Department of Justice sues Google, alleging it maintains a search monopoly
The Department of Justice filed an antitrust suit against Google on Tuesday, alleging that the tech giant has used its dominance in the search business to become a "monopoly gatekeeper" of the internet.
The Justice Department alleges that Google, which is a division of Alphabet, paid billions of dollars to Apple and other mobile-phone manufacturers, as well as to web-browser companies, for those companies to maintain Google as their default search engine.
Those payments and similar arrangements have allowed Google to maintain a lock on the web-search market, which has long been the foundation of its business, according to the antitrust suit.
In one of the alleged arrangements described in the suit, Google requires device manufacturers to preload not just its search app, but five other apps, including Chrome, Google Play, Google Maps and YouTube. What's more, manufactures are required to preinstall the apps "in a manner that prevents the consumer from deleting them," according to the government's case.
"For years, Google has entered into exclusionary agreements, including tying arrangements, and engaged in anticompetitive conduct to lock up distribution channels and block rivals," the Justice Department said in its antitrust complaint. "Two decades ago, Google became the darling of Silicon Valley as a scrappy startup with an innovative way to search the emerging internet. That Google is long gone."
"It is a very good case," according to antitrust expert Eleanor Fox, a professor at New York University School of Law. "If the Justice Department is able to prove the facts that it has in the complaint, they should be able to prove that Google has been anticompetitive and should be enjoined."
Although Fox also noted that the Supreme Court has made it very hard for the government to win most antitrust cases.
The case was filed in federal court in Washington, D.C. Eleven states, all with Republican attorneys general, also joined the U.S.'s case against Google.
Google called the lawsuit "deeply flawed" and in a lengthy statement claimed that the suit "would artificially prop up lower-quality search alternatives, raise phone prices, and make it harder for people to get the search services they want to use."
Dan Ives, a top Wall Street analyst who follows Google and other tech giants for Wedbush Securities, said the case against Google shows that Google and other tech giants are clearly in the antitrust crosshairs.
"A potential Blue Wave in November heightens the breakup risk down the road for [Google and other tech] giants in our opinion," said Ives. "Right now tech stocks are shrugging off all bad news including this DOJ suit today as investors are taking a wait and see approach on the big tech breakup fears."
Shares of Google parent Alphabet rose $40, or 2.5%, to $1,570 on Tuesday, despite the news of the government's case.
A search behemoth
Google has long been dominant in the online search space, accounting for more than three-quarters of online searches, and often much more.
According to the Justice Department, Google takes 90% of all search queries in the United States, and 95% on mobile devices, and the company has "used anticompetitive tactics" to defend and extend its monopoly. Google's conduct has harmed consumers by reducing the quality of search by limiting potential competition, according to the government. Some academic studies have found that consumers prefer Google searches that don't exclude content from competitors, such as consumer reviews posted on non-Google websites.
The complaint also alleges that Google, which makes most of its money delivering internet ads, has harmed its corporate clients by using its dominant position "in ways that allow it to charge advertisers more than it could in a competitive market."
The lawsuit marks the government's most significant effort to protect competition since its groundbreaking case against Microsoft more than 20 years ago. It could be an opening salvo ahead of other major government antitrust actions, given the ongoing investigations of major tech companies including Apple, Amazon and Facebook at both the Justice Department and the Federal Trade Commission.
The House antitrust subcommittee released a sweeping report earlier this month that recommended overhauling federal laws to make it easier to go after the four big tech companies, as well as potentially restructuring those companies or breaking them up into their component divisions.
The Justice Department won't immediately seek to have Google broken up, but it could eventually seek to force a change in how Alphabet operates, which could eventually include splitting up Google's various businesses.
The company, based in Mountain View, California, has long denied claims of unfair competition. Google argues that although its businesses are large, they are useful and beneficial to consumers. It maintains that its services face ample competition and have unleashed innovations that help people manage their lives.
Most of Google's services are offered for free in exchange for personal information that helps it sell its ads. Google insists that it holds no special power forcing people to use its free services or preventing them from going elsewhere.
An anti-tech administration
The Trump administration has long had Google in its sights. A top economic adviser to President Donald Trump said two years ago that the White House was considering whether Google searches should be subject to government regulation. President Trump has often criticized Google, recycling unfounded claims by conservatives that the search giant is biased against conservatives and suppresses their viewpoints in searches, interferes with U.S. elections and prefers working with the Chinese military over the Pentagon.
Nonetheless, Justice Department officials on a call with reporters Tuesday repeatedly insisted that the government's case against Google was not politically motivated. They also said that the timing of the case was not connected to the presidential election, which is two weeks away.
"This case has nothing to do with president," said Deputy Attorney General Jeffrey Rosen. "It is about competitive positions, in which there has been bi-partisan, across the board, interest."
Rosen said the case isn't connected to concerns that Google and other social media platforms have a liberal bias. "There are concerns that social media and some other technologies have a skew or bias," said Rosen. "Those are very separate from the questions in this case."
Letitia James, the attorney general of New York, which did not join the government's antitrust suit, said her state and others were continuing to investigate what she called Google's anticompetitive practices. James said in a statement Tuesday her investigation was wrapping up and if New York or another state were to file a case it would seek to consolidate the case with the government's action filed on Tuesday.
"This is a historic time for both federal and state antitrust authorities, as we work to protect competition and innovation in our technology markets," James said in her statement.
CBS News' Irina Ivanova and the Associated Press contributed reporting.