In an era when headlines and screens are dominated by politics and technological advancements, one legal battle stands out for its potential to reshape the digital landscape: the US v. Google case.
This week on the WhoWhatWhy podcast we delve into the intricacies of this landmark antitrust trial with Harold Furchtgott-Roth, a former FCC Commissioner (appointed by Bill Clinton) and the only economist ever to serve on the Federal Communications Commission.
As the trial unfolds in a Delaware courtroom, marking the most significant antitrust action since the federal government took on Microsoft over two decades ago, Furchtgott-Roth provides a nuanced perspective.
He questions the Justice Department’s focus on Google’s exclusive agreements with device providers like Apple and Samsung, pointing out that monopolies themselves aren’t inherently illegal; it’s anticompetitive behavior that the law targets
Furchtgott-Roth also challenges the idea that Google’s market dominance stifles innovation, citing the consumer’s ability to change search engines and the rapid advancements in AI technologies like ChatGPT and Bard as counterexamples.
He further discusses the glaring mismatch between the government’s slow-moving regulatory apparatus and the rapid pace of innovation in the high-tech world.
In his view, “the technological landscape is evolving so swiftly that this case could become obsolete before a verdict is even reached” — much less in the three to five years it may be on appeal.
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(As a service to our readers, we provide transcripts with our podcasts. We try to ensure that these transcripts do not include errors. However, due to a constraint of resources, we are not always able to proofread them as closely as we would like and hope that you will excuse any errors that slipped through.)
Jeff Schechtman: Welcome to the WhoWhatWhy Podcast. I’m your host, Jeff Schechtman. Every day our news feeds are flooded with headlines about elections, politics, democracy, and AI. It’s a whirlwind of information, but this week a trial has begun unfolding in a Delaware courtroom that will last for months but could have far-reaching implications for all of us. The US v. Google is a legal battle that could redefine the very architecture of the internet. It is the most significant antitrust trial in the US since the government took on Microsoft more than two decades ago.
At its core, the Justice Department is questioning whether Google has used illegal agreements to sideline competitors and harm both consumers and advertisers. Google pays billions to secure its position as the default search engine on various platforms, and it’s these deals that the government argues are stifling competition. This, they argue, not only stifles innovation but also allows Google to inflate its advertising prices on its search result pages.
Google, however, argues that their deals actually promote competition and that users can easily switch search engines if they wish. According to Google, their dominance is not the result of coercive tactics, but because they offer a superior product. But in a world rapidly transformed by AI technologies like ChatGPT and Bard, we have to ask, does this case even matter anymore? Is it possible that the trial, regardless of its merits, is becoming irrelevant as technology evolves? And what could be the potential outcomes if Google loses?
To help us navigate these complex waters, I’m joined today by Harold Furchtgott-Roth. Harold is a former FCC Commissioner from 1997 to 2001. He was appointed by President Bill Clinton and the only economist to have ever served as an FCC Commissioner. He’s been instrumental in shaping telecommunications policy including working on the landmark Telecommunications Act of 1996 which gave us, among other things, Section 230. His insights couldn’t be more timely, and it is my pleasure to welcome Harold Furchtgott-Roth here to the WhoWhatWhy Podcast. Harold, thanks so much for joining us.
Harold Furchtgott-Roth: My pleasure. Thanks for having me.
Jeff: Well, it is great to have you here. As I mentioned in the introduction, this is the biggest antitrust case the government has brought against a technology company since going after Microsoft some 20 years ago. Why this case? Why did the government pick Google in this particular case, do you think?
Harold: I don’t know. I’ve wondered the very question. I think there probably is a lot of anti-competitive conduct that goes on in the US economy, but I’m puzzled that this would be the one that the Justice Department would go after.
Jeff: Talk a little bit about what it is that’s at the heart of this case.
Harold: At the heart of the case, this is what is called a Sherman Section 2 case. It’s about unilateral efforts to harm competition and to promote the market power or the market position of the company that is exercising it. And so the Department of Justice is alleging that Google has done this with its search engine. I think they would have a very strong case if once a search engine were installed on a machine or an application, that the user couldn’t switch out of it or couldn’t switch out of it without extraordinary effort. That’s just not the case. In fact, on every internet browser that I know of, you can switch to a different search engine very easily. On my iPhone, it takes me it about 10 seconds to do it and I’m kind of slow. I suspect someone half my age could do it in half the time.
