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Google-Android’s Deceptive Antitrust Defenses Presage a US v. Alphabet Suit

The likely probability of an eventual U.S. v. Alphabet Sherman monopolization case improved further now that we know how weak Alphabet-Google’s likely primary U.S. antitrust defense of Android is.

This means not only is a potential U.S. v. Alphabet antitrust case stronger than the seminal successful and upheld U.S. v. Microsoft precedent, but Google’s relative antitrust defense is much weaker too.

Google’s CEO Sundar Pichai’s public Android antitrust defense has fatal flaws.

First, Google-Android claims Apple iOS is a direct competitor when factually in an antitrust context it is not.

Google’s CEO is deceptively claiming the licensable Android mobile operating system is a direct competitor to Apple’s un-licensable iOS operating system when Google knows full well it is not.

That’s because legally it is established antitrust precedent in U.S. v. Microsoft (that was upheld unanimously by the DC Circuit Court of Appeals) that Android and iOS are not part of the same market for antitrust purposes.

Evidently Android and iOS are not direct competitors, because they have:

 

1.      Different customers: Android licenses to OEMs; Apple sells to consumers.

 

2.      Different product: Android licenses software; Apple sells hardware.

 

3.      Different economic model: Android is a wholesale model; Apple is a consumer retail model.

 

4.      Different monetization model: Android indirectly harvests data from consumers for its advertising revenue model; Apple sells hardware for a premium price directly to consumers.

 

5.      Different monetization engines: Android’s customers are advertisers which makes consumers the product that Google sells to advertisers; Apple’s customers are the consumers to which they sell their products.

 

6.      Different cost model: Android is licensed for free as a loss-leader for lower price smartphones; Apple iOS is a premium feature of the premium Apple integrated hardware/software product.   

 

7.      Different customization model: Android is a stand-alone product in the marketplace that is then intended to be customized by OEMs before offered to customers in a differentiated way; Apple iOS is totally-integrated internal software that optimizes Apple hardware and software in one way only.

 

8.      Different business approach: Android is a commercially and freely available universally in the marketplace; iOS is exclusive to Apple. 

 

9.      Different intellectual property model: Android alleges to be an open platform model; iOS is prideful about it closed walled-garden proprietary model.

 

10.   Different data model: Android is a data-driven business; Apple is not.

 

11.   Different data protection models: Android as a wholesaler does not control the ultimate security and privacy of consumers’ data by design; Apple as a retailer by design has an interest to protect the privacy and security of their consumer-customers and their data.

Second, Google effectively argues that the ends should justify the means, which would eviscerate antitrust’ s purpose of preserving competition.   

Google CEO Pichai’s public Android antitrust defense -- “Android has created more choice, not less” -- is the truth, but not the whole truth and nothing but the truth, the legal standard required when defendants are deposed or testify under oath under penalty of perjury.

Google is claiming that the vertical market “ends” or “choices” that Android has created in the new vertical Google markets of devices and apps, show much more competition, so whatever “means” Google may have used to achieve those evident increased vertical choice “ends” (like reducing choice in the horizontal markets of operating systems, browsers, and search engines) are to be considered irrelevant or not offsetting in an economic antitrust analysis of this matter.

Google effectively is arguing consumers are better off net-net from Google’s claimed quantitative beneficial increase in vertical “mobile platform” device and app choice and competition than they are qualitatively harmed by a substantial reduction in the little choice of horizontal competition that there was in the markets for operating systems, browsers, and search engines, all critical strategic services on which consumers depend for accurate and competitive market information and choices.

The problem is that antitrust is all about the “means” of preserving competition and protecting the competitive process, to prevent the “end” of anti-competitive monopolization.

Google-Android’s implicit argument here turns the purpose of antitrust upside-down, to protect the “end” of Google’s claimed choice-enhancing monopolization, over protecting the “means” of competition in multiple critical markets.

This is the Android manifestation of the “Google School of No-Antitrust Fake Consumer Welfare Standard” explained in the white paper that I presented at the University of Chicago, Stigler Center for the Study of the Economy and the State, 2018 Antitrust and Competition Conference on “Digital Platforms and Concentration.

This is also part of Google’s de facto “jury nullification” strategy to discourage support for antitrust enforcement against Google.

