Attorneys who’ve prosecuted Microsoft in antitrust proceedings say the DOJ may have a tough time succeeding towards Google
Pedestrians wearing protective masks walk past a Microsoft Technology Center in New York on Wednesday, July 22, 2020.
Jeenah Moon | Bloomberg via Getty Images
Lawyers prosecuting Microsoft for alleged antitrust violations in the late 1990s saw some well-known tactics in the Justice Department complaint against Google that was filed this week.
However, according to several lawyers involved in the Microsoft case questioned by CNBC, this is not a copy of the complaint.
The DOJ cited its landmark antitrust case against Microsoft on page five of its complaint against Google, filed Tuesday in the same federal district court that ruled positive for the government. The lawsuit is not the sweeping indictment against Google's search and advertising businesses that some expected.
However, the argument touches on various parts of its business, claiming that Google has cut off competitors from major sales channels in part through foreclosure agreements, including its lucrative payments to Apple as the default search engine for the iPhone and other Apple devices. As a result, the complaint noted, Google has harmed competitors, advertisers, and consumers who have been denied the extra choices and high quality search services that may have endured with more competition.
Google's top lawyer described the complaint as "deeply flawed" in a blog post that set out the company's initial objections.
"They're trying to fit the facts from Google into Microsoft's theory," said Stephen Houck, who was the states' chief attorney during the Microsoft trial. "But the relevant facts that I think are very different, almost 180 degrees different in many ways. I think they are going to have a very difficult time proving this."
Houck told CNBC's David Faber on Tuesday that he has been consulted for Google over the past few years, but his skepticism about the strength of the case comes from his own perspective.
A Justice Department representative did not immediately respond to a request for comment.
Lawyers like Houck, who knew the Microsoft case well, say the DOJ's new lawsuit against Google differs on key points that may be far from flushing out and redoing the earlier process.
"From the Microsoft Playbook"
There is no question why the DOJ would try to resort to the Microsoft case. Although an appeals court overturned the court's decision to break Microsoft and the case ended in a settlement, the appeals court also largely upheld important parts of the process and ruled unanimously.
"This is the strongest antitrust precedent you can set in the Supreme Court," said Gary Reback, an attorney credited with helping convince the DOJ to bring proceedings against Microsoft. For the past few years he has worked for clients who fought against Google.
Reback's view of the case is more optimistic. He said the facts presented by the DOJ could be proven in court.
The core of the Microsoft lawsuit revolved around allegations that the tech giant had illegally maintained its monopoly power by tying its Internet Explorer web browser to its Windows operating system. According to the lawsuit, Microsoft would require PC manufacturers to use the predominant Windows operating system to pre-install their browser and prevent users from removing it, displacing competing browsers like Netscape. The court of appeal upheld the decision that Microsoft had violated antitrust law by maintaining its operating system monopoly with anti-competitive means.
The case against Google also focuses on the way parts of its services were allegedly tied together to maintain monopoly on search. For example, the complaint alleges that Google has signed exclusion agreements with phone manufacturers that used a version of its Android operating system that required manufacturers to preinstall certain Google apps.
"It's clearly a type from the Microsoft Playbook," said Doug Melamed, a top antitrust officer for the division, when filing a lawsuit against Microsoft. "It's conceptually very similar to the core of the Microsoft case."
But the DOJ has benefited in some ways from the passage of time. Melamed said some arguments that were "taken for granted today" were "hotly contested" at the time of the Microsoft trial, such as the ability to have a monopoly in a market where consumers don't pay for the service or the ripple effects of a digital network.
"In that regard, this is a much simpler case than the Microsoft case," said Melamed.
Where the case deviates
Government attorneys on the Microsoft case benefited from several things that the Google case seems to lack on its surface. It is important to note, however, that the complaint itself can still be modified or even consolidated with a potential separate case by a group of states still investigating the tech company.
Here are some of the key differences they pointed out:
A major benefit to the government's case in the Microsoft study was the messy paperwork executives that were left behind. Internal emails and a long memo from then CEO Bill Gates helped the government prove that Microsoft viewed web browsers like Netscape as a threat to its dominance in the operating system market. They also helped show the length it would take to maintain that dominance.
Google has learned from Microsoft's stumbling blocks. Google's CEO and top attorney told staff Tuesday after the government filed their lawsuit to keep their heads down while the case continues. According to a recent report in the New York Times, the company has put in place compliance training courses for employees that explain how and when to address antitrust issues in order to limit the revenue that may be discovered.
"They had more inflammatory documents in Microsoft and that made it easier to convince a fact-finder that they were up to no good," Melamed said. "Here they complained that Google had told people to be careful what they wrote down."
Another challenge for the government in proving their case is to show that Google's contracts guaranteeing their services a standard position (like the one for their search engine on Apple's iPhones) are anti-competitive. The case is based on the government's claim that Google is using "anti-competitive and exclusive distribution agreements" to block standard spots for its search engine on various devices. As Google pointed out, it's still fairly easy for users to change the default settings if they want, which makes it more complicated to prove the alleged anti-competitive effect.
"What (Microsoft) was trying to exclude or exclude Netscape Navigator from any distribution mechanism," said Houck, adding that Microsoft's methods were more compelling than Google's from the complaint. "And I really don't see any isolation or exclusion here. Being a standard is another matter."
It's also a lot easier to download alternative software in 2020 than in the age of dial-up Internet, said Houck – a point that Google itself was quick to address.
"If it is very easy to change (the default) and few users do it, one possible explanation is that they are not changing it because why should they move away from the best search engine?" Said Melamed. "The government here has to answer that question. It may have to show that users don't change default settings, and the stickiness of default settings cannot be explained simply by product superiority."
Who is hurt?
Also, unlike the Microsoft case, several lawyers said, the person or organization harmed by Google's actions is not so clear. The government was able to paint Netscape as a clear slide for Microsoft, showing how Microsoft's supposedly exclusive practices effectively drove it out of the market.
The allegations against Google are not that neat. The DOJ claims that Google harms consumers and advertisers by reducing competition in search and thus reducing the quality of the services available. According to the complaint, this has also harmed the competitors themselves by increasing costs and closing sales channels. It names search competitors like Microsoft Bing and DuckDuckGo.
However, based on the initial complaint against Google, Houck stated that "no real harm to the consumer can be seen".
According to Harry First, who ran the New York Attorney General's antitrust office during part of the Microsoft trial and the Microsoft settlement, the Google complaint is "more forward-looking" than the one against Microsoft.
The Google complaint alleges that the company already has its sights set on the next sales channel it can block. The complaint alleges Google is positioning itself to control emerging search distribution channels such as smart speakers and connected TVs and watches.
"Microsoft was brought to a time before servers were really developed, so all of the compute was really on huge mainframes or PCs," First said. "So the complaint didn't really address much of the future in Microsoft. This is trying to do that."
New rulings from the Supreme Court
In this case, the time has not worked entirely in favor of the government. New Supreme Court rulings could potentially undermine the strength of Microsoft's precedent, First said.
In one known case, Ohio v American Express, it was found that some markets can be defined as bilateral, e.g. B. Consumers on the one hand and advertisers on the other in the case of Google. Google could possibly argue that even if one side of its market is slightly disadvantaged (such as higher advertising costs), it is offset by the advantages for the other side (such as free search services).
Another case known as Trinko narrowed the grounds on which a monopoly case could be filed. Verizon's alleged failure to share its network with AT&T, as required by the Telecommunications Act, is not an antitrust claim.
"I think you will be lucky enough to be able to defend Microsoft," said First.
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