Antitrust showdown: Google’s dominance, tech titans, and the future of Search

Google is facing one of the historic anti-trust cases in the US. Tech mavens must be feeling a sense of déjà vu. Back in 1998, the US Department of Justice pursued a landmark antitrust case against Microsoft, targeting its monopoly over computer operating systems and internet browsers.

Microsoft was accused of weakening the once-dominant browser, Netscape, through multiple agreements with internet service providers that favoured Internet Explorer (IE) access, ultimately putting Netscape users at a disadvantage. During the course of the trial, a Microsoft executive was accused of pledging to “cut off Netscape’s air supply,” which the tech giant refuted. We all know what happened eventually. IE became the default browser for a long time until the arrival of more user-friendly and feature-rich browsers like Firefox and Google’s Chrome.

Much water has flowed under the bridge since the Microsoft case; so much has changed, except the Big Tech’s monopolistic tendencies even as policy-makers and governments continue to struggle to keep pace with the frenetic pace at which technology is advancing.

Three decades later, the US lawmakers are trying to rein in Google in pretty much the same way it tried with Microsoft. They are primarily worried about Google’s firm control over the search and search-advertising markets, mainly established through its strategic agreements with smartphone manufacturers and internet browser developers. These contracts ensure that Google is the default search engine in virtually every consumer touchpoint.

“I absolutely understand why this case was brought,” says Shane Greenstein, Martin Marshall Professor of Business Administration at Harvard Business School. In an interview with The Harvard Gazette, Greenstein said that Google signs contracts for default settings with the distributors of phones and computers. “It’s not everyone, but it’s the vast majority of device makers and distributors. The concern is that these contracts make it impossible for new entrants or too difficult for new entrants who might compete with Google to get their new services in front of users. That’s the accusation.”

According to Greenstein, Google will argue that the default settings enhance the user experience, as defaults are essential. He feels that the search giant will also say that users generally prefer them, which they will argue is not an antitrust violation if they serve users.

The justice department, on the other hand, will counter Google saying that these contracts are overly restrictive, limiting user choices, and discouraging alternatives. Numerous contracts exist, with Apple’s being the most concerning to antitrust enforcers.

Google will attribute its market dominance to offering a “superior product.” Kent Walker, Google’s President of Global Affairs, has argued that browser and device makers “have a choice, and they choose Google”.

Drawing a parallel between Google’s current situation and the 1998 case, the tech giant’s legal team will argue that user preference is a crucial distinction. Unlike Microsoft, where most users preferred Netscape over IE, Google will argue that their consumers are actually getting what they want. Additionally, Google intends to contend that if someone prefers not to use Google, they are at liberty to do so; it is relatively simple to go for another search engine, such as Bing or DuckDuckGo, even though many devices come with Google as the default.

‘Smart’ contracts

Google’s parent company Alphabet has entered into various agreements with tech giants like Verizon and Samsung to establish Google as the default search choice on their platforms. However, the arrangement with Apple has garnered particular attention. Even though Apple isn’t a defendant in the current antitrust case, its executives have been summoned to provide testimony.

Interestingly, Google and Apple compete with each other on pretty much every front: email, OS, cloud computing, app stores, etc. But they partner in one crucial area: search.

In the US, Greenstein added, Apple’s iPhone reigns supreme in the smartphone market, with no other competitor coming close to its dominance. Its primary rival is Android, backed by Alphabet. Apple has a contractual agreement with Alphabet, designating Google as its default search engine. Google compensates Apple based on the volume of searches originating from Apple devices, resulting in a substantial financial exchange over time.

Every year, Alphabet reportedly pays Apple billions of dollars to ensure that Google search engine remains the default option on iPhones. A couple of years ago, Microsoft reportedly approached Apple with a multi-billion-dollar offer to make Bing the default search engine. But Apple refused.

The Information reports that Google was once worried about Spotlight, Apple’s own in-house search engine. Way back in 2014, in an internal document, the search engine giant expressed its concern over Spotlight. With the ongoing antitrust case casting uncertainty over the future of the Google-Apple agreement, there’s speculation that Apple might opt for Spotlight as an alternative should the partnership falter.

This possibility underscores the fluid and competitive nature of the technology industry, where shifts in alliances and strategies are always on the horizon. The outcome of the case will undoubtedly be closely watched by industry observers, as it could reshape the dynamics of the search engine market and further shape the digital landscape.

The digital ad landscape

The digital advertising landscape is currently under the shadow of Google’s formidable dominance, holding what some consider a virtual monopoly in markets. Google’s control is supported by its extensive customer database and primary user data, a position that aligns with the global shift towards greater privacy emphasis.

“The digital advertising market, whether in developed or emerging nations, is currently dominated by Google, which holds a virtual monopoly,” opines Karan Taurani, Senior Vice-President, Elara Capital.

“Google has an extensive customer database with primary user data. In India, data protection legislation is on par with GDPR in Europe. Google is also transitioning to a cookie-less system around the middle of the next year. These are clear signals that the world is moving towards a greater emphasis on privacy, both in developing and emerging nations. There is a growing awareness that customer data is of paramount significance. Strict rules are needed to ensure that this data is not misused and that no privacy breaches occur,” he adds.

He feels that many retail, fashion, and e-commerce companies will likely benefit from this shift, as they will have control over their first-party data and can use it for their own monetisation purposes, without involving third parties or engaging in partnerships for their databases. On the other hand, Taurani says, Google operates more as an integrator and advertising tech platform. They collaborate with advertisers and publishers to monetise data. Google has a substantial and diverse customer base, particularly in countries like India, where Android penetration exceeds 90 per cent. Android also has a substantial global presence.

“We’ve seen Apple’s move towards a cookie-less approach, with a focus on obtaining user consent for customer data. Google is expected to follow a similar path. The key difference is that Google heavily relies on advertising revenue, unlike Apple, which does not depend on advertising to the same extent. Privacy is the future,” says Taurani.

The future of Search

The outcome of the Google antitrust case holds the potential for a profound and far-reaching impact, extending beyond the case itself. It has the power to reshape not only the trajectory of emerging technologies, but also the competitive landscape in the online search market. If the court rules against Google, it could catalyse a significant shift in the dynamics of the tech industry. The momentous effect lies in the fact that it would provide Google’s competitors, both established and innovative AI-dependent newcomers, with a unique opportunity to claim a more substantial foothold in the market.

By challenging Google’s current dominance, the ruling could foster a more competitive environment where new technologies and innovations have a chance to flourish. This, in turn, could motivate rival companies to invest in and deploy their own AI models and advanced search technologies. Such a diversified landscape could benefit consumers with more choices, spur innovation, and encourage the development of AI-powered search products.

In a recent policy brief, Matt Stoller, Director of Research at the American Economic Liberties Project, and his colleague Sahaj Sharda, argued that if the judge in the anti-trust case allowed Google to remain dominant, it could deter companies from developing new search products that integrate advanced AI technologies. One example they highlight is Neeva, an AI-powered search engine founded in 2019, which shut down as it failed to attract users due to Google’s market dominance.

The ruling in the Google case could significantly impact the future deployment and commercialisation of new technologies, such as Neeva, providing Google’s competitors with a chance to gain a larger market share and potentially leading to a transformation in the Search industry.