The Economic Rationale of United States v. Google

• Date: 01 March 2022
• DOI: 10.1177/0003603X211067116
• Published date: 01 March 2022

https://doi.org/10.1177/0003603X211067116

The Antitrust Bulletin

2022, Vol. 67(1) 23 –39

© The Author(s) 2022

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DOI: 10.1177/0003603X211067116

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Article

The Economic Rationale of United

States v. Google

Germán Bet*, Roger D. Blair*,**,

and Javier D. Donna*,***

Abstract

In 2020, the Department of Justice (DOJ) filed an antitrust suit against Google alleging that Google

has unlawfully monopolized the markets for general search services, search advertising, and general

search text advertising. The complaint raises questions involving market definition, monopoly power,

and monopolizing conduct. In this article, we examine these issues through the lens of microeconomic

principles. Our analysis finds that there is a sound economic rationale for the DOJ’s complaint.

Keywords

Monopolization, google, antitrust, search services, search advertising

I. Introduction

In 2020, the Department of Justice (DOJ) filed an antitrust suit against Google alleging a §2 Sherman

Act violation.1 There is no doubt that Google dominates the market for general search services, search

advertising, and general search text advertising in the United States.2 But “mere size” does not offend

the Sherman Act.3 Something more than dominance is required.

In this article, we analyze the Complaint through the Grinnell framework provided by the Supreme

Court.4 We focus on DOJ’s specific allegations and the proof that will be needed for the DOJ to pre-

vail.5 We also address the thorny issue of relief in the event that DOJ does prevail.

*Department of Economics, University of Florida, Gainesville, FL, USA

**Levin College of Law, University of Florida, Gainesville, FL, USA

***The Rimini Centre for Economic Analysis, Rimini, Italy

Corresponding Author:

Roger D. Blair, Department of Economics, University of Florida, 224 Matherly Hall, P.O. Box 117140, Gainesville,FL 32611-

7140, USA.

Email: rdblair@ufl.edu

1067116ABXXXX10.1177/0003603X211067116The Antitrust BulletinBet et al.

research-article2022

1. United States v. Google LLC (2020). “Case Number: 1:20-cv-03010,” District Of Columbia District Court, Filed:

10/20/2020, hereinafter Complaint. DOJ filed a civil action rather than a criminal action. Since this decision was dictated

by the DOJ’s legal strategy, we are unaware of their reasoning.

2. Id.

3. United States v. United States Steel Co., 251 U.S. 417 (1920): [“. . . the law does not make mere size an offense, or the

existence of unexerted power an offense. It, we repeat, requires overt acts . . . .”]

4. United States v. Grinnell Corp., 384 U.S. 563 (1966).

5. Much of Google’s monopolizing conduct involves vertical contracts that may be objectionable on §1 grounds. The DOJ has

not alleged any §1 violations, so we focus on §2.

24 The Antitrust Bulletin 67(1)

We begin by outlining the evidentiary hurdles contained in the Supreme Court’s opinion in

United States v. Grinnell Corp.6 Following that, we spell out the allegations in the Complaint. We

then examine the alleged adverse consequences of Google’s monopoly in the general search ser-

vices market. We then turn to a similar analysis in the digital search advertising market. In the event

that DOJ prevails, the next problem is relief. As it turns out, it is complicated by elements of natural

monopoly in the general search services market. Finally, we close the Article with some concluding

remarks.

II. Evidentiary Standards

According to the Complaint, Google has unlawfully monopolized three separate markets. To carry its

burden of proof, the DOJ will have to satisfy the Grinnell test for unlawful monopolization:

The offense of monopoly under §2 of the Sherman Act has two elements: (1) the possession of monopoly power

in the relevant market and (2) the willful acquisition or maintenance of that power as distinguished from growth

or development as a consequence of a superior product, business acumen, or historic accident.7

To prevail at trial, therefore, the DOJ will have to define the relevant antitrust market—both product

and geographic markets—and prove that Google has monopoly power in those markets.

For antitrust purposes, the relevant product market includes all reasonably close substitutes. The

idea is to include all products that significantly influence price. For example, one would probably find

that Coca-Cola and Pepsi-Cola are reasonable substitutes but that milk and orange juice are not. The

geographic market should include sources of supply that significantly influence price. For example, it

is doubtful that ice cream cones from Boston are in the same market as ice cream cones from New York.

In contrast, two ice cream shops located two blocks apart may be reasonably close substitute sources

of supply. In practice, reasonable substitutability is determined by experience and judgment. Defining

markets involves both art and science along with empirical evidence and experience with similar

situations.

Monopoly power refers to a firm’s ability to control price in the relevant antitrust market by adjust-

ing the quantity supplied. The existence of monopoly power will be inferred when the firm in question

has a market share of at least 70 to 75 percent when there are entry barriers. In the case of Google, DOJ

argues that both elements are present.

If the evidence supports the allegation of monopoly power in the relevant market, the DOJ will have

satisfied the first prong of the Grinnell test. It will have established the structural condition of monop-

oly, which is not necessarily a violation of §2 of the Sherman Act. Then the DOJ will have to prove that

Google had attained or maintained its monopoly through competitively unreasonable conduct. If a firm

attains a structural monopoly by building a better mousetrap and simply improves its product, it does

not violate §2. But if it maintains its original lawful monopoly by exclusionary practices, it then runs

afoul of §2 of the Sherman Act.8

III. Allegations in the Complaint

In October 2020, the DOJ filed a Complaint against Google alleging that Google has monopoly power

in the markets for general search services, search advertising, and general search text advertising. It

6. United States v. Grinnell Corp., 384 U.S. 563 (1966).

7. United States v. Grinnell Corp., 384 U.S. 564, 570-71 (1966).

8. Since DOJ has only alleged §2 violations, it need not prove that Google’s vertical contracts violate §1. DOJ’s focus need

only be on their exclusionary potential for maintaining Google’s monopoly.