The Justice Department’s case against Alphabet’s search business formally opens Sept. 12, scrutinizing a component of the internet that billions of people use on a daily basis in a trial that will impact global businesses and society.
A cornerstone of the Google search empire is its advertising business meaning marketers and adjacent professionals need to pay attention to proceedings, the outcome of which will profoundly impact their future practice.
Below is a synopsis of the key talking points media professionals can use to hold up their end of the inevitable “watercooler conversations” in the weeks to come.
Who is involved?
The DoJ, along with several Attorneys General, is suing Google in a civil antitrust suit alleging several violations of the Sherman Act, a U.S. Federal law prohibiting monopolistic business practices, in a district court for the District of Columbia.
The participating AGs — representing Arkansas, Florida, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Montana, South Carolina, and Texas — give the impression of local action, but the impact of the eventual outcome will be global.
After all, this is just one of several slings and arrows whereby the online colossus faces government requests for remedies.
Why is this a big deal, what historic precedents are there?
Google’s search division generated $163 billion in revenue last year — that includes revenues from advertisers plus its search distribution partners — accounting for more than half of Alphabet’s $283 billion 2023 revenue. A reminder that search is still the jewel in Alphabet’s crown.
As for historic precedent? Well, yes and no …
It’s worth noting how the DoJ’s EU contemporaries have had the search giant in their crosshairs for several years with Google’s price comparison services, a service adjacent to search, found in breach of competition laws there resulting in fines worth billions in recent years.
However, it’s difficult to point to historic precedent (on this scale) in Google’s domestic market when it comes to search. Legal historians and market veterans alike can point to Microsoft’s antitrust trial at the turn of the century whereby the DoJ targeted its activities in the PC and web browser market.
Here, a years-long battle resulted in a settlement that many interpret as arresting growth of Microsoft’s Internet Explorer – Google’s Chrome browser now sits aloft that market sector, but that’s a whole other antitrust conversation.
Who does this impact?
In a word: everyone.
In its latest annual report, Alphabet notes how aggressive enforcement of competition laws could “increase our cost of doing business, make our products and services less useful, limit our ability to pursue certain business models” in a manner that could have “an adverse effect on our business.”
The downstream impact is potentially infinite. Consider any professional whose marketing activity (both organic and paid-for) employs the use of keywords for search engine optimization, plus any website-owner that uses Google as their default search browser in their toolbar.
The slightest alteration to how Google operates will have a widely-felt ripple effect given that its share of the search engine market is in-and-around 90 percent.
Combine this with the fact that optimizing for/bidding on keywords to improve placement in search engine results is the core component of performance marketing, and it’s clear: the future of the marketing profession/practice hinges upon the outcome of this trial.
What are prosecutors‘ talking points?
Essentially, prosecutors allege that Google is “a monopoly gatekeeper for the internet” having employed anti-competitive tactics to corner internet search services.
“A general search engine must find an effective path to consumers for it to be successful,” read official documents, first filed in 2020, that argue Google has “de facto exclusivity”.
Google’s “exclusionary agreements, including tying arrangements … to lock up distribution channels and block rivals” with hardware manufacturers (particularly cell phone-makers) and telco-providers are in violation of competition laws.
Prosecutors also assert that such agreements with parties such as Apple, AT&T, Motorola, Mozilla, etc., steer billions of queries (ergo eyeballs) away form rival search engines.
The end result is that Google can take its foot off the gas when it comes to offering innovative services, denying U.S. consumers realistic choice and, by default, meaning Google can pay less attention to users’ privacy.
What are the talking points of the defense?
However, representatives of Google will likely counter, arguing that competition is ‘just a click away’ and that default settings are in no way binding to consumers. Ultimately, such arrangements don’t necessarily don’t block rival search engines from being installed on devices.
Also, the phrase ‘to Google …’, which literally means online content discovery in popular parlance, is testament to its historic record of successfully offering the U.S. public what it wants in a competitive marketplace.
After all, it could be argued how there are rival offerings when it comes to discovering goods and services online with the likes of e-commerce giant Amazon and Microsoft, the provider of rival search engine Bing, hardly qualifying as internet minnows.
One boost for the defense came in pre-trial hearings when presiding Judge, Amit P. Mehta of U.S. District Court for the District of Columbia, dismissed prosecutors’ claims that Google returns self-preferential results in its search returns.
Firstly, it’s worth noting that the case will scrutinize three areas:
- Organic search results
- Keyword-based text ads served beside organic search results
- General display ads served on the top of organic search results
The multibillion dollar SEO industry is a notorious black box for the majority of the sector while the auction-based monetization of the other two subjects of scrutiny are the very cornerstone of the trillion-dollar Alphabet empire.
Prosecutors will argue that Google’s network of distribution agreements deprives rivals of the necessary data to improve their search results to compete in a realistic manner. This then kicks off a ‘negative flywheel effect’ of: less data, less competition, less choice, and higher prices for ad space.
Advertisers need to contemplate their comfort-levels with the resulting scenario whereby Google allegedly owns the auction house, controls the bidding process, and is effectively the only party with a transparent view of the entire process.
Critics would argue that this can result in a process whereby advertisers are effectively bidding only against themselves just like in the notoriously complicated ad tech sector where Google faces similar charges.
It is also worth noting the coming proceedings take plaec in the form of a ‘bench trial’ meaning the subsequent proceedings are likely to be quite technical, as neither side will have to present a case that can be understood by a jury of (laymen) peers.
Hence, it’s worth listening out for expert witness testimony – the full witness list was not publicly available pre-trial – explaining the downstream impact said distribution agreements can have, and how adjustments can have notable impact.
What are the potential outcomes?
The Sherman Act allows for wholesale break-up of parties deemed a detriment to market competition and consumer benefit, but at present prosecutors have yet to outline any remedies they may pursue.
While Google has been hit with multiple antitrust fines in Europe, historians with a more U.S.-focused lens will point to the historic precedent for settlements similar to the Microsoft antitrust case of two decades ago.
Other examples include Google’s own 2013 settlement with the Federal Trade Commission in a matter concerning mobile internet services whereby it gave advertisers greater flexibility to simultaneously manage campaigns across Google AdWords and rival platforms.
However, right now, the DoJ and its cohorts are focusing on proving whether or not Google broke antitrust laws. Marketers will have to wait weeks and months, if not years, before they can start rearchitecting their online practice.
Will this impact Google’s other antitrust wranglings?
It’s important to reiterate how the above case is separate to a parallel antitrust case from the DoJ, also with several state AGs, alleging that Google’s ad tech stack arrangements constitute multiple violations of Sections 1 and 2 of the Sherman Act.
See the above video for more on that one, but that case is not expected to formally kick off until next year, but the legal arguments are likely to center on the legal concepts.
How long do marketers have to wait on a result?
Again, this is another tricky part with the trial formally opening in September 2023 with proceedings set to run into January the following year.
If historic precedent is anything to go by, there will be months, if not years, of haggling before a definitive outcome emerges.
However, that’s no excuse for complacency, as prosecutors are keen to point out, this is a battle over the future of the internet and its environment for doing business for the decade to come. The case continues.