This week, the United States Department of Justice launched its rumored antitrust law suit against Google. The government's complaint brief alleges that Google has a monopoly in search and search advertising, and has unlawfully maintained that monopoly. Among the many complaints, the government points specifically to the billion dollar payments google pays to Apple, in exchange for Apple carrying the search engine on be the de facto search engine on its IOS platform. The Government is alleging that these practices are not in the best interests of consumers or competition. The case is the most high profile antitrust case in decades, and could potentially remake google, antitrust law, and the internet as we know it.
Today’s Teleforum is cosponsored by The Bork Foundation, a non-partisan, nonprofit educational foundation just launched, led by Robert H. Bork, Jr. who chairs a board which includes today's speaker, George L. Priest, the Edward J. Phelps Professor of Law and Economics and Kauffman Distinguished Research Scholar in Law, Economics, and Entrepreneurship at Yale Law School.
The Bork Foundation was launched this month to promote the life and legacy of Robert H. Bork – lawyer, Yale Law School professor, Solicitor General, federal appellate court judge, Supreme Court nominee, author, and public intellectual.
George L. Priest, the Edward J. Phelps Professor of Law and Economics and Kauffman Distinguished Research Scholar in Law, Economics, and Entrepreneurship at Yale Law School
Dean Reuter: Welcome to Teleforum, a podcast of The Federalist Society's practice groups. I’m Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society. For exclusive access to live recordings of practice group teleforum calls, become a Federalist Society member today at fedsoc.org.
Dean Reuter: Welcome to The Federalist Society’s practice group Teleforum conference call as today, October 21, 2020 we discuss the United States v. Google, filed just yesterday. I’m Dean Reuter, Vice President, General Counsel, and Director of Practice Groups at The Federalist Society.
As always, please note that all expressions of opinion are those of the expert on today’s call. Also, this call is being recorded for use as a podcast and will be transcribed as well. And we’re very pleased to announce that today’s call is being co-sponsored by the Bork Foundation.
And we have with us a single guest today on Teleforum conference call. I think we can call this a Courthouse Steps version since this concerns a case just filed yesterday. George Priest is the Edward J. Phelps Professor of Law and Economics and the Kauffman Distinguished Research Scholar in Law, Economics, and Entrepreneurship at the Yale Law School. He’s going to give his opening remarks for about 10 to 15 minutes. But then, as always, we’ll be looking to the audience for questions, so please have those in mind for when we get to that portion of the program. With that, Professor Priest, the floor is yours.
George L. Priest: Thank you very much, Dean. Well, I presume most people on the call have read something about the complaint against Google. The complaint yesterday follows a voluminous House Judiciary Committee report issued two weeks ago, which addressed antitrust actions -- antitrust concerns and potential actions against Google, Amazon, Apple, and Facebook, all of the four big tech industries.
Now, this complaint doesn’t -- the complaint by the Justice Department doesn’t exactly follow the House Judiciary report. In fact, it’s much more limited than the complaints that the House Judiciary Committee had issued in its report. Now, reading the complaint against Google, I find it to be extremely weak and, in fact, internally contradictory. And I wouldn’t be surprised if it were -- if the complaint were simply dismissed because of these internal contradictions. But district court judges don’t often do that.
Basically, what the complaint says is that Google has a large market share in general search and in search advertising, but then it admits that this market share grew internally. The large market share was not the result of mergers to monopoly—as was true of, say, Standard Oil and U.S. Steel—and that Google’s advantage is that it possesses scale. It possesses 88 percent of the market for general research, 70 some percent of the market for search advertising.
Now, that’s -- I’m sorry to say that’s the heart of the complaint. But the complaint goes on to make these comments. This is at paragraph 35 of the complaint. “Scale is of critical importance to competition among general search engines for consumers and search advertisers.” So the complaint itself said the scale is very important.
And then it goes on to say, “The developing of a general search index of this scale”—meaning of Google’s scale—“as well as viable search algorithms would require an upfront investment of billions of dollars of costs and of maintaining a scaled general search business would cost an additional hundred millions per year.” So that’s what Google does. And we have in the Justice Department complaint itself the admission that scale is important. And obviously it is. These are network benefits provided to consumers, principally, and, where the search involves sellers, of sellers. And it cost a lot to maintain it.
