Front Burner - The case against Google

Episode Date: November 27, 2024

The second of two major antitrust cases against Google wrapped up this week. Earlier this year, a judge found the company holds an illegal monopoly over the internet search market. Now the U.S. Department of Justice is arguing the same thing about its grip on online advertising. This is all part of a major push of antitrust litigation against tech companies by the U.S. government — Apple, Amazon and Meta are all facing similar cases.What's behind this push to crack down on these companies now? Would proposed remedies like breaking them up actually make a difference? And will the momentum survive the transition to a second Trump presidency? Paris Marx — author of the tech newsletter Disconnect and host of the podcast Tech Won't Save Us — breaks it all down.For transcripts of Front Burner, please visit: https://www.cbc.ca/radio/frontburner/transcripts

In the Dragon's Den, a simple pitch can lead to a life-changing connection. Watch new episodes of Dragon's Den free on CBC Gem. Brought to you in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. This is a CBC Podcast. Hi, I'm Elaine Chao, the senior producer on the show. I'm in today for Jamie. In 2024, about 90% of all internet searches happen through Google. And that's part of what's led a U.S. judge to rule that Google is operating

as an illegal monopoly. Google is appealing that ruling. But that's not the only legal trouble that Google is in. This week, a second antitrust case against the company wrapped up. It focused on Google's alleged monopoly over online ad sales. This is all part of a wider trend we're seeing right now of big tech companies facing antitrust action. So why now? And even if these cases lead to the breakup of a handful of big tech companies, would it actually change their dominance in the marketplace? My guest today is Paris Marks. He writes the tech newsletter Disconnect and hosts the podcast Tech Won't Save Us. Hey, Paris.

Hey, great to join you. So this case against Google and its ad sales platform, that wrapped up this week. And it has to do with the way it essentially like brokers online display ads. These are the ads that you see along the tops and sides of web pages. And can you walk me through what Google was being accused of here? Yeah, absolutely. You know, Google doesn't just have a dominance in the ads that happen on its own platform, right? We're used to doing a search and seeing the ads along the side or near the top or what have you. It also has this platform that is used for digital ads across the entire internet that even a lot of major publishers and major websites

rely on. And so what the Department of Justice was alleging here is that Google has another illegal monopoly because as you were saying back in August of 2024, it was found that it had an illegal monopoly in search. So the Department of Justice is saying that it also has an illegal monopoly in, you know, this digital ad kind of platform space, where it controls both sides of the market. So the market that, you know, publishers use to offer ad space, and that advertisers use to buy ads, Google is in the middle. Google owns, you know, kind of controls both ends of this. Google gets a lot of information that other players in the market do not have. It's a very opaque platform, a lot of people say. And this really comes out of an acquisition in particular that Google made in 2008 for a company called DoubleClick,

where it got control of this digital ad platform. And so that is really the focus that the Department of Justice has now in, you know, looking at these different aspects of Google's businesses that it says are basically legal monopolies. Right. And it's essentially like a conflict of interest issue here, right? As given its role as a broker. Yeah. So I guess the accusation is that Google is able to have the prices higher than they would otherwise be. And Google makes a greater profit because of the fact that it has this illegal monopoly for this digital ad platform. Right. Right. And I understand like Google has about like an 87 percent market share in ad selling tech as well. Like they are just the dominant player here. Yeah. You know, just like they control search, they also, you know, are very dominant in digital

ads as well. And so that is why the focus is here, right. And it's important to say as well, that this is where Google makes, you know, the bulk of its profits to, you know, the vast majority of the company's profits, I believe it's somewhere in the range of the high 70% comes from digital ad sales, not all this other stuff that it does. So this is like the, you know, the kind of heart of Google's, you know, profits that has made it one of the largest companies that we know. And what was Google's defense here? I think for me, it's hard to, you know, make a good case for Google's defense, because I think it is pretty flimsy. And I think it is quite likely that it's going to be found to be an illegal monopoly again, now it's in ads instead of just in search.

