In 2000, a US antitrust case against Microsoft resulted in a ruling that helped define the competition rules for the digital giant of the time.
At the time, a federal judge said Microsoft had abused the monopoly power of its Windows operating system and ordered the company to be broken up. A split was overturned on appeal, but key legal findings were upheld. And Microsoft was barred from imposing restrictive contracts on its industry partners and ordered to open up some of its technology to outsiders — preventing the company from single-handedly controlling the Internet.
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More than two decades later, a ruling in a Google antitrust case promises to similarly shape new rules for the tech industry. U.S. District Court for the District of Columbia Judge Amit P. Mehta ruled Monday that Google violated antitrust laws by suppressing Internet search engine rivals to protect its monopoly.
Google’s loss could have major implications for today’s competition. U.S. regulators have also accused Apple, Amazon and Meta of violating antitrust laws by promoting their own products on platforms they control and acquiring smaller rivals. Google’s ruling and potential legal remedies to be decided by Mehta are likely to weigh heavily on those cases, including a second lawsuit against Google over ad technology that goes to trial next month.
Mehta’s ruling is “a predictor of what other courts might do,” said Rebecca Haw Allensworth, a law professor at Vanderbilt University who studies antitrust. “You can also expect other justices to read this opinion and be influenced by it.”
The influence of the Microsoft antitrust case was, in fact, clearly visible in the Google decision. In Mehta’s 277-page ruling, Microsoft appeared on 104 pages, both as a would-be rival to Google and as a legal precedent. Google has said it will appeal the ruling.
After years of little enforcement, antitrust activism has taken off in recent years, first under the Trump administration and then under President Joe Biden. The heads of antitrust enforcement at the Justice Department and the Federal Trade Commission, Jonathan Kanter and Lina Khan, have sued the other tech giants, alleging that they are monopolies engaged in illegal corporate conduct.
All of these cases revolve around the 19th century Sherman Antitrust Act, which makes it illegal for a monopoly to engage in corporate behavior designed to stifle competition. But that law, designed for companies like Standard Oil, faces the ongoing challenge of being applied in an industry environment different from the new technology of the day. And both agencies have tried to test the old law by applying new legal arguments when it comes to the tech giants.
Without big cases, “the law stagnates,” Kanter said in a 2022 speech. “Congress designed antimonopoly law to be fought in the courts.”
In the 1990s, Microsoft was the dominant digital platform, with its Windows software controlling the user experience on more than 90% of personal computers. Today, Google has a similar hold on web search.
That changed for Microsoft after a judge ruled it was a monopoly. Regulators had brought the lawsuit after the software giant began a campaign to crush a new entrant, Netscape, the pioneering commercial browser company. Microsoft intimidated PC makers with contracts that effectively prevented them from offering the Netscape browser. Ultimately, Microsoft was prohibited from restricting PC makers’ freedom to offer other software in its contracts and was forced to open up some of its technology. The time, money and attention of management, as well as the negative public scrutiny, had a deterrent effect and moderated the company’s behavior, according to some antitrust experts.
As a result, Microsoft was no longer able to control the development of the Internet, said Fiona Scott Morton, professor of economics at the Yale University School of Management.
“The goal is to open a path for future innovation,” she said.
On Monday, Mehta found that Google had broken the law by making exclusive deals with Apple, other device makers and browser companies to automatically select Google’s search engine.
Mehta praised the company for its technical prowess and investment in search. “But Google,” he wrote, “has a big, largely invisible advantage over its rivals: default distribution.”
Google’s ruling is important because it “applies to large technology platforms, where you can be dominant but you can’t abuse that dominance,” said Bill Baer, a former top antitrust official at the Justice Department.
Unlike Microsoft, Google is a pure internet company with a very different business model, relying primarily on advertising rather than software licensing.
In Google’s case, as in Microsoft’s, the court found that the contracts illegally excluded rivals. But Google was more of a carrot than a stick, offering industry partners generous payouts rather than threats. Google paid smartphone companies and browser makers more than $26 billion in 2021, according to court testimony, to configure its software to automatically process all searches.
In the case of Google, data was described as a vital asset. The more user queries that flow through a search engine, the more data is collected and then used to improve search results, attracting even more users and generating more data.
“At every stage of the search process,” Mehta wrote, “user data is a critical input that directly improves quality.”
Google’s billion-dollar default deals gave it a huge data advantage in search, the government claimed. It also cited behavioral economics studies that concluded people rarely switched from automatic settings, even when it wasn’t a daunting technical task. Consumer behavior wasn’t coerced, but strongly steered by the power of defaults.
In his ruling, Mehta pointed to “the power of defaults.” He cited and agreed with an expert witness for the government, Antonio Rangel, a professor of neuroscience, behavioral biology and economics at Caltech, who testified that the “vast majority” of searches were conducted habitually.
In court, Google argued that its search engine was the leader because it was a superior product; that data was important, but smart software was the real advantage; and that the contracts were entered into voluntarily by the industry partners.
But Google struggled to credibly explain why it was paying so much to get preferential distribution when its search software was clearly the best technology. The payments made sense, the government insisted, to ensure that Google, with its entrenched monopoly, was the winner.
“That’s how the government told the story, and it’s a pretty compelling story,” said Herbert Hovenkamp, an antimonopoly expert at the University of Pennsylvania’s Carey Law School.
Mehta will now decide what measures to take to open up the search engine market to more competition and new innovators.
Even before his ruling, antitrust experts had issued a flurry of recommendations, ranging from banning Google from entering into exclusive search distribution deals and sharing its search data with competitors to spinning off Google’s Chrome browser or its Android mobile operating system.
“This is the first significant monopolization case against one of the dominant digital companies. In that sense, it’s super important,” said Nancy Rose, an economist at the Massachusetts Institute of Technology.
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