Now, what the complaint then does is claim that contracts that Google has entered with Apple and others—revenue sharing agreements—are restrictive contracts under the antitrust laws, exclusionary -- sometimes it uses the term exclusionary agreements, although it doesn’t really show the exclusion part of it since Google is paying for these agreements. Now, this resembles the claims against Microsoft about its agreements with original equipment manufacturers to install Internet Explorer on its computers, which Microsoft gave up, actually, voluntarily before the case went to trial. But this complaint claims that Google is buying default status for Google, that as Google is the default search engine on this equipment.
And then it claims the scale that Google has, 88 percent of the market for general search, constitutes a barrier to entry, meaning it’s difficult for other firms to compete against it, which obviously is true if you have 88 percent of the market. And it’s especially true if the 88 percent of the market is derived from network benefits. It’s not true if you have mergers to monopoly, as in Standard Oil or U.S. Steel. Both of those monopolies were created by mergers of previous competitors. And over time, competition from new entrants broke them down. But when you have this scale of search, you can’t -- it’s going to be a competition for the market, not a competition along the edges, as was true of Standard Oil and U.S. Steel.
Now, again, I view that complaint as extremely weak. It acknowledges the benefits of the search network that Google has created. It admits that -- or acknowledges that Google is paying other companies to maintain this -- to maintain the scale of its network, to provide benefits. But it doesn’t pay any attention to the implications of those admissions.
Again, this was internal growth based on the development and the expansion of network benefits. Again, all of that’s on a network benefit if more people are connected to the network and if the network can provide search to a larger range of sources, which is, again, quite different than typical monopolies under Section 2 of the Sherman Act, Standard Oil, U.S. Steel, even Alcoa. There were no network benefits -- or no clear network benefits, certainly not with Standard Oil and U.S. Steel. Alcoa’s a little more complicated.
The complaint also does not even suggest a remedy. And if you’ve seen the coverage in the press, the press accepts the Justice Department’s statement “Well, we’ll deal with that later.” Yeah. Well, you’ve got to think about what you’re doing it seems to me. So there’s no explanation in the complaint about how any remedy against Google will benefit consumers versus destroying the network benefits.
That’s why I think the complaint is weak. The case is weak. It may cost a lot of money to litigate it. And, of course, it got a lot of press here just before the election for the attack on Google, but I don’t think this is going anywhere. All right, Dean.
Dean Reuter: Yes, thank you very much. If you joined us late, we’re with Professor George Priest talking about yesterday’s filing United States v. Google. We’re going to get to audience questions in a moment. Let me start off by asking you, Professor, is it uncommon for a case like this to not set out a remedy?
When I was in law school, decades ago now, part of the whole case in controversy in the ability of a court to visit an issue and decide an issue was the notion that there was a remedy that was enforceable against a party. And that was one of the conditions for a court hearing a case, I think, and certainly deciding a case. So how common is it for a case like this not to seek a remedy?
And as you’re answering that, it occurs to me when I was listening to your description of this whole matter it almost seems like as if the Department of Justice is looking to categorize Google as a public utility when they talk about the pervasiveness of Google and search and then waiting to see about a remedy until later. Anyhow, your response.
George L. Priest: Those are good questions. The complaint doesn’t need to set out a remedy, but there certainly should be some kind of remedy implicit in the allegations of the complaint. That’s not true here. There’s no remedy implicit. In fact, as I say -- and I can give you more from the complaint.
The Justice Department is very complimentary of Google and what it’s done and recognizes the great benefits of having this huge search engine with -- at one point it cites, “Google has developed 100 million gigabytes in size.” So it’s very complimentary of Google in a large way. But there’s no remedy even implicit in what the Justice Department has claimed.
Now, treating it as a public utility, not in this complaint. Where there are -- it was suspected and it was argued in the House Judiciary Committee report that Google had set up its search engines and its algorithms for search to benefit its own products or products it had some interest in. And there should be some kind of nondiscrimination requirement.
