Google, illicit monopoly? All charges in the US and Europe

Potentially, however, they are enormous for the internet ecosystem and the digital economy; it is not just a question here of a penalty, however steep.

In the swirl of news chasing each other, it is worth clarifying a few points about what is at stake.

Abuse of dominant position

Abuse of a dominant position occurs when a company with strong control over a market uses its power to hinder competition, preventing other companies from competing fairly. This behaviour is prohibited by antitrust laws in many jurisdictions, including the European Union and the United States, because it distorts the market and harms consumers. In addition, the monopoly can be obtained or maintained by purely unlawful means, as ruled by the US court on default motor payments.

See the online advertising monopoly case, the least known but with very important impacts on the market. The US Department of Justice accused Google of monopolising the online advertising technology market through its acquisition of DoubleClick in 2008, a company that ran auctions for advertising space. Google now has an 87% market share in ad sales technologies. Thus, it has the power to set rules and prices. In fact, Google controls all stages of the buying and selling of digital advertising: the platforms for running auctions, selling advertising space and placing advertisements on websites.

Recall that in 2019, the European Commission fined Google EUR 1.49 billion for abuses in the advertising market. Google had imposed restrictive clauses in contracts with third-party websites using its AdSense platform to prevent them from displaying advertisements from competitors.

The consequences of unlawful dominance

Google, for the prosecution, can thus impose conditions more favourable to it in the whole business. Higher prices for those who advertise and a lower revenue share for the sites that host them. In short, Google earns more at the expense of everyone else. News sites close because they cannot earn enough from advertising; companies charge more for products to compensate for the high costs of advertising paid to Google.

Google allegedly used its power to make it difficult, if not impossible, for other companies to compete fairly in the ad tech market. This was done, for instance, by pushing publishers to use its advertising platforms even though other offers might have been more advantageous.

If there were more competition - and there isn't because Google has managed to tightly control the market with techniques that are deemed illegal - site publishers and advertising companies would have more alternatives. Conditions would become fairer and there would be more distribution of the advantages of this business, now captured instead by Google.

In the case of the Play Store, Google was accused of monopolising the distribution of apps on Android smartphones and was thus able to impose high commission costs on developers. Here, the impact on consumers is a potential increase in the cost for apps, subscriptions and in-app purchases.

The absence (or almost absence) of competitors also hinders innovation, but this element emerges more in the lawsuits that Europe and the US have brought against Google's monopoly in search. Consequence: on the one hand, the emergence of better products or technologies is slowed down, on the other hand, the quality of the services offered tends to drop.

The dominant company in fact feels secure under these circumstances; it does not have the pressure to improve its products (and reduce prices) to beat the competition. Many experts note how the quality of Google search continues to deteriorate, suffocated by an excessive number of increasingly intrusive sponsored links.

The illicit digital monopoly then tends to do damage in adjacent sectors. Europe considers that Google had favoured, on its general search results page, the results of its own product comparator over those of competing product comparators. This harms the emergence and development of alternatives in comparison services and thus better offers to consumers.

The possible consequences of Google's defeats in court

In addition to possible sanctions, from the defeats in court (if confirmed in all degrees) Google now risks something bigger: having to radically change the way it operates. The authorities could force the company to change practices deemed anti-competitive; split or separate certain activities to limit mutual influences, e.g. the advertising business from the search business; the Android business from everything else (this platform is also in the antitrust crosshairs; in 2018 the EU fined Google €4.34 billion because the company forced Android smartphone and tablet manufacturers to pre-install Google Search and Google Chrome).

Google might be forced to open up some of its platforms or data to competitors, such as providing access to more developers or third-party companies in markets where it currently dominates (e.g. the Play Store).

In more extreme scenarios, the authorities might consider a so-called 'break-up' of Google, i.e., splitting the company into separate entities to reduce its monopolistic control over certain markets. This could involve separating activities such as online search, digital advertising and the Play Store into separate companies.

This type of intervention, although rare, has been debated in the past in the context of large technology companies. A historical example of spin-offs imposed by antitrust authorities is the case of AT&T in the US in the 1980s.

In general, Google's defeats could open the door to other legal actions on other big tech, with disruptive cascading effects for the entire digital business.

Google's defences

Google defends itself against these accusations with some recurring arguments. The company claims to have achieved its position through the quality of its products and services, not through anti-competitive practices. According to Google, success should not be penalised if it is derived from legitimate management and innovation. The company insists that the accusations do not reflect the reality of the modern digital market, where consumers and businesses have many options in all these fields, from search (including with artificial intelligence) to advertising on social media.

Google finally claims that its practices have brought significant benefits not only for consumers, but also for the entire digital ecosystem, fostering the emergence of many digital businesses (apps and sites).