It is true, Google can quantitatively show the “ends” that put them in a good light: “Android provides choice” in that there are “1300 brands powered by Android;” “24,000 different devices at every price point;” and “1 million apps available in the Google Play Store.” 

However, Google’s purposeful and deceptive half-truth here is trying to distract everyone from the core monopolistic “means” Google perpetrated 2008-2018 to foreclose any reasonable choice in the horizontal markets Google dominated -- search syndication and search advertising -- since 2008 when the W. Bush, Barnett DOJ Antitrust Division threatened a Sherman Act case to block the Google -Yahoo ad Agreement.

The EU case against Google-Android is extraordinarily similar to the U.S. and EU cases against Microsoft in the U.S. (United States v. Microsoft Corp.), and in the EU (Microsoft v. Commission) which was about tying an operating system to a browser to protect the monopoly Microsoft operating system, and the Android case which is about tying a search engine service and a browser to a mobile operating system to protect Google’s monopoly in search syndication and search advertising.

In a nutshell, Google is claiming Android is good because it has expanded the number of numerous devices and apps dramatically, while ignoring or dismissing that Google’s vertical tying restraints have effectively dramatically reduced limited horizontal competition in search engines, browsers, and operating systems from effectively a few, to two, or to one.     

Conclusion

DOJ Antitrust Division Chief Makan Delrahim has made it clear that he believes the Bork-based, antitrust consumer welfare standard is sound and up to the task of dealing with 21st century monopolizations. He also has made clear that his approach will be evidence based, apparently appreciating there is no shortage of Google antitrust evidence: here, here, here, here, here, here, here, here, and here, etc.

FTC Chairman Simons’ scheduled hearings indicate he knows he has inherited a true mess from his predecessors, especially with Google-Android. He also has publicly committed to focusing his antitrust efforts where there is the most market power, which logically puts Alphabet-Google at the top of his antitrust scrutiny list.

Historically, the Clinton-DOJ, with bipartisan support, created a strong 21st century antitrust precedent in U.S. v. Microsoft that effectively enabled Google, Amazon, Facebook, etc. to thrive.

The W. Bush Barnett-DOJ Antitrust Division in blocking the Google Yahoo had agreement, and EU Competition Commissioner Vestager in convicting Google-Android on the evidence, provide profiles in courage, judgement, and mettle in applying traditional evidence-based antitrust enforcement to Google to ensure Internet platforms cannot think they are immune from antitrust accountability.

The Obama Varney-DOJ valiantly experimented with trying to create more search syndication and search advertising competition in approving the Microsoft-Yahoo ad agreement, reinforced the critical importance of competition in search and search advertising.

Breaking with the pro-competition pattern, the Obama Hesse-DOJ and Ramirez-FTC evidently protected Google more than consumers and competition, in closing the FTC Android investigation without a vote or explanation, and then effectively facilitating Google-Android’s methodical destruction of mobile search syndication and search advertising competition from Microsoft, Yahoo, Facebook, and Apple, and in providing a leading example of the worst of the Washington swamp and what not to do going forward at the DOJ or FTC.  

Trump Administration antitrust enforcers at the DOJ and FTC understand that information is power, and that Alphabet-Google has monopolized the search syndication and search advertising markets that provide consumers access to the world’s information and advertisers access to searching consumers.

It is hard to imagine a worse 21st century market to be monopolized for the overall process of healthy competition economy-wide than the prerequisite need of everyone’s access to accurate, fair and honest information.  

The cumulative public evidence to date continues to indicate that the Trump FTC/DOJ will not duck the Google antitrust case or protect Google from evidence-based antitrust enforcement for the next two or six years but will eventually file a “winning” Android-related Sherman antitrust monopolization case against Alphabet-Google.

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Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, an internetization consultancy specializing in how the Internet affects competition, markets, the economy, and policy, for Fortune 500 companies, some of which are Internet platform competitors. He is also Chairman of NetCompetition, a pro-competition e-forum supported by broadband interests. Cleland has testified seven times before the Senate and House Antitrust Subcommittees on antitrust matters. Overall, eight different congressional subcommittees have sought his expert testimony a total of sixteen times. When he served as an investment analyst, Institutional Investor twice ranked him the #1 independent analyst in communications. He is also author of “Search & Destroy: Why You Can’t Trust Google Inc.”

