Google antitrust probe takes shape as states step up to investigate core businesses

06 Apr 2020 4:50 pm by Mike Swift

As the states' antitrust probe of Google takes shape, Iowa, Utah, Tennessee and New York have emerged as additional key states in investigations of the three pillars of Google’s business: advertising, search and Android, MLex has learned.

The US Justice Department is likewise investigating Google, and early last fall issued a sweeping civil investigative demand to the company concerning nearly every aspect of its business, including advertising, search and Android, it is understood.

The division of the investigation by 51 US states and territories into a three-prong, bipartisan group underscores the growing sophistication of the multi-state probe — and the seriousness of the regulatory threat to Google.

Attorneys general in Iowa and Utah have taken the lead in investigating potential antitrust violations in Google's Android mobile operating system, while MLex has learned that Tennessee and New York are looking into Google's search practices. Along with Texas's continued focus on Google’s advertising technology business, the states have chosen to highlight three Google businesses targeted by European antitrust regulators in recent years.

New York's attorney general is heading up a separate multi-state antitrust investigation into Facebook.

Until recently, Texas has been the public face of the multistate probe. Texas has one of the largest stables of antitrust attorneys among the US states, and its antitrust division probed Google for several years during the past decade. Now, other states such as Utah and Iowa — headed by influential attorneys general with a history of bipartisan cooperation — have stepped up to take the lead on individual strands of the current probe, escalating the regulatory risk Google faces.

“We’ve broken it down,” Texas Attorney General Ken Paxton said in a recent video interview with NTD News, a conservative-leaning news service. While Texas is looking into digital advertising markets, Paxton said, “there are other states that are looking at searches and whether there is fair competition in the search market. There’s also other states looking at the Android system and whether there is fairness as it relates to that.”

Paxton did not disclose the division of labor among the states. Spokespersons for the Utah, New York, Tennessee and Iowa attorneys general declined or did not respond to requests for comment.

The individual Android, search and advertising-technology strands should not be thought of as separate investigations, said people familiar with the probe, who spoke on condition of anonymity because they weren't authorized to speak about the investigation. They are, rather, “soft divisions,” in which each group of states seeks to develop an expertise into Google’s complex business.

In a statement, a Google spokeswoman said, “Google products help people, create more choice, and support thousands of small businesses across the US. We have a strong track record of constructive cooperation with regulators around the world. But we're also concerned with the irregular way Texas’ investigation is proceeding, including unusual arrangements with advisers who work with our competitors and vocal complainants.”

The states have assigned leadership roles to Democratic and Republican attorneys general in the individual Android, search and advertising technology strands, burnishing the probe’s credentials as a serious, bipartisan challenge to Google’s business practices. MLex reported this month that Nebraska, headed by Republican AG Doug Peterson, has also hit Google with an investigative subpoena.

As the nation’s longest currently serving state attorney general, Iowa’s Tom Miller is an influential figure, particularly for current and former Democratic attorneys general. First elected in 1978, Miller has served as Iowa’s attorney general ever since, except for four years in the early 1990s when he was in private practice.

Utah Attorney General Sean Reyes, a Republican, has teamed up with Democratic AGs in the past, joining with District of Columbia AG Karl Racine in 2016 to urge the US Federal Trade Commission to reopen its antitrust probe of Google.

The division of labor and three areas of focus on what are arguably the three most important pillars of Google’s business demonstrate a significant evolution in the multi-state probe, which began last September when Paxton and other state attorneys general announced the investigation on the steps of the United States Supreme Court.

The division of the multistate antitrust probe appears to mirror the focus of European antitrust regulators, who spent years digging into Google’s advertising, product search and Android markets before hitting Google with significant antitrust penalties.

The EU has slapped Google with a 1.49 billion euro (around $1.69 billion) fine for abusing its market power in online advertising and another 2.42 billion euro ($2.6 billion) fine for demoting rival comparison shopping sites and promoting its own service in search results. Google is appealing both of those.

The European Commission’s Android probe ended in 2018 with a 4.34 billion euro ($4.83 billion) fine for abusing its Android market power. Following that decision, Google announced it would give rival search providers — such as Yahoo — more chances to serve Android customers, powering search boxes or as the default service in the Chrome browser.

Android is the world’s most common mobile operating system, and its dominance has helped cement Google’s continued leadership in mobile search, where the company has an even more dominant market share than on desktop computers. While Google gives Android away to manufacturers such as Samsung and LG, it has generally required the manufacturers to install Google services such as search, maps and Gmail as defaults.

Google doesn't break out Android revenues, but in a copyright suit over Google’s duplication of elements of the Java programming language to create Android, Oracle has said Android indirectly generates billions of dollars in ad revenue for Google. Oracle asked for about $9 billion in copyright damages in a copyright trial against Google in 2016, a number based on Google’s Android revenues up to that time.

The states’ Google probe is only part of a wave of investigations of dominant technology companies in the US and elsewhere. In addition to the Justice Department's Google probe, the DOJ and US Federal Trade Commission also have ongoing antitrust investigations into Facebook.

Google, along with Apple, Amazon and Facebook, is also the subject of a House Judiciary Committee antitrust investigation of online markets. And those four companies and Microsoft are the subject of a wide-ranging US Federal Trade Commission study seeking 10 years’ worth of information on their non-reportable acquisitions — those that haven't received federal antitrust scrutiny.

Paxton said in his recent remarks that the states are concerned about Google’s central, dominant location in the digital advertising market.

“One of the concerns we have with Google is that they completely dominate advertising on the Internet; that they control almost all of it, and therefore there is very little competition,” he said. “They usually represent the buyers and the sellers and the interchange between the two — the market. So they have all the information. Even though you might think you’re getting a free search, in the end, because there may be a monopoly, it could be that consumers are paying a lot.”

Paxton said investigators continue to get complaints from small and large businesses about Google’s market power.

“It’s been probably the most requested investigation that I’ve ever worked on,” he said. “That’s why we did it. It wasn’t like some idea I came up with, or my office came up. It was because of questions from so many people and so many companies across the country.”

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