That’s also the argument the House Judiciary Committee has made and other people have made too about Amazon and other of these big tech industries. That’s treating them like a public utility where you have a nondiscrimination requirement. This complaint doesn’t say anything about that, about nondiscrimination. I thought it would having read the House Judiciary Committee report, but it doesn’t.
Of course, there’s no legal basis for converting Amazon or Google or any other company into a public utility. That’s not provided under the antitrust laws. There’s really no -- very slim antitrust basis for that. But this complaint doesn’t do that at all. Again, I think since there’s no legal basis for it, what are we talking about here? Is there going to be compensation for turning it into a -- compensation to the company for turning it into a public utility? That’s not even raised in this complaint and wasn’t seriously addressed in the House Judiciary Committee report.
Dean Reuter: We’ve got quite a few people on the line. Before we turn to the audience, you’ve used the term, Professor Priest, about scale. Are you using that interchangeably with market share? And secondarily, how would you distinguish this case -- or maybe how would the government distinguish this case from sort of the biggest bad mantra of what is becoming known as hipster antitrust?
George L. Priest: Well, let me answer the second question first. I don’t know that it distinguishes it from the hipster antitrust biggest bad. Basically, that’s what the Justice Department is saying. Google is big. It doesn’t say it’s bad, really, except that it talks about revenue sharing agreements and restrictive contracts and the like, which aren’t restrictive. You know, you have to pay to get scale. So it’s not -- but it is a complaint under Section 2 of the Sherman Act, so that’s bad, I guess. That indicates they think it’s bad.
Now, scale versus market share, there’s a real difference and a conceptual difference here in the context of network industries. Market share is a frequently used term in antitrust and defined in the merger guidelines and the like and in many cases as allowing a firm -- market share allows a firm to raise price over cost because there are fewer competitors. So the larger the market share, the fewer the competitors there are, meaning the less opportunities there are for consumers to go to other sellers of the product. So market share is a method of measuring monopoly power.
Now, scale as described by the Justice Department and as used in the context of network industries is a lot different. It doesn’t mean raising price over cost. In fact, there’s no cost to Google. Google has to pay these other -- Google pays out prices and gains revenue from advertising. But there’s no cost to consumers of using Google. So the large market share is not quite the same as it is in other antitrust contexts.
The scale means this is a great search engine. You want to find something Google is -- and I’m sure all of us have this experience. Google’s the place -- we use Google to find it. And Google’s great at finding a lot of things, a lot of things. And none of these are really of commercial -- or have very little or no commercial value in particular. You want the lyrics of a famous song? You go on Google, and it gives you those lyrics.
Again, what’s the commercial value of that? It’s just a benefit to consumers. There’s no charge for it. There may be an ad somewhere, or oftentimes there’s not even that. So scale is a little different from the antitrust concept of -- scale and network industries at least. Scale in manufacturing industries may mean the same as market share, but scale in network industries mean it’s a larger network and there are more network benefits from its operation.
Dean Reuter: Interesting. We do have five questions pending now, and we’ve got a little bit more than 35 minutes. So let’s now turn to our first caller even though I have more questions for you, Professor Priest.
Stuart Gerson: George, this is Stewart Gerson. Interesting to hear your analysis. What do you think of the DOJ’s market definition separating search from advertising -- pure search from advertising? That seems like somewhat artificial but as perhaps a predicate for dividing the company along those lines but then producing much worse results for consumers.
George L. Priest: I agree with you entirely. The only way you can explain that is as a potential remedy. Although, again, what are they thinking of? In functional terms, it doesn’t make a lot of sense. So maybe they have some legal grounds to argue that, but I don’t think we’re going to get very far with that. So I agree with you entirely. No way in which that benefits consumers in particular.
Dean Reuter: Let’s turn to our next caller.
Howard Foster: Hello, this is Howard Foster. I’m a lawyer in Chicago. I’m wondering what is the market for in this case -- what is the product or service? Is search engine either a product or a service that can be monopolized?
George L. Priest: Well, it’s a service, but I don’t know what monopolization means. In the context of a network industry, all of us want the broadest possible network. And so monopolization of the network, again, is not what we normally mean by -- or to use the term monopolization is not what we normally mean by monopolization, which is control over sale to raise price above cost and to gain a monopoly profit.