But effectively, it's saying that, you know, this is this is one marketplace that there are a bunch of other companies that offer digital ad services where other people can go, it shouldn't be prejudiced, I guess, for for having this dominant platform and for, you know, having as much market share as it does, because it makes a better platform, right. But again, like, like in the search trial, I think it's often really hard to believe Google's arguments. And there's also this kind of thing that happened alongside the case as well, where Google is known to have deleted a lot of, you know, records that the Department of Justice wanted and that would have been used in this trial. And so that is something that the judge is looking at as well.

Right, right. I saw the New York Times reporting on this, their investigation into this. Essentially, these are like communications between employees, for example, right? Exactly. Yeah, that could have, you know, revealed things that could have been quite important to a trial like this or for the search trial as well. So it makes it look like Google has something to cover up if it is deleting, you know, these communications that, you know, likely say some things that probably wouldn't look very good for Google. argument here too, like with, you know, their lawyer was saying that the Department of Justice was ignoring kind of the company's legitimate business decisions. And as you mentioned, you know, their argument being that the online advertising market is actually quite robust is how they've described it.

As you mentioned, Paris, like there is this other case, this other antitrust case as well about Google search, right? Where a federal judge ruled that Google had a monopoly over the online search market. And can you walk me through kind of what led to that ruling and the kind of evidence that the DOJ made its case with? Yeah, absolutely. And, you know, most people will know that they use Google, right? The vast majority of people use Google as their search engine. It is the dominant search engine, not just in North America, but around the world, right? It's what people use to search the web. Of course, it's a verb. Yeah, exactly. You Google things. Yeah. But in that case, again, it's the fact that Google has this search platform. Yes, there are other search engines available, but it has the lion's share of the market share, right? Like in the high 80s, low 90s percent, when you think of who is using this.

And so the Department of Justice was looking at the fact that Google has these deals with owners of operating systems and browsers like Apple or just browser makers like Mozilla who makes the Firefox browser to make sure that Google is the default search engine and pays a lot of money in order to basically get that placement, right? So that when you start to use an operating system

or when you start to use a different browser, Google is gonna be the default. You don't need to go in and choose something else. And so the Department of Justice was alleging that this is something that helps to maintain Google's power in the search market, you know, along with the many other products that it has that links to it, along with its ownership of the Chrome search engine with Android, where Google is kind of built into all these things. And why is Google like being the default search engine on a lot of these platforms? Like, why is that such a big deal? It's not that like they're necessarily stopping people from using other search engines if they wanted to.

Exactly. And this is where I think the arguments get a bit difficult, because the Department of Justice alleges and the judge seems to agree that that by having these agreements where Google is the default, it discourages people from using something else. And so it makes it so virtually everyone is using Google. And sure, you can go in and change it if you want, but most people are not going to do that is, I guess, the argument that people are making. I think, though, that we also have evidence out of the European Union where they've already tried this and giving people the option of choosing a search engine. And what they found there is that most people use Google anyway, because people are used to using Google, right? Right. It's familiar. Exactly. So if it's not offered as the default,

people will choose it anyway, because people are already used to doing that. Now, if something like that was put in 15 or 20 years ago, would we have the Google dominance that we have today? I don't know, it's hard to say. But when it already has that dominance, giving people this choice probably doesn't make a whole lot of difference at the end of the day. And what kind of penalties or remedies are being looked at right now with in regards to this, search case yeah so we've just got you know a closer picture into that recently there has been talk of whether a breakup would be hard to this for a little while and basically what the department of justice is trying to do is to get google to divest of its ownership of the chrome web browser because it says chrome is i guess like

a dominant web browser you know a very significant number of users of the web use it to connect. And so basically, the Department of Justice alleges that if Google didn't have control of this browser, then you know, the Google search engine wouldn't be totally embedded in this browser that so many people use. And as a result of that, you might have, you know, a more competitive marketplace, or it might be easier for people to use other search engines. It also wants to get rid of these agreements that Google has with, say, Apple or Mozilla or other companies to make it, you know, the default. So, for example, Google has a deal with Apple where Apple gets 20 billion dollars.

