Alphabet’s facing a major US antitrust lawsuit

What’s going on?

The US Justice Department (DoJ) filed an antitrust lawsuit against Alphabet (a.k.a. Google) on Tuesday, accusing the tech giant of using anticompetitive tactics to preserve itself as “a monopoly gatekeeper of the internet”. Alphabet’s Google currently has around an 92% share of the search engine market, Microsoft’s Bing coming in at around 3% and Yahoo at around 1.5%.

The anticompetitive tactics named are things like: Google paying Apple to ensure it’s the default search engine on the Safari browser; exclusivity agreements stopping other browsers from being pre-installed on devices; and making their search applications undeletable.

Alphabet’s rejoinder is essentially that “people don’t use Google because they have to, they use it because they choose to” –pointing out how easy it is to download and switch to another search engine. Alphabet has also pointed out how their products are ‘free’ for consumers and therefore there are none of the usual hallmarks of monopolistic behaviour such as price gouging.

The DoJ however has pointed to Alphabet’s alleged monopolistic behaviour as resulting in a reduction in the quality of search “including on dimensions such as privacy, data protection, and use of consumer data”.

What’s the backstory?

This is a big deal. It could mean a major shift in the tech landscape if the suit is successful. Back in 1911 the US Supreme Court ordered John D. Rockefeller’s Standard Oil to be broken up into 34 companies; the event is an illustration of what the courts wielding their full power can look like. 

The last time this happened tech-wise was in 1998 when in an extremely similar case to this one – Microsoft was accused of illegally using its monopoly in desktop operating systems to shut out competition among web browsers (in particular, Netscape). Microsoft ended up being found to have repeatedly violated US antitrust laws, ironically leading to players like Google growing their market share.

The market seems to be on Alphabet’s side so far – the company saw a rise in its share price on the day the suit was announced of more than 1% ($1555.93 USD).

What does it mean going forward?

If the suit is successful it looks like the Australian Competition and Consumer Commission (ACCC) will have a crack too. Chairman Rod Sims told the National Press Club “I’m delighted the DoJ’s taking it on and we’ll follow it really closely… We’re going to look at it and see whether there’s any value in what we might do.”

The ACCC has been working to reign in the tech giants –just last year the watchdog sued Alphabet alleging the company broke consumer law by misleading Android users about their location data. Alphabet denies this.

It’s also happening at the same time as Treasurer Josh Frydenberg prepares to put forward a media bargaining code in December. The idea is to get tech giants like Alphabet and Facebook to pay for Australian journalism. Google has said the proposed laws would mean a “dramatically worse Google Search and YouTube”.

While the outcome of all this is still unknown, what is clear is that the tech giants are looking down the barrel of some major regulatory battles in coming years.

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