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Why a US v. Google-Android Antitrust Case Is Stronger than US v. Microsoft

SUMMARY

The impending EU-Google-Android abuse of dominance conviction and expected record fine and substantial behavioral prohibitions, begs the question of how U.S. antitrust enforcers will eventually act on the outcome of their own Google-Android investigation?  

Conventional wisdom is wrong that the 2013 FTC decision to shut down its Google search bias antitrust investigation because of insufficient evidence to justify legal action, indicates there is no sufficient evidence to justify legal action in a potential U.S. antitrust case against Google-Android.

These are completely different antitrust cases alleging completely different case theories, abuses, harms, and facts.

The cumulative public evidence to date indicates that the Trump FTC/DOJ will eventually file an Android-related Sherman antitrust monopolization case against Alphabet-Google.

That is first because America’s strongest Sherman Act monopolization case and legal precedent, U.S. v. Microsoft is extraordinarily analogous to a potential U.S. v. Alphabet Android monopolization case, and second because the potential Google-Android antitrust case precedent, evidence, and harms are substantially stronger and more fully-developed than the DOJ’s successful, 1998, Sherman antitrust monopolization case against Microsoft.

This analysis will lay out the evidence why the likely eventual U.S. v. Alphabet Google-Android Sherman monopolization case is likely and is stronger than the seminal, analogous, successful, and “rock solid” U.S. antitrust precedent case of U.S. v. Microsoft. 

Scrutiny of DOJ Antitrust Chief Makan Delrahim’s public speeches -- here, here, here, here, here, and here -- to august antitrust bodies indicates a sophisticated understanding and public defense: of the relevance, flexibility, and capability of the widely-adopted, Bork antitrust consumer welfare standard to address any potential digital or Internet-related monopolization case; and of the Bork-backed, “rock solid,” nature of the U.S. v. Microsoft antitrust precedent.

FTC Chairman Joe Simons has publicly promised to be a tough antitrust and consumer protection enforcer and has launched a once-in-a-generation retrospective of ~15 public hearings this fall to examine the adequacy and effectiveness of the FTC’s antitrust and consumer protection enforcement and authority, evidently focused on Internet platforms and Google. He and his fellow FTC commissioners apparently are acutely aware of the FTC’s 2013-2017 questionable antitrust non-enforcement of Google-Android.  

The apparent nutshell theory of the potential U.S. v. Alphabet Google-Android antitrust case would be like U.S. v. Microsoft, not a vertical case objecting to integrating its suite of services, but a Google monopolist horizontal attempt “to preserve its monopoly by destroying” actual and potential rivals via multiple vertical exclusionary contracts that “impose multiple requirements” on others “that inhibit their dealings with” Google’s “rivals.”

The government’s case would “not challenge” Alphabet’s “size or its business success” and it would “seek only to reestablish competition in the market by applying solidly established antitrust doctrines.” [Note the quotes in this nutshell summary, are pulled directly from Judge Bork’s nutshell summary and support for the Government’s U.S. v. Microsoft case in his July 29, 1998 white paper in U.S v. Microsoft -- here.]      

The reasons that a potential U.S. v. Alphabet antitrust case would be stronger than the successful U.S. v. Microsoft case are briefly: a stronger precedent; a much fuller and more developed record of evidence; vastly broader monopolization and destroyed competition; and more and broader consumer harms.

 

ANALYSIS

Stronger precedent:First, this potential U.S v. Alphabet antitrust case would be based on a much more recent and upheld U.S. v. Microsoft precedent (1999 & 2004) than the 1951 Lorain Journal precedent.

Second, the U.S. v. Microsoft precedent is extraordinarily-analogous in terms of established market definition of the same product – a licensable software operating system, Windows and Android, but not Apple’ iOS operating system because iOS is not a direct competitor to Google’s Android operating system because iOS is not a licensable operating system and Android is.   

Third, the U.S. v. Microsoft precedent is eerily-analogous in the alleged Android antitrust abuse of vertical contractual full-line forcing to foreclose actual and potential horizontal competition to its monopoly. Simply, Google brazenly used Microsoft’s monopolization playbook.

Much fuller and more developed record of evidence: First, at the time of 1998 U.S. v. Microsoft case the PC market was still emerging with less than 50% U.S. PC computer adoption, whereas now the Internet markets are mature with >90% of Americans using the Internet, 90% of Americans using Google search because Apple uses Google Search as default, and 70% of Americans use smartphones.

Second, while the FTC and DOJ investigated Microsoft formally on antitrust three times in six years from 1992 to 1998, the FTC and DOJ have investigated Google formally on antitrust ten times in 11 years from 2007-2018, which included: a threatened Sherman Act case to block the proposed Google-Yahoo ad agreement; an extraordinary approval of a #2 Yahoo and #3 Microsoft to try and create a competitor to Google Search; advice to a court to block the Google book settlement as anticompetitive; a consent decree on Google-ITA; and a settlement to not act anticompetitively with patents and with advertising practices. 

Third, unlike the Microsoft case where the DOJ led, and the EU followed, in this instance the EU is leading and the FTC/DOJ following on a Google-Android matter. The EU is reportedly poised to convict Google of an Android-abuse of dominance and impose an expected record fine and substantial behavioral prohibitions.

