Google suffered a major defeat when U.S. District Court Judge Amit Mehta found that the tech giant had acted illegally to maintain its monopoly in online search. Mehta has yet to decide on the consequences — which Google will undoubtedly fight — but many have speculated how the decision could alter the way Google does business, change the structure of the internet or shake up opportunities for startups.
On Wednesday’s episode of Equity, Rebecca Bellan sat down with Neil Chilson, a lawyer, computer scientist and head of AI Policy at the Abundance Institute, to help us understand what’s at stake for Google in its online search case, what to expect in Google’s upcoming ad tech antitrust trial and how generative AI will change the game for Google in particular and antitrust in general.
Google’s upcoming ad tech case
Opening arguments are scheduled to begin on September 9 for yet another case that will explore Google’s anti-competitive tendencies. This time, the courts will decide whether Google created an advertising technology monopoly that squashes competition and forces publishers and advertisers to use Google’s ad tech products, as the Department of Justice alleged in its initial complaint in January 2023.
“The DOJ is arguing for a narrow market in their complaint that focuses on a very specific ad tech stack,” Chilson said. That stack is display ads, which populate on the side of a web page, and in which Google holds a dominant position.
The DOJ is arguing that Google controls key parts of the ad tech ecosystem, like tools for advertisers to buy display ads or for publishers to sell ad space, which allows the company to allegedly manipulate ad pricing, disadvantage competitors and favor its own services.
Chilson said he expects Google to argue that advertisers have a lot of options for display ads.
“So whether that’s on TV or you go to The New York Times or you go to Facebook, and that these are all competitors because advertisers are choosing between them when they try to decide how to display advertisements,” Chilson said.
Chilson noted that the DOJ will likely bring up Google’s acquisition history, in which it purchased DoubleClick in 2008 that then became the backbone of its ad business. Google also bought AdMeld in 2011 to gain more control over the ad market’s supply side. But Google will probably refute those purchases by pointing out that the Federal Trade Commission and the DOJ approved those deals at the time.
Becoming versus maintaining a monopoly
The main difference between the two cases is around how Google got to its monopoly status and how it maintained its monopoly status.
“[Mehta] went to great lengths [in the online search case] to say that Google had achieved … its market power through consumers finding them very popular and wanting to use them,” Chilson remarked on the online search case.
“The Google search case is more about Google maintaining its monopoly at the top through what the court decided were anti-competitive contracts that it was entering, for example, with Apple to have the default position on the iPhone as the search engine,” Chilson continued. “[The ad tech case] is more about how did Google get to this market share through its conduct on the way up, whereas the search case is more about how did Google stay at the top by using these exclusive contracts?”
How does that play into potential outcomes?
Many have speculated that Google might be forced to break up its businesses, share data with competitors or open up its APIs as a result of its online search monopoly ruling. Chilson isn’t so sure.
He pointed out that Mehta threw out some of the complaints early on that would have suggested breaking up Google’s businesses as the right remedy for its exclusive contracts. “It’s hard to see how breaking up Google is the right remedy here,” Chilson said. “The obvious remedy is to say that Google can’t do those kinds of contracts anymore.”
Which is to say, that might set a precedent for barring such conduct once a company has a monopoly.
Whereas in the upcoming ad tech case, the allegations are that Google achieved its monopoly through anti-competitive conduct, which would support an argument for a breakup.
“Although you run into a bunch of concerns around rule of law if you’re trying to unwind 16-year-old mergers,” Chilson said. “People might start to be like, ‘Well, if I might get sued in 16 years if I’m successful in this merger, maybe I’ll think twice about doing something that makes business sense.’”
Five years too late or two years too early?
Generative AI is changing the nature of how people search for information. And ironically, Google was the one to invent some of the modern technology, like transformer architecture, that is powering large language models. But it was other, much smaller companies like OpenAI that jumped in and forced Google to start doing something that looks very different than their traditional search.
When Bellan asked Chilson whether Google’s monopoly cases came five years too late, he argued that they might have come two years too early. “The problem here is that Google is facing competition, and we might be bringing this case just as Google’s business model is under pretty serious threat, so in two years, we might look back and be like, Why were we suing Google for being anti-competitive? They’re being crushed.”
Online search isn’t the only thing that’s changing with generative AI. Display ads, and digital advertising in general, will also shift.
Google uses clicks via its link-based search to determine which advertiser has to pay for an ad and who gets paid. But that doesn’t quite work with a model like Perplexity’s, which envisions publishers getting a cut of ad revenue if their content is surfaced in response to a query.
“For example, if you search for car insurance on Google, that ad buy is really, really precise, because you know somebody’s looking for insurance, and that if you can get that click, it could be worth hundreds of thousands of dollars over the consumer’s lifetime,” Chilson said. “And so those are very, very, very useful ads. It’s hard to see how that fits exactly with the AI placed ad.”
Chilson noted that Perplexity’s model might even come up in Google’s case, as it represents a new entrant into the display ad marketplace in which the DOJ is suing Google.
In 10 years, Chilson argued, the AI-fueled online ecosystem might change so much that the antitrust conversation will look very different.
“I think we can expect to see it becoming increasingly efficient to have small firms … that can punch way above their weight if they have AI on their side,” he said, noting this could cause a distribution change where many small, nimble firms will use AI to do a lot of the bureaucratic work that big organizations use people for today.
If you want to dive deeper into the early wave of major legal cases regarding tech giants, their in-market heft and behavior, Rebecca Bellan joined Alex Wilhelm back in November to talk through it all. You can catch that episode here.
Equity will be back on Friday with our weekly news roundup, so stay tuned!