Like this is a lot of money for making Google the default search engine. in part by National Angel Capital Organization, empowering Canada's entrepreneurs through angel investment and industry connections. Hi, it's Ramit Sethi here. You may have seen my money show on Netflix. I've been talking about money for 20 years. I've talked to millions of people and I have some startling numbers to share with you. Did you know that of the people I speak to, 50% of them do not know their own household income. That's not a typo. 50%. That's because money is confusing. In my new book and podcast, Money for Couples,

I help you and your partner create a financial vision together. To listen to this podcast, just search for Money for Couples. We've been talking, kind of focusing the conversation on Google specifically, but, you know, almost all of the big tech companies are facing antitrust cases in the U.S. right now, you know, from Amazon, Apple to Meta, Facebook's parent company. What is the connecting tissue around what they've been accused of doing? You know, that's had regulators come after them. Yeah, it's about regulators come after them. innovation, you know, all these things that we probably think are important. And they are essentially controlling these platforms to make sure that their profits increase, but are not necessarily providing the benefits that we would hope from them, right. So for Amazon, for example, you know, they're being accused of using their e commerce platform to really squeeze their sellers

and by extension hurt customers because it makes prices higher when they're charging all these fees from the sellers. And because they have this dominance in e-commerce, because, you know, people expect to go to Amazon and define the things that they're looking for there. Sellers are limited in the options they have to leave Amazon or to go somewhere else. So that's, you know, what they're looking at in the case of Amazon. With Apple, it's the app store. You know, if you use an iPad or an iPhone, you'll know that you need to go to the app store to get your apps.

You know, a lot of companies are charging that they should be able to put their own app stores on iOS if they want or offer other ways to do it so that they don't need to pay this 30% fee that Apple charges for every, you know, app sale. Right. Like Epic Games, right? Like that's one of the one of the companies that that is taking issue with this. Like they want their own app store, for example. Exactly. Epic Games has really been leading the charge in the Apple case. And, you know, there's a bit of self-interest there as well because Epic Games makes this game called Fortnite

along with, you know, other games and it does other things. And it wants to be able to offer those things on Apple devices without having to pay this fee to Apple, but also without having to kind of jump through the hoops that Apple makes these companies jump through in order to offer their games and their services through the Apple App Store. And so it's been fighting that Spotify has been fighting it as well. But Epic Games has really been leading the charge. And then the other one is meta, of course, which, you know, is being targeted because it bought WhatsApp and bought Instagram when it

saw that the dominance of Facebook itself, its main platform, you know, was in trouble. And so really what they're trying to do in this case is to make it so that meta would have to divest of those sales. So basically, give up control of those companies to limit its ability to continue to control these markets. Why do you think this is happening now? You know, where is this push coming from? Like, there's been a real kind of parade of these major federal cases. Like, where is this push of antitrust enforcement coming from? Yeah, it's a really good question, right? Because through a lot of the 2010s, you know,

if we thought about the tech industry, it was, oh, it's these companies that were creating these good services that we'd like to use. Sure, we might have occasional problems with them. But in general, it seemed like, you know, they were kind of like the good capitalism, or at least that was the general narrative that we received about these things. But then as they continued to grow, right, as they continued to become some of the largest companies, not only in the United States, but in the entire world that so many people depended on, you know, the focus started to shift. And in particular, after the original election of Donald Trump, and after the leak of the Cambridge Analytica details, you know, with regard to

