Dana Taylor. Taylor Wilson will be back tomorrow morning with another episode of The Excerpt.