US court rules Google is a monopolist on search

The judgment was made by Judge Amit P. Mehta, who in his exhaustive ruling concluded “For the foregoing reasons, the court concludes that Google has violated Section 2 of the Sherman Act by maintaining its monopoly in two product markets in the United States—general search services and general text advertising—through its exclusive distribution agreements.”

Here’s a condensed explanation taken from the ruling’s introduction:

Specifically, the court holds that (1) there are relevant product markets for general search services and general search text ads; (2) Google has monopoly power in those markets; (3) Google’s distribution agreements are exclusive and have anticompetitive effects; and (4) Google has not offered valid procompetitive justifications for those agreements. Importantly, the court also finds that Google has exercised its monopoly power by charging supracompetitive prices for general search text ads. That conduct has allowed Google to earn monopoly profits.

Much of the introduction is spend framing the current search market and Google’s role within it. We’re told that, in 2020, nearly 90% of all US search queries went through Google. In addition to continual investment in its search product, Google maintains such dominance by paying the owners of other browsers, as well as operators and device-makers, to make Google the default search service.

This payment mainly takes the form of ‘revenue share’ through which the partners get a percentage of advertising revenues generated by Google search made through them. In 2021, Google paid out more than $26 billion to those partners, a figure it would be ruinous for any would-be search competitor to match. Thus, Google’s dominance of the search market is self-reinforcing and therefore monopolistic.

What to do about this situation is another matter entirely, and not one within the purview of this case. Remedies such as Europe’s insistence on ‘choice screens’ when you first set up an Android phone are unlikely to have had much effect on Google’s search and browser market share. The same judge will now contemplate remedies and Google will, of course, appeal. That process is expected to take several more years to play out.

One of the challenges of monopoly litigation is how to unwind a dominant market position built-up over decades. As the ruling concedes, Google is synonymous with search for most people. A decision to ban revenue share payments will potentially end up hurting partners as much as Google itself but, since the largest of those is Apple, there will be limited sympathy for any collateral damage caused.