Google doesn’t gain a monopoly profit from its general search. It gains no profit at all from search from millions and millions and millions of things. The advertising, again, it’s providing a service, this broad network that it’s created. So it’s gaining a return for its creation of that service. But again, the term monopolization doesn’t quite fit in the context of these network industries.
Howard Foster: Thank you.
Dean Reuter: Go ahead, caller.
Martin Peck: Yeah. My name’s Martin Peck. I’m a lawyer in Kansas, and I’m not at all an antitrust expert. But I’m aware the European Union has taken a more aggressive stance against tech companies using antitrust theories. How’s the Justice Department’s approach similar to or different from the EU’s approach to big tech antitrust enforcement?
George L. Priest: Well, as I understand—and I haven’t studied it carefully—the European Union’s approach has been on discrimination grounds, that these big tech industries are favoring their own products. And they’ve been successful under European law, which is different from U.S. law. European law prohibits dominance of industries. It does not, as the U.S. courts have interpreted the Sherman Act, prohibit harm to consumer welfare. So they’ve been successful in levying fines against Google and other of the big tech companies.
So the U.S. approach is different from that in that it has to show harm to consumers -- it’s necessary to show harm to consumers. And that’s why I think this case is weak because it doesn’t show at all any harm to consumers. It shows big size. It shows contracts, these revenue sharing agreements with Apple and the like. But it doesn’t show harm to consumers.
It doesn’t show how anything could be done to benefit consumers for it. You don’t have to do that under European Union law. It’s just a punishment of dominance. And as a consequence— and I’ve written about this in other contexts—European Union law often harms consumers rather than benefiting them by punishing dominance, even in non-network industries. But this is extremely true in network industries.
Again, I think one of the bases for this complaint is that the U.S. antitrust laws have not dealt seriously with network industries and the benefits that derive from network industries. They may, if this suite continues—and it may—they’ll have to deal with that. And I think that would be very good for the antitrust laws to try and work this out because, again, as I’ve said kind of a couple of times this complaint doesn’t show any harm to consumers from this behavior. It simply shows size.
Dean Reuter: George, maybe a follow up question from me. This is Dean. You mentioned in your opening that there are a handful of state AGs who’ve joined this complaint. The caller’s mentioned EU enforcement. I’m wondering, when it comes to antitrust enforcement about the dynamics of businesses having to answer to state, federal, foreign, and even international lever enforcers, is there a way to harmonize antitrust enforcement? Or is it better to have competing competition regimes?
George L. Priest: Well, let’s see. That’s a good question. I think harmonization would be appropriate. The best method of harmonization is for these different antitrust agencies to agree on a set of ideas about what they want to use the antitrust laws to do. That hasn’t been true, and it’s why you’ve gotten these fines against Google and others in Europe, not in the United States.
Do the state attorneys general add much? I don’t know. It’s a good question. I do know that there are a number of state attorneys general who have been looking at Google and investigating Google and want to file suits against Google who didn’t join the complaint that was filed yesterday. And so maybe they have other grounds.
I would think the only other grounds that they could argue is this discrimination ground that we talked about before about Google and Amazon favoring its own products or products in which it has an interest over -- or giving them priority in some regard. It doesn’t really favor them. It gives them a priority on the screen above other products. So we may see another lawsuit in that regard.
Does that add anything? Well, I think obviously the Justice Department decided not to. That argument has been around for a long time. So the Justice Department in the complaint filed yesterday didn’t add it to the complaint and I think for a good reason because there’s not a strong basis for not thinking that’s part of the return for creating the network.
But we may see that, and it would be good to elucidate that in some regard. Although, we may see it in -- there’s an implication that these lawsuits against Google, Amazon, Apple, Facebook are going to be -- are all going to be filed under the antitrust laws. And we may see that argument there. Do the state Attorneys General add much after that? Not much, no.
Dean Reuter: Very good. We’ve got four questions pending. Let’s check in with another caller. Go ahead caller.
Laura Peterson: Hello, Laura Peterson in Washington. What, Professor Priest, is the government’s theory, if it’s not spelled out in the complaint, reading between the lines, of harm to consumer welfare and/or harm to the competitive process? Which consumers and/or which suppliers would be harmed in the government’s eyes, and how would they be harmed? Looking to innovation, is the government arguing explicitly or implicitly that innovation or dynamic competition is being impaired? And if so, how? Thanks.
