Ken Paxton Prosecutes Google for Antitrust

Prosecutors have announced the opening of an antitrust investigation against the company, accused of dominating all aspects of advertising and Internet research.

The staging was well done. State prosecutors were standing in Washington on Monday, September 9, before the columns of the United States Supreme Court, a sign of the seriousness of the case. One after the other, they took the floor to announce the opening of an antitrust investigation against Google. All united, or almost all of them. Only California, the company’s headquarters, and Alabama have chosen not to participate in the offensive led by Texas prosecutor Ken Paxton.

The grievances against Google were expressed in pictorial terms so that everyone could understand. “Many consumers believe that the Internet is free. We know from Google’s profits[the group made $30.7 billion in profits in 2018, or €27.8 billion, for a turnover of $136.8 billion] that this is not the case,” Paxton said. And to accuse Google of dominating many markets: the company monopolizes 92% of online searches worldwide, its Android operating system equips 76% of mobile devices and the group alone captures 31% of the global online advertising market.

 

Defending American citizens and consumers

Everyone made their own comparison: the Louisiana attorney explained that not a single company would have been allowed to control all printing plants, all paper, all ink, before the invention of audiovisual media. The representative of Arkansas explained that she wanted to find the best doctor on the Internet for her little girl, not the one who could afford to pay for advertising. Democrats and Republicans, men and women of all origins, who are strongly opposed to abortion, weapons or immigration, as Washington DC prosecutor Karl Racine said, but determined to defend American citizens and consumers.

The case brought by 50 prosecutors against Google (48 of the 50 states plus Puerto Rico and Washington DC) follows that announced by New York prosecutor Letitia James on Friday, September 6, against Facebook, in collaboration with eight of her counterparts (Colorado, Florida, Iowa, Nebraska, North Carolina, Ohio, Tennessee, Washington DC). It is part of a general offensive against the four giants of American technology: Google ($780 billion in capitalization), Amazon ($907 billion), Facebook ($535 billion) and Apple ($964 billion), the GAFA.

Google is accused of using its search engine for its own benefit, whereas it was originally supposed to allow free navigation on the Web. “We want to get you out of Google as quickly as possible and to the right place,” said one of its founders, Larry Page, in 2004. Today, the Internet user often comes across Google products or companies that have paid to be at the top of the page.

Online retail giant Amazon, for its part, is accused of taking advantage of the data left by Internet users when they buy products from other distributors to better promote its own products.

Facebook, on the other hand, would seek to acquire a social media monopoly. It did so by buying Instagram in 2012 for $1 billion and then WhatsApp two years later for $19 billion – an application now used by more than 1 billion people – and would prevent the emergence of competitors.

Finally, Apple is accused of disadvantaging its competitors in its AppStore application store. A New York Times survey showed that the apple brand’s in-house services were taking the top spots for many search terms before the algorithm was changed.

Google Antitrust Prosecutors

A matter of freedom

The affair became bipartisan: the Trump administration sought, from the beginning, to fight the large conglomerates drifting towards monopoly, while the tide turned for the technology giants of the West Coast, traditionally supported by the Democrats. Russian manipulations in the 2016 presidential campaign have boosted Facebook’s debonair image; Elizabeth Warren, a progressive Massachusetts senator and Democratic presidential nomination candidate for 2020, called in January for the dismantling of the GAFAs. The angle of attack: by their excessive power, these groups are a danger to the economy and democracy, the consumer and the citizen.

The turnaround is spectacular. For forty years, in a general consensus, the antitrust authorities did little in the United States. The idea was that the giants were good for consumers, since prices were falling and the Internet was free. In the new world, the winner takes 100% of the bet, but is not a winner for long, as evidenced by their sudden emergence and the withdrawal of yesterday’s stars, such as IBM, the first market capitalization of the 1980s. And then we realized that the cartelized economy was bad for innovation, growth and consumers, and concentrated excessive power. So much so that European decisions (GAFA tax, general data protection regulations, fines imposed on Google by the Commission, etc.), which were once disparaged, are now being cited as examples.

This is the point of the speech delivered by Makan Delrahim, antitrust boss at the US Federal Department of Justice in Tel Aviv in June. Mr. Delrahim gave a history of antitrust, going back to the three emblematic cases: the dismantling of the Rockefeller empire in 1911, which prevented any competition in the oil sector at the dawn of the second industrial revolution; and the AT&T case in 1982, when the telecoms explosion occurred. And finally, the trial against Microsoft in 1998, which did not result in its dismantling, but in its condemnation, after the complaint of the browser Netscape, which accused it of imposing Internet Explorer. Without this trial, perhaps today’s GAFAs would not have emerged. This is the kind of argument that lawyers are exploring, as the classic charge of price cartels is not valid in the pseudo-free world of the Internet. “The fact that Mr. Delrahim makes references to the Standard Oil, AT&T and Microsoft cases, which have marked antitrust, gives the impression that a great moment is coming,” says Winston Maxwell, a former technology lawyer with Hogan Lovells and currently Director of Law and Digital Studies at ParisTech School.

In the United States, the subject has become deeply political, but also a matter of freedom, as procedures multiply. The Federal Ministry of Justice had already opened an investigation against Google, taking over a case that the US competition authority, the Federal Trade Commission (FTC), closed without major sanctions in 2013.

The same FTC is also investigating Facebook. The outcome of these procedures is long, often uncertain. “Facts will lead where facts will lead,” said Ken Paxton, about Google. The latter states in a statement that he has “always worked constructively with the regulatory agencies”. For the time being, observers are relying more on fines imposed on operators than on dismantling. But other measures are also mentioned: requiring by law transparency on the data collected, better monitoring of company takeovers by technology giants or imposing portability and interoperability on platforms, so that users can easily switch services or communicate with users of a competitor. In any case, the change in mindset is major.