Google's antitrust battle will shape the future of dominant US companies, says ex-FTC Chair
«A breakup is in the range of possibilities - says Kovacic in the interview - but courts in the US have approached that with a great deal of caution»
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The US government's antitrust case on Google, which kicked off on Tuesday, is poised to have a profound impact on the behavior and operations of dominant firms in the United States, according to competition expert William Kovacic, who chaired the Federal Trade Commission from 2008 to 2009, following a tenure as its General Counsel from 2001 to 2004.
Kovacic, who has served as a Non-Executive Director with the United Kingdom’s Competition and Markets Authority since 2013, and now leads the prestigious Competition Law Center at George Washington University, sees this case as a watershed moment. This is by far the most relevant case since the antitrust Microsoft case as it will outline the “acceptable forms of conduct” for dominant firms, he said.
Here, the expert discusses Google’s strengths and weaknesses in the ongoing antitrust trial, offers insights into how it's gone so far, and speculates on the potential trajectory of the tech giant's future.
What's Google's strength in this case?
In general terms, Google has one major advantage and that’s that the jurisprudence in the US governing dominant firms is relatively permissive. It’s relatively tolerant in giving dominant firms broad freedom to choose marketing, and other practices of their own preference. So jurisprudence is generally favorable to them.
But the danger here is that the jurisprudence is not completely favorable and the Microsoft case establishes the foundation for the government’s case in this matter. The Microsoft case said that a dominant firm cannot take certain measures to deny rivals an opportunity to obtain inputs that they need to survive, including distribution, so that if you are paying the key inputs (such as the producers of smartphones) simply for the purpose of excluding a rival from this very precious part of the information systems economy that can be treated as an abuse of dominance.
How has the trial gone so far?
In these first few days of the trial, the government has been seeking to develop the theme that Google was aware that its rivals needed access to smartphones in order to succeed and that being the default search engine was an enormous advantage for a company. This is because people did not switch away from the default very readily, so that if they could get that default status, they’d have a tremendous advantage compared to all other rivals in the market.
Indeed, one of the documents that was presented to a witness on Wednesday describes the default placement as being decisive and says that Google’s strategy ought to be the “pay what it takes” in order to ensure that it obtained that exclusive position. That evidence is very good for the government.
Google can try to develop arguments that suggest that there were good business reasons for doing this, reasons that gave users a better experience, but the danger for them already identified in the evidence so far is that there is a path that the government has taken before to establish an infringement. And that path has been demonstrated to be successful. That’s a real threat to Google.
Will Google have to split up into different companies if it loses?
A breakup is in the range of possibilities, but courts in the US have approached that with a great deal of caution: it’s available, but the government bears that additional burden of showing that it’s an appropriate solution.
It’s more likely that the solutions in case of evidence infringement would involve changing Google’s conduct imposing restrictions on what it can do.
And if it wins, will it still have to undergo changes?
I think even if Google wins, the case is changing their behavior. Other cases around the world are already changing their behavior (there are a large number of jurisdictions that have brought abuse of dominance cases).
Simply the fact of having to respond to all of these cases is a distraction for them. They’re clearly having to spend lots of top management time on the cases – senior managers gathering documents, providing information. And every hour you spend doing that is an hour you’re not doing your job.
There are also so many other developments that I think are already affecting their behavior. For example, the Digital Markets Act is going into effect in Europe and they’re going to have to comply with its obligations.
How does this case differ from previous ones brought against Google?
The main thing the government has been able to do in the last three years is to go through a lot more evidence. You can tell that they are very carefully studying Google’s records, that a lot of the documents they’ve been presenting in court and showing to witnesses are documents that were generated in 2003, 2004, 2005, when Google was putting together the strategy that was designed to give them a position of preeminence.
So they have used the three years basically to reconstruct the development of the company, year by year, step by step. And they’re using that evidence to confront Google’s witnesses or Google executives whom they have called as witness to say “from these documents it looks as though you were aware that these contracts would have an exclusionary effect.”
Is this a good chance for the government to show that it can regulate big tech?
I think there’s still going to be a big question about whether this approach to oversight is superior to the development of new regulatory commands. We could be fully three years away from a final resolution on Google’s case. In the meantime, industry changes. There are other commercial developments. This is a slow moving method of ultimately imposing controls on the company.
Will this antitrust case be good for consumers?
The most favorable interpretation is that the government scrutiny of Microsoft in the 1990s and early 2000s gave new tech companies, like Google and Apple, some breathing room, and that enabled them to emerge and grow. The hypothesis is that the growth of today’s tech giants wouldn’t have happened if it hadn’t been for that earlier Microsoft lawsuit.
The key assumption of the government’s case on Google is that that will happen again if there’s effective intervention here, that it will give other companies an opportunity to try methods and introduce services that they wouldn’t have offered otherwise.
Can you guess who will win?
There’s such a long distance to go – the trial is going to last for nine weeks. There’s going to be a lot of evidence. And this is just like the first five minutes of a football match.