George L. Priest: That’s a very good question. There are hints of that in the government complaint, not so much harm to consumer welfare. It doesn’t talk at all about harm to consumer welfare. But there is a claim that this large size -- scale of Google harms the competitive process, that it makes it -- and the complaint uses the term barrier to entry quite a bit. It makes it difficult for anyone, any other firm to compete with regard to search or search advertising because Google is so big.
And then it claims that, without competition -- and it makes the sort of typical arguments about competition. The more competition you have, the more innovation and the like and that dynamic competition is better than having a static firm with a large size and so forth. But it’s not a strong argument. And it’s, at best, a theory that the government is presenting for which there’s really not much support in the antitrust -- in antitrust cases to pursue it.
Again, modern antitrust law, as you mentioned, focuses on harm to consumer welfare. And the complaint says nothing about harm to consumer welfare except it alludes to, well, there’s less competition. There’s less innovation and the like. But it doesn’t show why that is true. It gives some examples of firms that have been trying to enter the search market that have not been able to raise the scale -- to achieve the scale of Google.
That’s pretty weak. Why haven’t they? If there’s some disadvantages to the Google search engine—and this will be true if these other attorneys general—or if there’s another complaint that claims discrimination in favor of Google related products. Why doesn’t another search engine -- if that consumers, why doesn’t another search engine come in and supplant it, which consumers find to be better? No explanation of that. So there’s not a strong theory to this complaint. That’s a problem.
Dean Reuter: We’ll continue taking caller questions. A reminder, we’ve got to finish in about 25 minutes, just a couple minutes earlier, due to some time constraints here.
Judge Braden: Hi, it’s Judge Braden. I’m taking a walk in the Rock Creek Park, and it’s lovely out here, and listening to this important podcast. And let me just give a shoutout to Laura and all the good work the USPCO has done in this administration to promote innovation. I wondered if anybody’s given the thought that there may be unintended consequences from the filing of this lawsuit. And it strikes me that, depending on a number of factors with the election, that what you may wind up with is, while the lawsuit is pending, that there will be a number of congressional committees asserting jurisdiction over the remedy.
And you may find yourself back in the good ol’ days of the ICC where they couldn’t figure out how to deal with the railroad consolidations. So they created a regulatory body. And there’s nothing we know that some of friends on the opposing political spectrum like more than regulating. Any thoughts?
George L. Priest: Yeah. Well, that’s a long way away, I hope. It’s really unimaginable to me. And Google hasn’t come up with much of a response so far. I’m sure it will develop it. But it seems to me -- but I don’t understand politics. That’s for sure. But it seems to me that it ought to be inconceivable to establish a regulatory body to deal with Google, Amazon, Apple, Facebook. That would seem inconceivable to me.
But there are stranger things that have happened in the world. But it would -- the consumer benefits from these services are so great and extend so broadly and are, quite unlike the railroad, so vastly used by the populace of the country that it would seem very hard to me to think that there is political advantage in submitting these companies to regulation. But again, stranger things have happened. But I am hopeful that’s a long way off.
Dean Reuter: Well, maybe a—this is Dean again—a somewhat related follow up question. I’ve noticed that a lot of regulatory agencies, in lawsuits or enforcement actions, they arrive at consent decrees. Maybe for antitrust it’s more often in the merger area. But consent decrees can involve concessions, which arguably go beyond the legal authority of the agency -- some of the concessions that are extracted. Am I right about that? Is there an indication that this could happen in any enforcement action? This is maybe a more general question than we have in this case.
George L. Priest: No, that does happen. Certainly, it happens. Going beyond the authority of the agency, that’s harder. Beyond the authority that the agency or that the Justice Department or FTC has now, yes, that happens a lot. But is it likely to happen here? I think this is just -- honestly, maybe I’m way off. But I think this is just so weak -- this complaint is so weak that I really don’t think it’s -- it may require a lot of litigation, but I don’t think it’s going to go anywhere. I really don’t.
