How Liable Are Technologies We Rely On?

On October 20th, the United States Justice Department, along with eleven states (Georgia included), filed an antitrust lawsuit against Google. The case is grounded in Section 2 of the Sherman Act, a law passed in 1890 that broadly outlaws monopolization. According to the complaint, Google enjoys monopolies in three distinct markets: general search services, search advertising, and general search text advertising.

Google allegedly maintains these monopolies through exclusive agreements with device manufacturers which set Google as the default search engine on smartphones, tablets, and computers. With this volume of guaranteed search traffic, Google then becomes the most critical place for businesses to advertise. Therefore, Google wields monopoly power over the market for search services and for advertisers looking to reach consumers.

While the Trump Administration is effectively the lead plaintiff, Democrats in Washington share in the concern regarding big tech. Two-weeks before the filing of this suit, the House Judiciary Antitrust Subcommittee released the findings of its more than 16-month long investigation into the state of competition in the digital economy. Their conclusion states that Google, along with Apple, Amazon, and Facebook, possesses significant market power over large swaths of the economy, recommending antitrust enforcement and regulatory reform focused on encouraging compatibility of services and limiting self-preferencing.

Google CEO Sundar Pichai (Left), Monopoly Man (Right).

While this lawsuit is ultimately about Google’s search business, most of the big tech companies have something in common; they do not want to be a product or a singular service, but rather they want to be cross-industry ecosystems.

Google, through its parent company Alphabet, sells the Android mobile operating system, hosts content on YouTube, and is an internet service provider through Google Fiber. Apple sells computer hardware, develops proprietary software that operates exclusively on that hardware, and produces its own entertainment content for Apple TV. Amazon went from selling books to being a source for just about anything one could want, from groceries at Whole Foods to commercial-grade cloud computing through Amazon Web Services. 

In the strive to build these ecosystems, big tech companies frustrate more than just officials at the Justice Department. Earlier this year, Epic Games, the developer of the popular game Fortnite, took Apple to federal court regarding fee-sharing for developers that distribute their apps via the Apple App Store. In short, Apple takes a percentage cut from transactions that take place through the App Store.

Fortnite is a free to play (f2p) game, though users can pay to unlock additional features and content. Epic Games felt Apple’s percentage cut was unfair, so it directed customers to make their purchases through other avenues and encouraged that defection with lower prices. While Apple argues the cut is a term of doing business in the App Store, Epic Games counters that the fee stifles advances in software and blocks developers’ access to consumers with Apple devices.

Ultimately the debate about the power of big tech comes down to whether the exclusivity of the ecosystems is a feature or a bug. Does Google’s dominance in search engines lead to undesirable outcomes such as higher advertiser prices and less accountability for consumer data privacy? Do Apple’s restrictions guarantee compatibility and safety by holding app developers to higher standards? Are these actions anti-competitive or the results of victorious competitions?

There appears to be a commitment from federal and state governments to scrutinize and examine the positioning of big tech companies in the United States. In the midst of COVID-19, the reliance on technology has never been higher. While their power is undeniable, the question for the courts will be to what degree that reliance hinders competition and harms consumers.

You can read the full legal filing from the United States Justice Department by clicking on the hyperlink.