The Department of Justice on Friday laid out the facts of its complaint, alleging Google had anticompetitive practices in advertising. The agency wrote that Google’s search results were skewed to favor its own products over other companies’.
And it says it would take action against companies involved in unfair anti-competitive practices. “Any company that engages in conduct that deprives consumers of substantially equal choice will be subject to penalties,” a civil complaint says.
Investors flocked to Google stock in response to the news. At the close of trading on Friday, the shares were up more than 2 percent.
So what is this anti-trust lawsuit about? It touches on a very knotty issue.
Google’s search is the most important part of Google, with the majority of revenue and traffic flowing through it. As of the end of the second quarter, the search group accounted for $9.8 billion of Google’s total $36.9 billion in revenue, the majority of which came from advertising.
So if a company’s advertising algorithms favor Google, it may very well work for the benefit of Google.
To be sure, the government may argue that manipulating its search results is no different than giving preference to one company over another because, as the government’s complaint suggests, Google’s “toying with consumers” to favor its own results in its search results could artificially boost sales. And a company not colluding with Google may not benefit as much, as it would suffer competition from Google, rather than from other companies.
“Google is willing to violate the law and hurt competitors as it tries to keep us at bay,” the Justice Department complaint says. “Google appears to be willing to back down from bad behavior in order to placate other companies and obtain preferential treatment in its search results and advertising sales.”
As for Google’s punishment for its alleged anticompetitive conduct, this is where things get a little bit murkier.
The Justice Department’s civil complaint lays out a few strategies, but actually ending anticompetitive behavior may require action from an antitrust court. One of the Department of Justice’s options would be an expedited antitrust settlement. Such settlement processes are routinely handled via an administrative proceeding, which can take up to 180 days in the case of a small-and-medium-sized company.
The DOJ has every incentive to be aggressive in a case like this, because not all antitrust cases that end in a civil lawsuit are solved by administrative orders. If a case is filed against Google and it cannot be dealt with quickly, the Department of Justice may end up with an internal deal. In the case of a large, complex case, the court may determine that a negotiated agreement between the government and the company is best, and enforce it.
Google, for its part, is apparently determined to be a company that is open and willing to work with others. Though it has not been accused of illegalities, it is planning to countersue, the Wall Street Journal reports. Google, in a statement, said that it believes the DOJ allegations of anti-competitive behavior are baseless.
But to answer one fundamental question, this is only the beginning of the case. According to the complaint, Google’s ad practices are illegal. But will the final judgment be if Google’s anticompetitive practices win a civil case? Or will it depend on how the case plays out in court?