And this isn’t Microsoft because, again, the contracts that Google has entered are not -- are, first of all, one, quite different from the contracts or the requirements that Microsoft imposed with regard to Internet Explorer on original equipment manufacturers and internet service agencies and the like. But two, we have the Microsoft experience. Microsoft got rid of those requirements, and nothing happened. The European Union succeeded in forcing Microsoft to provide the sale of -- or to provide Internet Explorer without several of its applications. No one bought it.
So we have that experience, that attempting to break up these networks doesn’t really work because consumers value the networks. So I don’t think that’s going to happen here, and I would be very surprised, except for the possible savings of litigation costs, for Google to enter a consent agreement in any important -- that would have any important effect on its general search capabilities.
Dean Reuter: Very good. Again, we’ve got about 20 minutes, almost 20 minutes left. Go ahead, caller.
Ferris Besarsai (sp): Yeah. This is Ferris Besarsai, George Mason University’s Law School -- Antonin Scalia Law School. Your last point is a great segue to my question. When it comes to technology and cases like this one, in the Microsoft case it did take several years to reach a conclusion.
So I wonder in this case as well, if the case takes long -- and Google will be able to dynamically update certain things and write new software and so on and so forth and basically mitigate any changes that they would have to make to ensure consumers’ privacy and to challenge certain aspects of the antitrust law. So that’s the first part. And the second part is why isn’t Facebook, for example, as well part of the same case or a different case because other big tech companies have equally been in the same boat as Google?
George L. Priest: Yeah. Those are good questions. It is true the Microsoft case took a long time. The Microsoft case was somewhat unique. This is 20 years ago, but it was somewhat unique in that it was the first case brought against this company that had provided huge services.
And it was also different because, if we remember, Microsoft at the time had developed a browser, Internet Explorer, that was competing with Netscape Navigator. And so it was more like a typical competitive situation where you had two competitors and the question was was Microsoft benefiting itself by the actions that it had taken and diminishing the power of Netscape Navigator. So it’s a little different in that regard. Of course, Netscape Navigator went out of business, and Internet Explorer became a dominate browser until Google has developed its own search browser, Chrome, which is more successful than Internet Navigator.
Now, these issues of privacy are important issues. And Facebook is implicated in those, too. But they’re not involved at all in this lawsuit against Google. There’s no reference to privacy whatsoever. And I think it’s a different -- it’s not an antitrust issue. It’s a different issue that has to be addressed.
What are they seeking with regard to Facebook? Well, they haven’t sought anything yet. And, again, I think it’s going to be hard to file -- well, it’s going to be hard to file lawsuits against Amazon, Apple, Facebook if you take into account the network benefits. Although network benefits, as I’ve read, are referred to many times in this Justice Department complaint, they’re not taken seriously. And if you take them seriously, it’s very hard to see what you’re complaining about with regard to these other companies, including Facebook.
Ferris Besarsai: Thank you.
Dean Reuter: You’re welcome. Once again, we’ve got two questions pending. If you’d like to join the queue, we’ll continue to roll through our caller questions. Go ahead.
Michelle Green: This is Michelle Green. I’m a retired and recovering lawyer, and I’ve been out of the fray for quite a while. However, in the real world, my understanding of what’s going on is that the algorithms that are being used by the company in question are slanted in favor of one particular political philosophy. And that is the harm that is being done to a so-called consumer of the product. So I would like the person that is addressing this audience to talk about that.
George L. Priest: Sure. I’ll talk about it. I don’t care what area code you’re calling from. It doesn’t matter to me. I have held onto my cellphone number, too. That’s an interesting question. It’s not related at all to this case. There’s no reference at all to political philosophy in this case.
Michelle Green: Algorithms. The question is algorithms being used to harm the consumer.
George L. Priest: I know. But that’s not mentioned in the complaint.
Michelle Green: Maybe they need to amend the complaint.
George L. Priest: Well, and there may be another complaint coming from other state attorneys general, but it’s not in this complaint whatsoever.
Michelle Green: Would you address the issue, please?
