48 U.S. states launch antitrust investigation into Google
- Attorneys general for 48 U.S. states as well as Washington, D.C., and Puerto Rico are launching probes into whether Google is violating antitrust law.
- The investigations will initially focus on whether Google is overly dominant in the online advertising market and in internet searches.
- One outcome antitrust regulators might explore is forcing Google to spin off search as a separate company.
Fifty state attorneys general, led by Texas, have announced an investigation into Google's "potential monopolistic behavior." The attorneys general are looking into whether the Silicon Valley search giant has gotten too big, and perhaps too effective at stomping out rivals.
The investigations will initially focus on the advertising market and whether Google broke the law in achieving dominance in the industry, said Texas Attorney General Ken Paxton, who is leading the probe.
"This is a company that dominates all aspects of advertising on the internet, as they dominate the buyer, seller and auction side," Paxton said. He later added: "If advertising costs are higher, advertisers pay more, and ultimately that's passed on to consumers."
Attorneys general in 48 states, as well as Washington, D.C., and Puerto Rico, are leading separate investigations. The attorneys general of California and Alabama are not involved in the probe.
Market dominance
Google's parent company, Alphabet, has a market value of more than $820 billion and last year reported revenue of $137 billion and income of $31 billion. Google controls so many aspects of the internet that it's hard to imagine surfing the web for long without running into at least one of its services.
The legal authorities investigating the company on Monday focused on its dominance in advertising and in search. Nine of 10 online searches are conducted through Google, and the company has been criticized for prioritizing its subsidiaries in search results.
"When my daughter is sick and I search online for advice or doctors, I want the best ones — the best advice or the best doctors — not the ones who spent the most on advertising," said Arkansas Attorney General Leslie Rutledge.
Last week, online project management company Basecamp complained that Google's paid search ads are similar to a "shakedown," noting that it had to pay to make sure its service appeared before rivals' ads.
European regulators have fined Google for promoting its own shopping service in search. The company is appealing the fine.
Google this year will control 31% of global digital ad dollars, according to eMarketer estimates, crushing a distant second-place Facebook. And many smaller advertisers have argued that Google has such a stranglehold on the market that it becomes a system of whatever Google says, goes — because the alternative could be not reaching customers.
"It's like if you were trying to buy a house, and Google owned the house, and a lot of houses on your block. And they were the buyer's agent and also the seller's agent," said Missouri Attorney General Eric Schmitt. "It would raise questions, certainly."
"There's definitely concern on the part of the advertisers themselves that Google wields way too much power in setting rates and favoring their own services over others," said Jen King, the director of privacy at Stanford's Center for Internet and Society.
DoubleClick purchase
Critics often point to Google's 2007 acquisition of online advertising company DoubleClick as pivotal to its advertising dominance.
Europe's antitrust regulators slapped Google with a $1.7 billion fine in March, saying it unfairly inserted exclusivity clauses into contracts with advertisers, a clear disadvantage for its rivals in the online advertising business.
Google has long argued that although its businesses are large, they are useful and beneficial to consumers. But it appears regulators are growing more concerned not just with the effects on regular internet users, but on smaller companies as well.
"On the one hand, you could just say, 'Well, Google is dominant because they're good,'" King said. "But at the same time, it's created an ecosystem where people's whole internet experience is mediated through Google's home page and Google's other products."
A separate group of states announced an investigation into Facebook's dominance on Friday. The Department of Justice, the Federal Trade Commission and Congress are also conducting probes of both Facebook and Google.
Spin off the search business?
One outcome antitrust regulators might explore is forcing Google to spin off search as a separate company. Then there's Google's smartphone operating system, Android. Another acquisition of Google's, the system is the most widely used in the world.
European regulators have also fined Google to the tune of $5 billion for tactics involving Android, finding that Google forced handset makers to install Google apps, thereby increasing its reach. Google has since allowed more options for alternative browser and search apps to European Android phones.
It's also possible U.S. states won't follow in Europe's footsteps. They could, for instance, focus on areas such as Google's popular video site YouTube, yet another acquisition Google made, that time in 2006.
Google executive Walker emphasized that the company's products help people every day.
"Google is one of America's top spenders on research and development, making investments that spur innovation: Things that were science fiction a few years ago are now free for everyone — translating any language instantaneously, learning about objects by pointing your phone, getting an answer to pretty much any question you might have," he wrote.
CBS News' Irina Ivanova contributed reporting.