The U.S. Department of Justice and a coalition of states are preparing to sue Google for antitrust violations, opening up what could be one of the most consequential antitrust cases in decades, according to reports.
The DOJ and a group of state attorneys general are planning to file lawsuits in the coming months, according to the WSJ, with the DOJ expected to file as soon as this summer. The government bodies may pursue those cases independently or eventually merge them into one, but the antitrust claims are said to focus on Google’s advertising business.
Shares of Google parent Alphabet (GOOGL) closed 0.78% lower on Tuesday to $1,374.40.
“There’s a lot of momentum now, both politically and administratively, to actually once and for all come to grips with what Google is doing,” said Rick Hamilton, a partner at Ulmer & Berne and former trial lawyer with the DOJ's antitrust division.
There are a few scenarios that could unfold, Hamilton, explained. One is that the government will conclude that the investigations don’t warrant a case -- which appears unlikely at this point, given the interest across the political spectrum in challenging the power of Big Tech.
Provided the DOJ and attorneys general do bring the lawsuit against Google, the parties could negotiate a remedy that resolves the government’s concerns -- perhaps compelling Google to change some aspects of their advertising practices.
“There’s no question both sides will be looking for opportunities to forgo bringing the case, and trying to resolve the concerns of the government in a way, to put it bluntly, that Google can live with,” Hamilton said.
Bringing an antitrust case against Google would likely be a years-long process, with a high bar in proving that the search giant broke the law. The government must successfully convey not only that Google is dominant, but that it sought to preserve its monopoly position by engaging in exclusionary conduct that pushed out competitors.
Traditionally, courts have looked to consumer welfare as a primary framework in antitrust cases: Are prices reasonable? Do consumers choose Google because it’s simply a better experience? The government would have to successfully argue for expanding that framework, Hamilton said.
“The government is going to have to overcome old consumer welfare paradigm ... these aren’t traditional consumer transactions,” he said.
Depending on the final outcome of antitrust proceedings, the impact on Google’s business practices could be significant.
Alphabet earned 82% of its total revenue last year from Google advertising, and in a recent filing, noted various actions taken by antitrust authorities in the European Union.
In that jurisdiction, Alphabet has paid out billions in fines for antitrust violations since 2017, and tweaked certain business practices in response to antitrust complaints. Those include changes to AdSense for Search third-party agreements, changes to its Google shopping ads, and changes to how it distributes Android operating systems.
Significant changes to Google’s advertising practices could carry the risk of capping growth. Earlier this year, fellow ad giant Facebook (FB) cautioned investors that the impact of global privacy regulation and “other ad targeting headwinds” could hamper Facebook’s growth in the quarters to come.
Another potential outcome, according to Hamilton, could be a chillier environment for acquisitions that require regulatory approval.
“I could see in the future -- and not just for Google, but for some of these other tech companies as well -- that the default position will be ‘no,’” Hamilton said.
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