George L. Priest: Whether that’s a problem or not? I don’t know if it’s true. If it is true, I don’t know why it would be true, why Google or any other company would want to favor one political philosophy over another. There was a separate report filed by members of the House Judiciary Committee claiming that these companies had algorithms that favored Democrat rather than Republican political philosophies or political ideas. Again, it’s not in this complaint at all, not part of this complaint, which is a pure -- I should say this claim about algorithms favoring a political philosophy is not really an antitrust issue. It may be --
Michelle Green: Could it be a case of first impression under the statute?
George L. Priest: Well, it could be, but I don’t think the antitrust laws have much to say about it to tell you the truth. Having taught antitrust for 40 years, I don’t think the antitrust laws have much to say about it. It may be a problem. But it’s not mentioned in this complaint at all.
Michelle Green: Thank you.
Dean Reuter: Very good. We’ve got about 10 minutes left. Just one question pending. Go right ahead, caller.
Paul Larkin: Thank you, Dean. This is Paul Larkin from the Heritage Foundation. I want to thank the professor for coming on and The Federalist Society for hosting this event. My question focuses on one aspect of the government’s allegations in their complaint. The government alleges that in several of the agreements, or perhaps many of the agreements—the exact number is uncertain—Google required that, when one of its products was installed on, say, a cellphone, that it could not be removed.
So what I was wondering was is there a technological justification for prohibiting the ultimate consumer from deleting any particular application? If not, is there any consumer benefit from any such requirement? And is it an important benefit? And is this a big problem?
George L. Priest: Well, I saw those aspects of the complaint. One, I don’t know if it’s true or not. Two, I don’t know what deletion requires on behalf of a consumer. Is there a consumer benefit from not being able to delete Google? I don’t know what it would be. And again, 88 percent of the population doesn’t know what it is because they use Google’s search engine. So I think it would be a hard case. You know, it’s kind of a technical case, but I think it’s a hard case to make.
Now, again, Microsoft had some of those requirements. And prior to the ultimate trial, it eliminated them. It didn’t affect Microsoft’s market share at all. And maybe Google will do the same thing. I don’t know what value it is except to ensure that the agreement for which Google is paying these whoever is providing the device, say, Apple, is enforced. But other than that, I don’t know what it would be. So again, I think it would be trivial consumer benefit from prohibiting it. And Google may want to eliminate it internally itself.
Dean Reuter: We do have another question, actually, two more questions, George. So now --
Jim Prestiano: Hi, this is Jim Prestiano, a lawyer from New York. And it appears that the DOJ’s complaint is not particularly drafted and probably does not seem to be -- that it will be successful based on what the professor is suggesting today. It seems to me, as a prior caller mentioned, that the real concern is the market dominance of the Google search engine. And coupled with the algorithms, it enables Google in its position to really have a large slate of influence over 80 percent of the world’s population that’s using this search engine. And that’s the danger or the harm to the public. Is there anything in this complaint that raises that issue, or is that just not covered yet?
George L. Priest: There’s nothing that raises it explicitly. It’s an implication from the quoting of the scale of Google, that it has influence through its definition of algorithms. But the question is what is the influence and how are consumers harmed by the influence?
If the possession of the scale and the control of algorithms simply increases the ability of consumers to search for one thing or another, well, that’s not a harm to consumers. It has influence, but that influence is not used to harm consumers. So unless you can show the influence is used to harm consumers—and the complaint doesn’t do that at all—I don’t see how there’s really a case here.
Jim Prestiano: The way I had thought about it is the harm to the consumers is in essence when a lot of people go to Google and they want to search an issue—gun laws, right to an abortion—whatever the topic is they want to look at, they think they’re going to get a fair presentation of the facts, something that has not been skewed or swayed to one side or the other. And the way these algorithms work, from what I’m told—it’s not a specialty of mine—it can limit information or carefully create available information that could actually predispose the issue. Like the prior caller said, this could be for a particular party or really for anything which seems—and it is hard to articulate—to violate or cause some harm to the consumer.
George L. Priest: Well, again, I don’t know if that’s true or not. That’s a definition of consumer harm that hasn’t really been embraced by the antitrust laws. And so it’s not a Section 2 Sherman Act claim that there’s harm to consumers because they’re not getting the full truth or not getting a fair presentation. One, I don’t know if it’s true. Two, I don’t know why Google would want to do that anyway. But to put that aside, it’s really not an antitrust claim. So there’ll have to be other avenues to pursue that type of claim.
