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Google hit with third major antitrust suit — this time from 38 attorneys general

·6 min read
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A bipartisan coalition of states on Thursday became the third group of regulators within two months to file a federal lawsuit accusing Google (GOOG, GOOGL) of using its monopoly power to violate antitrust laws, as America’s tech giants face increasing scrutiny over their size and power.

“Google sits at the crossroads of so many areas of our digital economy and has used its dominance to illegally squash competitors, monitor nearly every aspect of our digital lives, and profit to the tune of billions,” New York Attorney Letitia James said in a statement on Thursday, announcing the state’s participation in the civil suit filed in the U.S. District Court for the District of Columbia.

Thirty-eight attorneys general led by Colorado and Nebraska accuse Google of three main anticompetitive practices, including using exclusionary contracts like one with Apple (AAPL) that makes Google the default search engine on Apple devices. Google is also accused of denying specialized search sites like Expedia (EXPE), Angie’s List, and Yelp (YELP) of “prime real estate” on its search results page, and of using its search-engine marketing tool to deprive competitors like Microsoft’s (MSFT) Bing of ad dollars.

The suit comes less than 24 hours after a civil antitrust suit filed by 10 states led by Texas focused on Google’s ad tech business, and less than two months after the Justice Department and 11 Republican state attorneys general filed a civil lawsuit focused on Google’s search and search advertising businesses.

Google director of economic policy, Adam Cohen, responded to the suit via a blog post saying that the allegations made by the attorneys general have already been rejected by courts in countries ranging from Germany to Brazil.

“We know that scrutiny of big companies is important and we’re prepared to answer questions and work through the issues,” Cohen wrote. “But this lawsuit seeks to redesign Search in ways that would deprive Americans of helpful information and hurt businesses’ ability to connect directly with customers. We look forward to making that case in court, while remaining focused on delivering a high-quality search experience for our users.”

The latest suit is part of a larger crackdown on the broader tech industry, which includes the Federal Trade Commission’s recent antitrust suit filed against Facebook alleging it uses its power to buy up or crush rivals. Apple and Amazon (AMZN) are also facing investigations into their business practices.

A new suit that addresses complaints by Yelp and Expedia

The latest lawsuit focuses in part on exclusionary agreements including one between Google and Apple that ensures Apple makes Google the default search engine on its various devices, Safari web browser and Spotlight search. Google, in turn, pays Apple between $8 billion to $12 billion a year, as the Justice Department’s lawsuit points out.

CEO of Alphabet Inc. and its subsidiary Google LLC, Sundar Pichai, appears on a monitor as he testifies remotely during a hearing to discuss reforming Section 230 of the Communications Decency Act with big tech companies on October 28, 2020 in Washington, DC. - US senators and tech CEOs girded for a clash Wednesday over a law making online services immune from liability for third-party content at a hearing set to debate Silicon Valley's handling of social media. (Photo by MICHAEL REYNOLDS / POOL / AFP) (Photo by MICHAEL REYNOLDS/POOL/AFP via Getty Images)
CEO of Alphabet Inc. and its subsidiary Google LLC, Sundar Pichai, appears on a monitor as he testifies remotely during a hearing to discuss reforming Section 230 of the Communications Decency Act with big tech companies on October 28, 2020 in Washington, DC.. (Photo by MICHAEL REYNOLDS / POOL / AFP) (Photo by MICHAEL REYNOLDS/POOL/AFP via Getty Images)

In terms of favoring its own search advertising tool, the suit alleges that Google’s ostensibly neutral advertising search engine, SA360, artificially drives advertisers to itself rather than competitors like Microsoft’s Bing.

Finally, the suit alleges that Google limits consumers’ ability to bypass Google’s main search results through advertisements placed on search pages, pushing organic results down below the “fold.” In other words users have to scroll or click to the next page to see true search results that aren’t Google ads.

This has been a major complaint of sites like Yelp and Expedia which say that Google’s use of such practices severely limits their ability to reach potential customers.

The Department of Justice’s case filed in October also centers on Google’s search and search advertising businesses, claiming it engaged in anti-competitive tactics to maintain its dominance over other market players in general search, search advertising, and general search advertising — a triad of markets the lawsuit characterizes as the “cornerstones” of Google’s empire.

The DOJ’s case goes on to say that Google’s deals to lock in its search tool as a default with device makers like Apple and wireless carriers like Yahoo Finance parent Verizon (VZ) effectively shut out competitors.

In response to the DOJ’s claim, Google released a statement saying people use the search engine by choice, and not by force.

The Colorado-led suit includes aspects of the DOJ suit, such as Google’s deal with Apple, but goes further in calling out the way Google’s search results are displayed to consumers. “The additional claims in this case are brought to combat a broader range of Google’s illegal conduct,” the complaint states.

As a solution to curb the alleged anticompetitive actions, the state attorneys general ask for the court to impose structural relief, if necessary, which can include divestitures to break up Google’s stronghold in the relevant markets.

‘The batter, the pitcher, and the umpire’

Wednesday’s Texas-led lawsuit — joined by Arkansas, Idaho, Indiana, Kentucky, Mississippi, Missouri, North Dakota, South Dakota, and Utah — centers on Google’s ad tech business. The suit claims that Google’s 2008 acquisition of DoubleClick allowed it to position itself on both the buy-side and sell-side of the publisher ad server market, and that it used the positioning to engage in unfair competition.

“Google repeatedly used its monopolistic power to control pricing, engage in market collusion to rig auctions, in a tremendous violation of justice,” Texas Attorney General Ken Paxton said in a video posted on Twitter on Wednesday. “...If the free market were a baseball game, Google positioned itself as the batter, the pitcher, and the umpire.”

The suit targets a deal Google struck with Facebook (FB) — its biggest competitor — to offer the social network favorable ad-auction treatment in exchange for less aggressive competition against the ad giant.

Facebook did not comment on the claims regarding its deal with Google.

A Google spokesperson issued a statement Wednesday calling the ad tech claims “meritless.”

“We’ve invested in state-of-the-art ad tech services that help businesses and benefit consumers,” the statement said. “Digital ad prices have fallen over the last decade. Ad tech fees are falling too. Google’s ad tech fees are lower than the industry average. These are the hallmarks of a highly competitive industry. We will strongly defend ourselves from his baseless claims in court.”

Alexis Keenan is a legal reporter for Yahoo Finance and former litigation attorney. Follow Alexis Keenan on Twitter @alexiskweed.

Email Daniel Howley at dhowley@yahoofinance.com over via encrypted mail at danielphowley@protonmail.com, and follow him on Twitter at @DanielHowley.

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