So the ability of consumers to pick the search engine that they want to use is very much available to, really, all consumers. And that’s what I think kind of undermines the DOJ case. But we’ll see. Maybe there are other documents in the record that I’m not familiar with that would suggest otherwise, but I can’t get around this technological ease of circumventing the default search engine.
Jeff: The other thing that seems that it would be a part of an antitrust case would be a situation that harms consumers. To what extent are consumers being harmed with something they’re getting for free?
Harold: Well that was sort of the central problem with the Microsoft case almost 25 years ago, was that ultimately the software that Microsoft put on various machines, the operating system were essentially available to free to the consumers, the additional software that was there. And that’s the same with search. Search is not something that consumers pay for directly. They pay for it indirectly in that the various platforms will share, the search engines will share revenue with the platforms. But consumers do not pay for search. You don’t pay to go to Google search or Bing search or any of the other search engines. So that is a real problem. And you can switch without any cost.
Jeff: The other issue that the government has talked about is that Google, because they represent 90 percent roughly market share in terms of search, has a monopoly, but monopolies are not in and of themselves illegal. Talk about that.
Harold: Right. To actually have a monopoly is not illegal under US law. To attempt to obtain a monopoly through anti-competitive conduct, that is what is illegal under this Sherman Act and that’s what the Department of Justice is going to have to prove at trial. Also, I’m very skeptical about the 90 percent search because the way it’s conducted is it only looks at traditional search engines.
And a lot of search, particularly by young people today, is done not through search engines. So if a young person wants to know who’s the lead guitarist in a certain band, chances are they’re going to go to TikTok or Instagram or some other social media site and type in lead guitarist for such and such a band. And a video’s going to pop up. They’re not going to Google. They’re not going to Bing. They’re searching for the answer in different ways. So the idea that it’s 90 percent Google, I’m skeptical.
And the other thing you mentioned a few minutes ago was about innovation, about the efforts to monopolize the market as a way of stifling innovation. And what we’ve seen in the past six to nine months is the evolution of new forms of artificial intelligence that quite likely are going to revolutionize search. These are developed by a company called OpenAI, more popularly their application is ChatGPT. That’s a company that’s not owned by Google. Paradoxically, it’s largest investor is Microsoft. So the way that even with traditional search engines the way they’re going to be done and being done today is not necessarily the way they were done 12 months ago.
I would also note that the software that was at issue in the Microsoft case 20 odd years ago, which the Department of Justice at the time said would create some insurmountable monopoly for Microsoft, none of that software is used anymore. The technology world evolves so rapidly that what we think of as being state of the art in one year becomes obsolete within a few years.
Jeff: One of the other issues that the government has raised is this notion of exclusive deals that Google has made with Apple, with Verizon, with various other providers to be the exclusive search engine. Talk about that and how it’s part of this case.
Harold: Well, I think those claims would make a lot — I would be deeply troubled. I would think the Department of Justice would have an ironclad case if those exclusive deals were really exclusive. But they’re not, they’re not exclusive. All they are is they’re a deal to make the Google search engine the default search engine on a browser for various services that are provided. But in each case, the user can circumvent the default browser and go to the browser of their choice. And they can go to Bing, they can go to DuckDuckGo, they can go anywhere, any other browser they want to, as I said, 10 seconds or less on an Apple iPhone.
The other thing I would observe is that default software on a handset or on a computer or for an ISP doesn’t necessarily give it any market advantage. On my iPhone there is default map application from Apple. I don’t know anyone in the world who uses that Map application.
Jeff: I don’t either.
Harold: Everyone uses Google Map or Waze. But the Apple map, gosh, it’s the default, it’s there, but I surely don’t use it. And I don’t know anyone who does.
Jeff: One of the questions that seems to come up repeatedly, particularly with respect to antitrust law and to Sherman, is the degree to which the antitrust laws are there to protect competitors or to protect competition. The law has been clear about this, but I’m not sure that it’s clear in the context of this case.
Harold: Well, this has been addressed by the courts over the decades, and unambiguously, the purpose of antitrust law is to protect competition, not competitors. And don’t get me wrong, I think there are many instances of anti-competitive conduct, and it’s appropriate for the government or for private plaintiffs to file an antitrust complaint and hold a business that’s engaged in anti-competitive conduct accountable.