Facebook around 2018. A Canadian man has blown the whistle on his own company for harvesting private data from 50 million Facebook users. Christopher Wiley says that users signed up for a personality test, then unwittingly gave away access to all their friends' information. The company collected data that could be used to predict and influence voters' choices during the election. There was a new scrutiny put on the tech companies and their actions and the potential social harms and economic harms that come out of the power that they had been able to accumulate. like Lena Kahn at the Federal Trade Commission, but also people in the Department of Justice and other people in his administration more generally, who were really focused on reviving antitrust in the United States, you know, this this kind of focus on competition policy, and wanting to have

more competitive markets, and really targeted that at the major tech companies. And so now, you know, it takes a bit of time to put a case together. And so we're starting to see some results in the case of these Google cases, but we're seeing cases against the other tech companies slowly moving forward now as well. And the bigger question is whether, you know, there's going to be enough time to actually see these things through now that we know the Democrats are, you know, on the cusp of losing power in January. Right, right. And I mean, how do you think with the second Trump administration coming in, how might it handle these cases going forward?

You know, there has been kind of during Donald Trump's campaign a lot made about the way that the tech industry is cozying up to the Republican Party. Absolutely. You know, that's obviously been a very clear story. People will be familiar with seeing, you know, Elon Musk with Donald Trump, but a lot of other tech billionaires have given money to the Trump campaign and were behind it, right? Because they believed that Trump's policies would be beneficial to them and their companies. And I would say that a lot of these people in Silicon Valley have been embracing a more

right-wing worldview. And so when it comes to tech antitrust and these antitrust cases in particular, I think it's going to depend on Trump's mood and how Trump feels about these particular companies. they're on his good side so that when he starts to look very clearly or when his people start to look at these cases and the general approach to antitrust, you know, more broadly that, you know, he'll be willing and whoever he appoints to the Department of Justice and the Federal Trade Commission will be willing to rein these things in and make sure that, you know, these companies won't be forced with, say, breakups or really aggressive remedies, or maybe the cases will just be ended altogether if they're not very far along. I should note that Trump's talked about

being in touch with Google CEO Sundar Pichai, like he says that Pichai told him. I actually got a call from your friends at Google, from Sundar, that's pretty good, right? He said, this is the biggest thing we've had in years. You at McDonald's? At McDonald's, did you know that? It was one of the... It was funny.

Who's a great guy, by the way, but he said, this McDonald's thing, I want to tell you, it's one of the biggest things we've ever had on Google. So those are, I think, just like coming back to what you were saying about kind of the connections being made between the industry and Trump. Yeah. And I would just add there that, you know, Mark Zuckerberg has said very positive things about Trump, particularly after the assassination attempt on him earlier this year. On a personal note, it's, you know, I mean, seeing Donald Trump get up after getting shot in the face and pump his fist in the air with the American flag is one of the most badass things I've ever seen in my life. But, and I think, look, at some level as an American, it's like hard to not get kind of

emotional about that spirit. Tim Cook has notably called Trump and Trump has said that they were talking about how Apple was annoyed about the regulations that the European Union was putting forward and trying to enforce on the company. He said, the European Union has just fined us $15 billion. I said, that's a lot. Then on top of that, they got fined by the European Union another $2 billion. So he's a $17 to $18 billion fine. And I said, that's a lot.

He said, but Tim, I got to get elected first. But I'm not going to let them take advantage of our companies. That won't, you know, be happening. So it seems quite clear that after last time Trump was in power, Apple was able to negotiate this tax cut to bring a lot of its foreign earnings back to the United States at a lower tax rate. And it seems this time he'll be trying to, you know, position the Trump administration to take on the European Union and its antitrust efforts over there. And are there any kind of lessons learned from the past on this? You know, I recall, you know, and we've actually talked about this on

this show in terms of the antitrust case against Microsoft back in the late 90s. And there was a change of administration there in the overseeing of that case. And could there be some lessons learned there from what happened there? Yeah, I think we're kind of seeing a bit of a parallel there. You know, so we had this of seeing a bit of a parallel there. You know, so we had this antitrust case in the late 90s into the early 2000s against Microsoft where, you know, Microsoft was positioned as this monopolist. It was found to be an illegal monopolist. The judge ruled that Microsoft was going to have to break up. So it would have to separate, say, its Windows business from its other software businesses

