The antitrust bonanza against Google and Facebook.
By Matt Stoller and cross-posted from his Substack platform.
It’s hard not to be excited about the multiple antitrust suits filed this week against Google. This past Wednesday, Texas Attorney General Ken Paxton, along with 10 other state AGs, accused Google of monopolizing online advertising, arguing it used coercive tactics to seize control of the plumbing that underpins all ad-financed internet content, and illegally divided up the online ad market with Facebook. The next day, Colorado’s Phil Weiser and Nebraska’s Doug Peterson led 38 states in accusing Google of manipulating its search results to disfavor specialized competitors like Yelp, as well as blocking competitors who seek to enter new search markets like those of voice assistants or internet-enabled cars.
The suits themselves are stunning.
The Texas case reveals new details about how online advertising markets function, drawing from Dina Srinivasan’s critical research on how advertising sales has been transformed into a complex financial market run by Google. While the complaint alleges that Google has engaged in monopolization, it also alleges a different violation, that Facebook and Google are in a cartel to violate user privacy and fix prices in advertising markets. The complaint reveals that after Facebook bought WhatsApp, which pledged to its users (and the FTC) strict privacy controls, “Facebook signed an exclusive agreement with Google, granting Google access to millions of Americans’ end-to-end encrypted WhatsApp messages, photos, videos, and audio files.” If true, that’s a remarkable set of illegal acts, by both Google and Facebook, as well as a betrayal of their users.
The complaint also asserts Google divided the ad market with Facebook, offering Facebook advantages in buying and selling ads through Google services if Facebook withdrew from head-to-head competition in other markets. This collusion is meaningful from a legal perspective. The Sherman Act has two parts. Section Two prohibits monopolization, but monopolization cases are very hard to bring and quite expensive, and require elaborate models. Section One prohibits cartels and price-fixing as conspiracies. Cartel cases are much easier – just show an agreement to collaborate on fixing prices, and you’re done. In fact cartels are so much easier to prosecute that price-fixing is the only area that enforcers actually bring criminal charges. And worrisome for Google, Texas is alleging cartel behavior.
The Colorado-led suit, while not unearthing anything earth-shattering, is also quite useful. Enforcers there are addressing not just today’s search markets on desktop and mobile platforms, but where search is heading in the future, platforms like internet-enabled cars and voice assistants. It’s a smart way to ensure that antitrust enforcement blocks monopolization at the creation of new markets, which is when it’s easiest to generate competition.
Since October, enforcers have brought four strong suits against Google and Facebook, two of the largest corporations in the world. And the demanded remedies for these civil violations are tough. Enforcers are asking for injunctive relief to stop the bad behavior, break-ups of these companies to end the structural conflicts, as well as monetary damages and civil fines.These few months represent perhaps the toughest spate of antitrust action since the post-World War II era, when Harry Truman restarted antitrust cases after their suspension during the war.
It’s not just these suits; Apple is facing a major attack from Epic Games and a broad coalition who seeks to destroy its app store monopoly, and Congress is gearing up to smash monopolies through legislative efforts. As Steven Perlstein noted in the Washington Post, this effort is more than just an attack on Google and Facebook, but a “legal shot across the bow of dominant firms in other highly concentrated industries — pharmaceuticals, telecommunications, financial services — who are now on notice that their nonstop acquisitions and hardball business practices could invite similar challenge.”
Even Europeans are getting more aggressive, with European member of Parliament Paul Tang winning a vote to ban personalized advertising in the EU, as well as offering increasing criticism of EU Competition enforcer Margarethe Vestager for lagging behind the tougher approach in the United States…