Alphabet’s Google is the target of a number of overlapping legal investigations, which will attempt to curtail its dominant position. Governments have tired of ‘big tech,’ and the enormity of Google’s assets combine to put a rather large target on its back.
The issue at stake here is what the smartphone ecosystem will look like in a year, after the combined impact of US legal action and the EU’s DSA on Apple and Google – the gatekeepers of iOS and Android. There is a lot of feeling that something is amiss, that they have abused the markets at the expense of consumers and competition, but 2024 will be the year that will either see the pair brought down a peg, or their positions entrenched further by legal victories.
In the US, the antitrust investigation into Google’s search business is underway, and is expected to reach a decision in Q2 2024. Google lost the 2020 lawsuit brought by Epic Games, with the judge ruling in December 2023 that it had an illegal monopoly. Apple managed to fend off the same allegations, but Google so aggravated the judge and jury through its internal retention policies and backdoor dealing that its loss felt completely assured.
The search suit, brought by the US government, began in September 2023, although the investigation began years before under the Trump administration. The evidentiary period ended in November 2023, and currently, closing arguments are scheduled for May 2024. The judge, Amit Mehta of the US District Court for the District of Columbia, closed the evidentiary phase by declaring that “I have no idea what I’m going to do.’
Also in the US, Google has agreed to a settlement for a case brought by 30 states, representing some 21 million consumers, concerning its antitrust position for the Play Store on Android, between 2016 and 2023. The settlement was reached in September 2023, but the terms have now come to light – a $630 million fund for consumers, and $70 million for states.
That settlement is pocket change for Alphabet, and fended off another trial that would have overlapped with the federal antitrust case. Here, Google reaffirms that it has always allowed for third-party app stores on Android, begrudgingly still supports sideloading apps (despite its security concerns), and commits to enabling alternative billing options for developers.
While the settlement takes a few shots at Apple and its iOS ecosystem, in Europe, the lens will focus on the relationship between Android and Google’s search and advertising business. A witness in the US antitrust case let slip that Google paid $26.3 billion in 2021, in deals to place Google as the default search engine – $18 billion of which was with Apple. In that same year, Alphabet reported revenues of $257.64 billion, and net income of $66.73 billion.
Europe last examined Google’s antitrust position in 2018, fining it some €2.42 billion for ‘abusing dominance as a search engine by giving illegal advantage to its own comparison shopping service.’
Since then, murmurs (and sometimes proclamations) of discontent have grown considerably, and so the new Digital Services Act (DSA), which is due to fully come into power on February 17th 2024, will set the stage for renewed Alphabet scrutiny.
Since August 2023, Google has been subject to these rules, as it began by targeting the very large online platforms (VLOPs) that have over 45 million users – equivalent to 10% of the EU population. There was plenty of time to make preparations, and so the US Play Store and search engine antitrust settlements must be considered against the EU’s DSA.
In its announcement of support for the DSA framework requirements, Google sounds chipper. However, the DSA has a fine of up to 6% of annual global revenue for failure to comply, as well as periodic penalties of up to 5% of daily average global revenue. The last resort is the temporary suspension of a service, but this requires ‘serious harm to users and entails criminal offences involving threat to person’ life or safety.’
As ever, the likelihood of success in enforcing these penalties is unclear, but the DSA provides the national regulators with the power to order access to the VLOPs’ data and algorithms, conduct interviews of staff, and carry out inspections of their premises. Delays in answering such queries can be up to 5% of the daily revenue too.
Notably, the European Commission has already used these powers on both Apple and Google, publishing an announcement on December 14th, asking them to “provide more information on how they have diligently identified any systemic risks concerning the App Store and Google Play.”
That sounds rather like laying the groundwork for some form of action, and the announcement is noteworthy for citing the enforcement actions available to the EU. Given the scope of the enquiry, the EU is potentially overstepping the mark.
Apple and Alphabet’s lawyers are going to work hard to define where their responsibilities end, as the EC is asking for anything “related to the dissemination of illegal and harmful content, any negative effects on the exercise of fundamental rights, as well as any negative effect on public security, public health, and minors.”
Death, taxes, and lawyers making bank are about the only certainties we have, so this is only getting started. These initial cases, appeals, and further investigations are going to take up an enormous amount of manhours, but the EU’s intent to reign in the power and influence of these VLOPs seems popular among voters.
The first batch of VLOPs were: Alibaba AliExpress, Amazon Store, Apple App Store, Booking.com, Facebook, Google Play, Google Maps, Google Shopping, Instagram, LinkedIn, Pinterest, Snapchat, TikTok, Twitter, Wikipedia, YouTube, and Zalando. Google Search and Microsoft’s Bing fell under the Very Large Online Search Engine (VLOSE) tag.
These initial 19 were announced in April 2023. The second batch were added in December, and consisted of three pornographic web services – Pornhub, Stripchat, and XVideos. The DSA now compels them to add a raft of new safety and moderation features, and block minors from accessing the services, and stop targeted advertising. Also announced was the opening of formal proceedings against X (Twitter), for already breaching the DSA.