and make those things separate because effectively what it was doing was using its dominance in operating systems with Windows to force people onto Internet Explorer and other software that it wanted them to use. And so what you had was that case was brought forward during the Clinton administration, but George W. Bush was elected in the process. And so when his administration came in, and you know, when people at the Department of Justice turned over, you know, they made sure that Microsoft wouldn't have to be broken up anymore. They put in, you know, some remedies for about 10 years that were

not very stringent on the company. And, you know, now we know that Microsoft is one of the largest companies in the world still, there are still talks about potentially bring a, you know, new antitrust case against them. So basically what we saw there was a change in administration allowed the company to ensure that it wouldn't really have to feel the consequences of its monopolistic actions. And it seems quite clear that that's about to be what we're going to see in the United States this time, where the Democrats leave power, the Republicans return to power. And under Donald Trump, it doesn't seem that there's going to be the same effort or desire to pursue antitrust and, you know, the attempt to break up these major tech companies.

Paris, you know, we talked about some of the proposed solutions earlier, like Google potentially selling off Chrome or other parts of its business. And similar things could potentially come out of these other cases against big tech. And I think I might know your answer to this, but is that approach of breaking these companies up enough? That's the difficult one, right? If you say make Google divest of the Chrome browser and stop making these exclusive deals, you know, for operating systems or browsers to have Google as the default, it doesn't seem very clear that that would actually make it so many fewer people would be using Google. You know, I think that there's a real desire for there to be more competitive markets, for there to be more search engines or more social media platforms or, you know, whatever

it is that, you know, these antitrust regulators in the United States are pursuing with these different cases. But I do think that some of that discourse, you know, doesn't fully recognize the degree that these companies are, in many cases, natural monopolies, right? They have really controlled these marketplaces. And even if there were other e-commerce platforms or other search engines or things like that, it's not clear that even without the explicitly monopolistic practices of some of these tech companies, that it wouldn't make it so, okay, now there are like multiple

search engines that people like 20% of people use one and 20% use another and 20% use another. Because once you have this platform that so many people use, it benefits a lot from, you know, all of the data and all of the usage in order to make itself better. And so it's probably difficult to make these markets more competitive. And maybe there are different kind of structural solutions to look at. Like in the past, we used to look at, say, public utility regulation on some of these things to make it so that maybe the companies have to share their patents or their intellectual property, or can only act in certain ways that, you know, are regulated by the government. In the US context, we can certainly look back to

something like, say, the breakup of AT&T, right, this telecommunications company, Bell Telephone, that was very dominant. And in 1982, the company was broken up into many different pieces in the United States. You know, and the idea was to create a more competitive marketplace for telecom. But what we actually saw in the years and decades that passed after that, and particularly after deregulation, was that these companies merged back up together. And so we have AT&T and Verizon, you know, a small number of really large players who control these things. But I would say in the Canadian context, we have history with this as well, right? Bell is a dominant telecommunications platform here that we regulated as a public utility.

In some parts of the country, that was not even okay with them, right? In the Prairie provinces, for example, the different aspects of the bail telephone system there were nationalized and made provincial public telecom companies that worked really well to serve, you know, rural people, right? So before, you know, telecommunications was about the internet, I think we were more open to these types of regulations or thinking about public ownership. these like tech companies that built themselves on it, it's so hard to think about just regulation, let alone, you know, thinking more generally about treating them as public utilities or having public ownership over these things. But maybe that is something that we need to start talking about or thinking about, especially as we're going to see these companies really

unleashed, it seems under a new Trump administration. Paris, thank you so much for your time today. I am sure we will be talking about this again. Absolutely. Yeah, happy to talk to you. That's all for today. I'm Elaine Chao, in for Jamie Poisson. Jamie will be back tomorrow.