Key Takeaways

  • U.S. DOJ files an antitrust suit against Google.
  • Suit alleges that Google uses anti-competitive practices in online search and advertising.
  • Eleven state attorneys general joined the suit as plaintiffs.

The U.S. Department of Justice has filed an antitrust lawsuit against Google, alleging that the online giant engaged in anticompetitive conduct to preserve monopolies in search and search advertising. The lawsuit, according to multiple reports, is the first of many long-anticipated actions by the Justice Dept. over massive tech companies like Alphabet, the parent of Google, Apple, Amazon and Facebook.

The Justice Dept.'s lawsuit alleges that Google uses a web of interlocking businesses that it owns or controls to lock out competitors from the highly lucrative internet advertising market. With 80% of market share in online search, Google's dominance, the lawsuit says, makes it impossible for competitors to have their search results appear in front of consumers.

More specifically, the Complaint maintains that Google has unlawfully maintained monopolies in search and search advertising by:

  • Entering into exclusivity agreements that forbid preinstallation of any competing search service.
  • Entering into tying and other arrangements that force preinstallation of its search applications in prime locations on mobile devices and make them un-deletable, regardless of consumer preference.
  • Entering into long-term agreements with Apple that require Google to be the default – and de facto exclusive – general search engine on Apple’s popular Safari browser and other Apple search tools.
  • Generally using monopoly profits to buy preferential treatment for its search engine on devices, web browsers, and other search access points, creating a continuous and self-reinforcing cycle of monopolization.

William Barr, the U.S. Attorney General, said in a press release, “Today, millions of Americans rely on the Internet and online platforms for their daily lives. Competition in this industry is vitally important, which is why today’s challenge against Google — the gatekeeper of the Internet — for violating antitrust laws is a monumental case both for the Department of Justice and for the American people,”

11 States Joined Case as Plaintiffs

The case—more than a year in the making—also involves 11 Republican state attorneys general, who have joined the Justice Dept. as plaintiffs in the case. Those states are Arkansas, Florida, Georgia, Indiana, Kentucky, Louisiana, Mississippi, Missouri, Montana, South Carolina and Texas, according to an open docket of the case filed Tuesday morning.

The suit also alleges that Google uses lucrative arrangements with mobile phone carriers to preload its search application on its Android operating system. The government alleges that Google unlawfully prohibits competitors’ search applications from being preloaded on phones under revenue-sharing arrangements, according to The Wall Street Journal.

What's Next

Alphabet, which owns Google, has more than $120 billion cash on hand, and has the resources to fight a long and protracted legal battle. It has claimed in the past that it offers its services for free, and is therefore not a monopoly. The FTC tried to fight a similar battle with Google in 2012, but ultimately settled with the company in 2013 after Google agreed to make slight changes to its practices. If the Justice department prevails, Google may be forced to change the way it operates and possibly break up its businesses.

The Justice Department’s lawsuit reportedly does not specify particular remedies, which would be addressed in a later case.

YCharts
YCharts.

Investors have clearly not been worrying too much about the Justice Dept.'s mounting case against Google, or other tech giants it is said to be pursuing. The FAANG stocks, including Alphabet, have been among the top performers across all markets since the DOJ investigation began.