The DOJ/FTC case can only be made stronger by learning from the EU discovery and witnessing in detail Google’s behaviors and best arguments against the EU case. Seldom does the U.S. get the benefit of a observing a foreign dry-run of their own antitrust case against an American company.

Vastly broader monopolization and destroyed competition: First, the Microsoft case was effectively contained to the tech sector, the potential U.S. v. Alphabet case implicates multiple industries outside of tech fanning most of the economy.

Second, while the Microsoft case was largely about preserving it operating system monopoly and destroying Netscape as a potential rival, a potential U.S. v. Alphabet-Google Android case could document how Google preserved its PC search-syndication/search-advertising monopoly and extending it more completely to mobile and destroyed all of Google’s major actual and potential rivals ability to compete in the process: Yahoo, Microsoft, Facebook, Apple, etc.

More and broader consumer harms: First, the Android system is well-known for a model that is good for Google and its market power, but provides poor quality security for consumers, including not being able to update consumers systems to protect them from known security flaws, and not providing normal and needed consumer tech support. In addition, Google-Android is pervasively and comprehensively tracking consumers much more than they have been informed about and without meaningful consent, all to advance the advertising-only business model over consumer welfare.

Second, Android’s permanent price fixed at zero contributes to systemic foreclosure of competitive price choices for consumers. For example, there is no a la carte pricing for privacy or security conscious consumers, despite the revealed preference that some users use ad blockers and others would pay for an ad-free, more privacy-friendly and secure Android system. There also is no business pricing to meet businesses’ different needs than consumers.

Third, Android discourages business model innovation that would conflict with its free ad-only business model, which forecloses competition for the licensable operating system market.

 

CONCLUSION

DOJ Antitrust Chief Makan Delrahim has been publicly laying out the Trump Administration’s antitrust doctrine as it applies to digital markets in a series of antitrust speeches -- here, here, here, here, here, and here -- that have made the case that the Bork-authored U.S. antitrust consumer welfare standard is up to the task of addressing any potential 21st century monopolization case in digital markets.

Tellingly, June 22nd at the Federalist Society, a bastion of conservative antitrust thought, Mr. Delrahim’s focused remarks made it clear that Judge Bork, the conservative lion of antitrust thought, fully supported the Clinton-DOJ’s U.S. v. Microsoft case, and that Mr. Delrahim did and does today. 

The grand question here is: if Mr. Delrahim was not trying to rally support from conservatives for a potential antitrust case, most likely against Alphabet-Google on Android (after several years of Google’s relentless swarming of the antitrust community and conservatives with its de facto “Google School of No Antitrust” doctrine and its deceptive academic-antitrust influence campaign) why then did Mr. Delrahim make these particular Bork-Microsoft-precedent, concluding remarks a few weeks ago to the conservative Federalist Society’s celebration of the venerable Judge Robert H. Bork’s seminal book on antitrust?

Mr. Delrahim said: “As Judge Bork wrote in a new epilogue to The Antitrust Paradox fifteen years after it was originally published, “Though the goal of the antitrust statutes as they now stand should be constant, the economic rules that implement that goal should not. It has been understood from the beginning that the rules will and should alter as economic understanding progresses.”

That insight forms the core of modern antitrust law. Enforcers and courts continue to rely on the latest economic tools in order to improve their understanding of what may, or may not, constitute harm to competition and, ultimately, to consumers.

Judge Bork’s embrace of evolving economics was not hollow. In his post-judicial life, I had the honor of interacting with Judge Bork on the Microsoft case while I served as a counsel to the Senate Judiciary Committee. Judge Bork firmly believed that Microsoft’s business practices intended to preserve the company’s monopoly position in violation of Section 2 of the Sherman Act, and he set forth his views in a famous opinion piece published in the New York Times 20 years ago. In that piece, he emphatically rejected the “widespread impression that the Microsoft controversy should be resolved by an ideological litmus test.”  As he put it, “the question is not one of politics or ideology; it is one of law and economics.”

That statement, I believe, best encapsulates Judge Bork’s lasting contributions to antitrust law. It is a principle I embrace and live by today, as we make consequential decisions at the Antitrust Division.

You may recall that around that time, many had argued that antitrust had no role in the dynamic software industry, and that Microsoft could not possibly violate the antitrust laws as a matter of conservative ideology.

The unanimous en banc D.C. Circuit would go on to uphold key parts of the ruling against Microsoft’s practices, as Judge Ginsburg no doubt recalls well. Not long after the D.C. Circuit issued its monumental decision in United States v. Microsoft, I was at a lunch with Judge Bork and others. One of the attendees claimed that the court of appeals got it wrong, and that the Justice Department should be precluded from settling the case. Judge Bork strongly pushed back, arguing that it was correct under the antitrust laws, and that there was no established principle to preclude the DOJ settlement.

The Microsoft case was not only correctly decided; it was a testament to Judge Bork’s approach to antitrust law: the consumer welfare standard remains the goal, while our economic tools and their applications to new business models and digital markets continue to evolve.

The cumulative public evidence indicates that the Trump FTC/DOJ will eventually file an Android-related Sherman antitrust monopolization case against Alphabet-Google.

Forewarned is forearmed.

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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] 

Q&A One Pager Debunking Net Neutrality Myths