States File Antitrust Lawsuit Against Google--3rd Update

By Ryan Tracy 

WASHINGTON -- A coalition of 38 states filed an antitrust suit against Alphabet Inc.'s Google unit, alleging it maintained monopoly power over the internet-search market through anticompetitive contracts and conduct.

The states alleged that Google leverages its position as the dominant search engine -- and the personal data such a perch allows the company to gather -- to limit consumers from using competing search engines, force businesses to use its proprietary advertising tools and foreclose competition from specialized search engines for travel or local businesses.

"Consumers have better products and services when they've got choice in the marketplace, and they've been deprived," said Democratic Colorado Attorney General Phil Weiser at a video streamed news conference with other state attorneys general.

"This will be a unified effort," said Iowa Attorney General Tom Miller, a Republican.

Google has long said it operates in a competitive market. In a blog post Thursday, Google economic policy director Adam Cohen said some of the actions described in the suit were taken to improve search results.

"We show information that helps you connect with businesses directly and helps them reach more customers," Mr. Cohen wrote. "This lawsuit demands changes to the design of Google Search, requiring us to prominently feature online middlemen in place of direct connections to businesses."

The 38 states filed in U.S. District Court in Washington, D.C., the same venue where the Justice Department filed a suit Oct. 20 against Google targeting its search business. The states said they were seeking to join the two lawsuits into one piece of litigation. Another state case, which focused on Google's digital advertising empire, was filed Wednesday in a Texas federal court.

Thursday's suit asks the court to order actions that prevent Google from harming competition, "including but not limited to structural divestitures." The states didn't specify what divestitures they might seek.

Google has called the federal suit and the Texas-led suit deeply flawed, arguing that it competes on merit and maintains dominance because consumers choose its product first.

Thursday's suit added allegations not covered in detail in the other two lawsuits, echoing concerns long voiced by specialized digital information providers such as Yelp Inc. and Tripadvisor Inc. that Google has discriminated against them to curtail their growth. Both those companies applauded the move.

The separately filed suits partly reflect a practical division of labor. Agencies with limited resources divvied up the work of probing different aspects of Google's business.

The filings also have a political backdrop. The leader of Wednesday's lawsuit, Texas Attorney General Ken Paxton, this month unsuccessfully asked the Supreme Court to void presidential-election results in states won by Democrats. His Google lawsuit received support from nine other Republican attorneys general, and no Democrats.

By contrast, the Federal Trade Commission and 46 states coordinated and simultaneously filed their recent antitrust lawsuit targeting Facebook Inc.

Whether the disparate suits benefit Google, or deepen its legal problems, remains to be seen. Robert Kaminski, an analyst with Capital Alpha Partners LLC, noted the Texas-led suit sought monetary damages that could go beyond any penalties imposed in other cases. "Three complaints being filed separately is a decision intended to inflict three times the pain," he said.

Thursday's lawsuit dates to September 2019, when state attorneys general stood outside the U.S. Supreme Court to declare -- in an unusually public manner -- that nearly every state and the District of Columbia were joining to probe Google's conduct. The investigations later divided along two tracks, with a group of states including Colorado looking at Google's search business and another group led by Texas looking at its advertising business.

One section of the suit filed Thursday focuses on SA360, a Google-owned tool for placing ads on internet searches. Google promised advertisers they could use the tool to place ads on the Google search engine as well as others, such as Microsoft Corp.'s Bing, but actually designed the tool to lend an advantage its own search engine, according to the suit.

The suit also accuses Google of seeking to forestall competition from rivals that could siphon search traffic and revenue using new technologies or specialized services. It cites contractual requirements and other actions that, according to the suit, are designed to ensure mobile phones, voice assistants, connected cars, and other technologies use Google search.

It also cites the way Google designs search results. It alleges that when consumers search for an electrician or a hotel, Google displays advertisements and other results in a way that favors Google-owned travel or recommendation services, rather than those provided by other companies.

In the blog post, Google's Mr. Cohen noted that some of the claims about search bias were reviewed by the FTC during the Obama administration -- and the FTC decided not to bring a suit.

The states' suit also repeats some allegations made in the Justice Department case, such as an accusation that Google foreclosed competition through a deal with Apple Inc. to make Google the default search engine on iPhones.

For now, the suit filed in Texas covers different terrain than the two Washington, D.C.-based actions. It accuses Google of abusing its power over the complex, highly technical market for displaying ads across the web.

Some of those claims could later be added to the other lawsuits filed in Washington. The Justice Department has been posing detailed questions to Google's rivals about that part of Google's business, according to people familiar with that probe.

Congress is also considering changes to antitrust law to bolster enforcers' abilities to go after big tech companies, though partisan disagreements could frustrate those legislative efforts.

The move against Google comes amid rising animus from across the political spectrum toward the tech giants, rooted in the power they maintain and the way they wield it.

For most of its history, Google benefited from hands-off U.S. oversight, with both state and federal officials approving its acquisitions and generally declining to challenge the company over complaints from rivals even as it faced antitrust suits in Europe.

For most of its history, Google benefited from hands-off U.S. oversight, with both state and federal officials approving its acquisitions and generally declining to challenge the company over complaints from rivals even as it faced antitrust suits in Europe.

That tide shifted in the past two years, as policy makers grew more concerned about the centrality large technology companies have acquired in American commerce and discourse.

Google has faced bipartisan criticism at congressional hearings this year.

"The evidence seems very clear to me. As Google became the gateway to the internet, it began to abuse its power. It used its surveillance over web traffic to identify competitive threats and crushed them," Rep. David Cicilline (D., R.I.) told Alphabet Chief Executive Sundar Pichai at a hearing in July.

Mr. Pichai said the company faces vigorous competition. "We have always focused on providing users the most relevant information, and we rely on the trust for users to come back to Google every day," he said.

Write to Ryan Tracy at [e-mail]

(END) Dow Jones Newswires

December 17, 2020 15:36 ET (20:36 GMT)

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