Economists have something called a no economic sense test, which is to say, one way of looking at this from an economic perspective is, is the conduct of the defendant something that makes no economic sense but for the purpose of stifling competition, of harming competition? And if that’s the case, if a business is engaged in some conduct that really a profit-maximizing competitive business would never do, then that’s going to look very bad for the defendant.
If on the other hand the conduct is entirely consistent with what a competitive firm would do, and if the conduct doesn’t actually harm competition, that it allows, in fact, often enables competition to thrive, then it’s hard to say that that’s anti-competitive conduct. And in this case, the contracts that Google has, as far as I know — now, look, I don’t have access to the record that’s out there. As far as I know, I don’t think any of these contracts for default search engines are exclusive in the sense that they prohibit consumers from reaching other search engines that they want.
Jeff: I want to come back to this issue of the technology itself. This is a case that the government has been pursuing and working on for three years now, long before OpenAI, before ChatGPT and Bard and AI. And regardless of how this plays out, there will be appeals. And this will go on, the trial itself will go on for months. I mean, this may not even be resolved for another three to five years during which time technology will be in a totally different place.
Harold: Jeff, I think you’re exactly right. Technology in this space moves so rapidly that it’s hard to think about the stability of the market. And I think a large part of the government’s claim, at least up until a few months ago, was that Google’s conduct was stifling innovation. I just don’t know how they can make that claim with a straight face today, given what’s been going on with AI. And as you say, yes, three years from now, which is not an unreasonable period of time for appeals and all, what is search going to look like?
Hard to be certain that it’s going to look exactly the way search looked 12 months ago. Because I don’t even think the way that search is done today is probably accurately reflected in the record in this case. Because I think there’s an awful lot of other ways that search is going on that it’s a much broader market than simply limited to Google search and Bing search and DuckDuckGo and a handful of other traditional search engines.
Jeff: What are the market consequences if Google loses this case?
Harold: I don’t know. It depends on what the remedies are. This is a bench trial and we’ll have to see. If Google loses the case, it’s not clear what the remedies would be. It could be anything from just a stiff line which would hurt Google’s bottom line, but might not actually have any repercussions in the marketplace. Two, some restrictions on the types of contracts that Google can enter into. There’s been speculation in the press about divestitures. I think that type of structural remedy is — I think it’s unlikely. It’s hard for me to see how that would be the case, but who knows? Who knows?
Jeff: And do you think that the way this trial plays out will have any impact on the government looking at regulation for the tech industry in general, and even things like AI, which we’ve certainly heard a lot about in the past 48 hours?
Harold: That’s right. There was a big confab on Capitol Hill. You had the titans of technology coming to Washington to meet with senators. [chuckles] I have to say, I always think those are bad ideas. And every time I see some CEO of any type of company come to Washington I say, “If I were you, I would get in a taxi cab. I’d go straight to the airport. Don’t take your checkbook out of your pocket. Don’t talk to anybody and get out of town. And you’ve got lobbyists and they do a good job. And there’s nothing good that can come out of your being in Washington other than you being shaken down for money.”
I worry about that. And then I also worry about some of these ideas of coming up with Department of Artificial Intelligence or some federal agency to regulate technology. I don’t see that that’s going to do any good. I can see that it could do a lot of harm. You know, at the end of the day, technology moves a lot more rapidly than the government can keep pace.
There’s some exceptions, don’t get me wrong. I think you do want the government regulating pharmaceuticals and a few other things. But when it comes to computer technology, I really am very skeptical about at least ex ante-regulation. There may be some ex post-regulation. Once you see the problem develop, then maybe you want to come back in and regulate it. But the idea that the government can figure out ex ante what regulation is needed and that that’s going to be a good thing in computer technology, count me as a skeptic. I just don’t see it.
Jeff: Isn’t that what got us to the problem we face today with respect to Section 230, that it was a particular thing of a particular place and time and the world has changed since?
Harold: I think that’s a great point, Jeff. I really do. I think that’s a very interesting way of — a good example.
Jeff: Harold Furchtgott-Roth, I thank you so much for spending time with us today here on the WhoWhatWhy Podcast.
Harold: Anytime. My pleasure.
Jeff: Thank you. And thank you for listening and joining us here on the WhoWhatWhy Podcast. I hope you join us next week for another radio WhoWhatWhy Podcast. I’m Jeff Schechtman.
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