Jim Prestiano: Thank you very much.
Dean Reuter: We do have two questions remaining, five minutes left. And I should mention that we probably will be planning more programming on this case, so look for that in the near future actually.
Chuck Sennet: Hi, this is Chuck Sennet calling from Chicago. And my question is how might a change of administrations affect the handling and fate of this case?
George L. Priest: You know, that’s a good question. I don’t know. There’s been a lot in the press today that this lawsuit was brought at the request of President Trump ordering his Attorney General to get this filed before the election to show that Trump is hard on big tech. I don’t know if that’s true or not.
Under a Biden administration -- obviously, if Trump is re-elected, the lawsuit will continue. Under a Biden administration, it depends upon who Biden appoints as Attorney General and Chief of the Antitrust Division. I think it’s an extremely -- I’ve read a lot of antitrust complaints. It is a very weak complaint. And so they may want to pull it and start over and think this through again.
When you read how weak this is, you wonder what’s going on. What are they doing? And either it was drafted hurriedly—although the Justice Department has been looking after Google for a long time—or there was so much dissent as to what would succeed that they couldn’t get more out of the antitrust division then this, which I think is probably the more likely. That may mean the case may be dropped under Biden. Although, again, Biden may want to show that he’s wary of big tech, too. So I just don’t know. I haven’t been so good at predicting political outcomes for quite some time now. So I’m not the best person to ask on this.
Dean Reuter: We’ve got two minutes left. Let’s see if we can get a final question in if possible.
Caller 11: Yes, sir. Fascinating discussion and it’s been a very long time since I took antitrust. And I haven’t touched it very much since. Obviously taking your word at the contents of the complaint, the weakness that it might contain. But if they were to amend, I’m wondering to what extent they might be able to make something out of basically a product tying claim, given that they are both a search engine provider/software vendor with products like Chrome and the Android operating system and their arrangements with Samsung and other Android IOS supported hardware -- and really if it turns into, okay, if you want a Samsung phone, then you have to get the Android system, which means you’re going to get Google. And as the gentleman from Heritage pointed out, you can’t uninstall it.
And of course, the real -- per the recent Netflix documentary, if it’s free, you’re the product. So the consumer data and the collection that’s going on on people is the harm to consumers. And briefly related to that, I wondered to what extent maybe the FTC is a more appropriate agency to bring this, given their potential jurisdiction about fraud issues that kind of touch on the -- not all people getting the same thing when they ask for the same thing.
George L. Priest: Those are good questions. This complaint makes no tying claim at all. The problem with the tying claims is they haven’t really been addressed in the context of network industries. And there is a real question as to whether the alleged product tying -- and it’s mostly preference. It’s not so much literal tying as it is preference to the products that may be related to the service -- to the network industry -- whether that’s not an appropriate return for the creation of the network.
Again, a lot of tying claims are in the context of patents, copyrights, grants from the government and the like if you look at the classic tying cases where that’s what’s created the market power. This is internally created market power by Google and Amazon and the others. So it’s a harder -- and the tying is not so explicit. So it’s a very much harder case to bring than a typical tying claim.
Should the FTC bring this action? Well, the FTC investigated Google and decided not to bring an action against them. So the Justice Department has done so, and it’s not going to be shifted to the FTC now. But will it succeed? I remain very skeptical of the success of this lawsuit.
Dean Reuter: Well, I’m afraid we’re going to have to leave it right there, Professor Priest. I certainly appreciate your time and I thank you for joining us, especially on such short notice, a case filed yesterday. So it’s great to have this discussion. And a reminder for our audience, we will revisit this issue probably with some others who might have different views on the lawsuit. And I want to thank the audience for dialing in and for your thoughtful questions as well, a reminder to check our website and monitor your emails for the next upcoming Teleforum conference call. But until that next call, we are adjourned. Thank you very much, everyone.
George L. Priest: Thank you, Dean.
Dean Reuter: Thank you for listening to this episode of Teleforum, a podcast of The Federalist Society’s practice groups. For more information about The Federalist Society, the practice groups, and to become a Federalist Society member, please visit our website at fedsoc.org.