Google x USA: judgment tests control of big techs – 08/19/2023 – Tech

When the US Department of Justice (DoJ) complaint against Google goes to trial next month, it will be the first case to investigate the business practices of a major tech company since the US sued Microsoft a quarter century ago. . If Judge Amit Mehta sides with the United States, the solutions he orders could have a direct bearing on Google’s core business, opening the door for rivals to take a bigger slice of the mobile search market.

You wouldn’t know from the stock price. Alphabet, parent company of Google, is up 47% this year, part of a strong recovery that has seen big techs lead the rise of the entire stock market. Since the “techlash” that occurred around 2017, when politicians and regulators around the world began trying to rein in the power of the biggest tech companies, investors have had a new risk to reckon with. The current mood of the stock market suggests they see very little danger.

It’s easy to see why. Despite the noise and furor emanating from Washington in recent years, regulators have yet to win big antitrust victories against tech companies, and Congress has failed to move forward with any major new legislation. Despite handing out a series of fines against Google, the European Union has done little to change the competitive dynamics in the markets it dominates.

The new EU Digital Markets Act may pose a greater risk. But in the absence of new laws in the United States, regulators have been forced to try to roll back existing ones. The courts, however, are afraid to limit commercial practices that give immediate benefits to the consumer, such as lower prices. Tech companies are warning that messing with their current way of doing business could threaten free Internet services and low-priced digital products that are popular with millions of consumers.

The US Federal Trade Commission’s (FTC) failure last month to convince a judge to block Microsoft’s acquisition of gaming company Activision Blizzard for $75 billion showed yet again the reluctance of US courts to act without that the consumer losses are clear, no matter how much the competing companies complain.

The case against Google revolves around a series of deals the company struck with handset and browser makers to make its search engine the default on devices and phones running its Android software.

While parts of the complaint were rejected by Mehta this month, the judgment will focus on an issue where Google may be vulnerable. Section two of the Sherman Act imposes a broad prohibition on any “excludable conduct” used to monopolize a market. The US has had success with a similar complaint against Microsoft, which used exclusivity contracts to promote its Internet Explorer browser and defeat browser maker Netscape.

Even if Google’s search agreements exclude competitors, however, the company will still prevail if it can show a pro-competitive intent in its conduct. Google argues that paying to make its search engine the default that users see on their devices is no different from the way breakfast cereal makers pay for top placement on supermarket shelves. He also says that if his own promotional deals are disrupted and the courts bar normal business practice it could lead to a worse experience for consumers, including higher prices for the phones.

The legal test comes as another major tech company looks set to face a claim over its core business. There have been reports for weeks that the FTC is close to filing a long-awaited lawsuit against Amazon’s e-commerce operations. The agency is said to target Amazon’s treatment of third-party sellers who use its online marketplace to reach customers. Amazon has long faced allegations that it forces these sellers to pay for extra services, such as Fulfilment by Amazon storage and delivery, to ensure their products receive top placement.

Just like Google, this seems to attack an important part of the core business. Independent sellers account for nearly a quarter of Amazon’s revenue, making them an important part of the company’s business. Yet Wall Street seems unfazed, and Amazon shares have rallied 57% this year.

One calculation that investors seem to be making is that even if companies lose, they will be able to resolve cases by adjusting the terms of some of their contracts, rather than being forced to make fundamental changes to their operations. Amazon, for example, has already made concessions in the European Union and the United Kingdom on its treatment of third-party sellers, with little impact on its business.

Google’s test will shed light on the kind of practices big tech critics have complained about for years. But if Wall Street is right, that won’t hurt companies’ most profitable operations.

_{Translated by Luiz Roberto M. Gonçalves}