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Precursor LLC Research Series on Asymmetric Accountability Harms:

Part 1:   The Internet Association Proves Extreme U.S. Internet Market Concentration [6-15-17]

Part 2:   Why US Antitrust Non-Enforcement Produces Online Winner-Take-All Platforms [6-22-17]

Part 3:   Why Aren’t Google Amazon & Facebook’s Winner-Take-All Networks Neutral? [7-11-17]

Part 4:   How the Google-Facebook Ad Cartel Harms Advertisers, Publishers & Consumers [7-20-17]

Part 5:   Why Amazon and Google Are Two Peas from the Same Monopolist Pod [7-25-17]

Part 6:   Google-Facebook Ad Cartel’s Collusion Crushing Competition Comprehensively [8-1-17]

Part 7:   How the Internet Cartel Won the Internet and The Internet Competition Myth [8-9-17]

Part 8:   Debunking Edge Competition Myth Predicate in FCC Title II Broadband Order [8-21-17]

Part 9:   The Power of Facebook, Google & Amazon Is an Issue for Left & Right; BuzzFeed Op-Ed[9-7-17]

Part 10: Google Amazon & Facebook’s Section 230 Immunity Destructive Double Standard [9-18-17]

Part 11: Online-Offline Asymmetric Regulation Is Winner-Take-All Government Policy [9-22-17] 

Part 12: CDA Section 230’s Asymmetric Accountability Produces Predictable Problems [10-3-17]

Part 13: Asymmetric Absurdity in Communications Law & Regulation [10-12-17]  

Part 14: Google’s Government Influence Nixed Competition for Winner-Take All Results[10-25-17]

Part 15: Google Amazon & Facebook are Standard Monopoly Distribution Networks [11-10-17]

Part 16: Net Neutrality’s Masters of Misdirection[11-28-17]

Part 17: America’s Antitrust Enforcement Credibility Crisis – White Paper [12-12-17]

Part 18: The U.S. Internet Isn’t a Free Market or Competitive It’s Industrial Policy [1-4-18]

Part 19: Remedy for the Government-Sanctioned Monopolies: Google Facebook & Amazon [1-17-18]

Part 20: America Needs a Consumer-First Internet Policy, Not Tech-First[1-24-18]

Part 21: How U.S. Internet Policy Sabotages America’s National Security [2-9-18]

Part 22: Google’s Chrome Ad Blocker Shows Why the Ungoverned Shouldn’t Govern Others [2-21-18]

Part 23: The Beginning of the End of America’s Bad “No Rules” Internet Policy [3-2-18]

Part 24: Unregulated Google Facebook Amazon Want Their Competitors Utility Regulated [3-7-18]

Part 25: US Internet Policy’s Anticompetitive Asymmetric Accountability - DOJ Filing [3-13-18]

Part 26: Congress Learns Sect 230 Is Linchpin of Internet Platform Unaccountability [3-22-18]

Part 27: Facebook Fiasco Is Exactly What US Internet Law Incents Protects & Produces [3-26-18]

Part 28: How Did Americans Lose Their Right to Privacy? [4-14-18]

Part 29: The Huge Hidden Public Costs (>$1.5T) of U.S. Internet Industrial Policy [4-15-18]

Part 30: Rejecting the Google School of No-Antitrust Fake Consumer WelfareStandard [4-20-18]

Part 31: Why New FTC Will Be a Responsibility Reckoning for Google Facebook Amazon [4-27-18]

Part 32: “How Did Google Get So Big?” Lax Bush & Obama FTC Antitrust Enforcement [5-23-18]

Part 33: Evident Internet Market Failure to Protect Consumer Welfare -- White Paper [5-31-18]

Part 34: What Happened Since FTC Secretly Shut 2012 Google-Android Antitrust Probe? [6-8-18]

Part 35: Buying WhatsApp Tipped Facebook to Monopoly; Why Didn’t FTC Probe Purchase? [6-19-18]

Part 36: The Sea Change Significance of Simons-FTC Privacy and Antitrust Hearings [6-27-18]

Part 37: New U.S. Privacy & Data Protection Law Is Inevitable Like a Pendulum Swing [7-9-18]

Part 38: Why a US v. Google-Android Antitrust Case Is Stronger than US v. Microsoft [7-16-18] 

Q&A One Pager Debunking Net Neutrality Myths