A rare bid to break up Alphabet Inc.‘s Google is one of the options being considered by the Justice Department after a landmark court ruling found that the company monopolized the online search market, according to people with knowledge of the deliberations.
Why Canadians should celebrate Google antitrust decision
In the next phase, the court will decide how to remedy the monopoly problem, which, if designed and implemented thoughtfully, should create the conditions for new competition to emerge.
A rare bid to break up Alphabet Inc.‘s Google is one of the options being considered by the Justice Department after a landmark court ruling found that the company monopolized the online search market, according to people with knowledge of the deliberations.
The U.S. District Court’s historic decision finding that Google had abused its monopoly position has been misportrayed by some as an attack by the government on the free market. Far from it.
After reviewing thousands of documents, hearing from dozens of witnesses and experts, and a lengthy trial, the court determined Google had locked up distribution for its core product — its search engine — effectively excluding rivals from gaining anything other than a toehold in the marketplace. The case found that not only does Google hold a monopoly in search, but that it has propped up that monopoly with practices that blunt the beneficial competitive process.
This wasn’t overreach or the application of an “old law” as some have argued. Just like the law prohibits companies from colluding with each other to fix prices, or engaging in deceptive marketing practices, antitrust laws prohibit dominant firms from engaging in contracting practices to prevent rival firms from competing.
Markets need these rules if we want to encourage companies to offer more innovative products or put pressure on their rivals to pass along cost savings to consumers.
It’s true that consumers don’t pay any money to search on Google. So in the classical sense, are they harmed?
Google operates in a special kind of market that has to balance the needs of two customers: users and advertisers. Google has imposed costs on both. Despite being a free service, Google’s monopoly position has allowed it to degrade the quality of its search offering, imposing an invisible cost on the free flow of information on the internet.
That same monopoly has allowed it to capture a greater share of advertising revenues and charge advertisers more to advertise on Google.
Those advertisers can pass along higher costs in the form of higher prices, or they may not be able to advertise as much as they would otherwise because the dominant firm is reaping more of the value from the transaction.
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It is costs like these that justify pursuing the conduct that has allowed Google to blunt the competitive process that might otherwise unseat it’s position as a result. Far from an attack on the free market, the decision has the potential to open one of the most important digital markets to competition and innovation.
Canadians should celebrate the court’s decision. In the next phase, the court will decide how to remedy the monopoly problem, which, if designed and implemented thoughtfully, should create the conditions for new competition to emerge.
This will be good for consumers, good for advertisers and could be good for Google shareholders too. The heroic sums Google was using to dominate key distribution channels, $26 billion in 2021 alone, can now be redirected towards improving the products that made it so successful in the first place.
But the extent of Google’s monopoly power is not limited to search and the giant faces investigations into its control of the digital advertising stack in the U.S. and by Canada’s Competition Bureau.
Will Google once again threaten to cut off access services to Canadians as a result? We’ll see. But the power accumulated by these companies cannot be an excuse for lawlessness.
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Regulators around the world have a duty to discourage companies from using their vast financial and technical resources to prevent other companies from developing innovative products for consumers and businesses.
Rather than an attack on the mythical free market the outcome of the Google search case is a reminder that markets require rules to keep them open to realize the benefits of contestation and competition.
Far from discouraging entrepreneurs from reaching for the heights of industry, the case is a strong defence of the kind of fair competition that best serves Canadians.
Keldon Bester is the executive director of the Canadian Anti-Monopoly Project.
