Does Google Have a Monopoly? Secret Docs May Hold The Key

Google, Inc. has to be getting used to lawsuits by now. In the last few months alone the company has faced legal action over, among other things, allegedly scanning unread e-mails, allowing minors to make in-app credit card purchases, and using cookies to track minors’ online activity. In March, we published a blog post exploring whether the sheer size of Google’s customer base made it practically impossible for those lawsuits to succeed. The problem is one of size: if a lawsuit hopes to represent a class consisting of all Google users – a class that could easily include hundreds of millions of individuals – the logistics can quickly overwhelm a court. As Federal Judge Lucy Koh pointed out back in March, “[the courts are] not a governments agency of verifying birth dates.”

Google’s size and market share make it impossible for Android OS manufacturers to say no to Google products, even if they wanted to.

A lawsuit filed this week in United States District Court, Northern District of California, is making headlines for accusing Google of having a “monopoly” of not just Internet search, but also mobile and tablet Internet search. It’s quite the claim – but what’s it based on? According to the suit, Google employs a secret Mobile Application Distribution Agreement (MADA) and pre-loads Android phones with a plethora of Google products:

The logic goes like this: Google purchased Android OS in 2005, and by then giving away the OS “for free,” built a substantial user base at little expense. Android, however, is said to have only “basic functionality,” while the Google apps (including YouTube and Google Play) that come loaded on Android phones are what really “brings mobile phones and tablets to life.” Thus, MADA allows Google to put its products onto Android OS manufacturers’ devices, but only – and this is the important bit – if manufacturers pre-load all the products onto “prime screen real estate.”

According to the lawsuit, Google’s size and market share make it impossible for Android OS manufacturers to say no to Google products, even if they wanted to. This unrivalled power and ability to get its products onto handheld devices essentially grants Google a monopoly, the suit claims.

Now, the MADA documents, described in the lawsuit as “contracts in restraint of trade that are designed to maintain and extend [Google’s] monopolies” don’t make especially exciting reading, but they form the crux of the allegations. If the suit’s to be believed, the agreements violate the Sherman Act (a federal antitrust law), the Clayton Act (another federal antitrust law), California’s Cartwright Act, and California’s Unfair Competition Act. The agreements certainly contain some interesting clauses, such as this one requiring the specific placement of Google apps on a new device:

And again:

The documents, obtained the attorneys who filed the case, are marked “highly confidential.” So, could they present a problem for Google?

This isn’t the first time Google’s faced accusations of being a monopolist. Last September, Microsoft CEO Steve Ballmer told a company conference that the U.S. government should take action against Google over the their cloud storage services. As Business Insider reported at the time, Ballmer’s view of Google was less than complimentary:

This could all be sour grapes, of course. Microsoft famously faced monopoly charges of its own for pre-loading computers with Internet Explorer and other Microsoft products. As the same Business Insider article points out, Microsoft faced anti-trust charges from the United States government for over a decade, and EU investigators brought additional charges less than one year ago. Those in glass houses shouldn’t throw stones, and the Microsoft CEO accusing a company of being too big is a tad hard to take seriously.

Back to Google’s lawsuit, then. If the claims are to be believed, MADA is blocking other applications from competing fairly by ensuring Google’s own products are pre-loaded and given preferential placement on handheld devices. Why is this bad? The lawsuit puts it succinctly:

It’s impossible to say right now whether Google is facing a serious problem here, or whether the impact of the MADA has been blown out of proportion. Technology is constantly advancing, and the fact that Microsoft faced monopoly charges over its Internet Explorer browser before the rise of Firefox and Google’s Chrome is proof that the next big thing could be just around the corner. Is there a future competitor waiting to challenge Google’s market share and make this lawsuit’s claims redundant? Innovative approaches to Internet search are certainly still being developed.

Google’s a big company – no one doubts that – and the larger a company gets, the more watchful eyes may be needed. A monopoly, though? That remains to be seen.