Every day, tens of millions of Americans interact with two of the world’s largest, most far-reaching, and powerful businesses: Amazon and Google. These behemoth companies dominate the spaces in which they operate online: retail shopping and search, respectively. But, according to the federal government and a collection of state authorities, that domination is not simply a measure of the companies’ success or the quality of their products and services. Instead, as claimed in antitrust lawsuits filed against both companies, they are monopolies that stifle competition, harm consumers, and violate federal antitrust law.

The cases against Amazon and Google, which could result in the breakup of the companies if the government is successful, follow other antitrust actions that illustrate a more aggressive approach to enforcing this century-old legal framework and put the spotlight on this complicated and nuanced area of the law.

Recently, Sherrard Roe Voight & Harbison antitrust attorney Ryan Holt discussed the lawsuits against Amazon and Google on News Channel 5’s OpenLine broadcast. In his interview with host Ben Hall and the show’s callers, Holt offered his insights into the government’s cases, antitrust law generally, and how the outcome of these matters may impact consumers and the companies’ competitors.

A Product of the Gilded Age

As Holt explained on the show, antitrust law is just a funny name for competition law.  The goal is to create lower prices and better goods and services through choice and competition. The term “antitrust” comes from the late 19^th century Gilded Age, when industrialization created the first great monopolists, such as Dale Carnegie, Cornelius Vanderbilt, J.P. Morgan, and John D. Rockefeller. These individuals and the companies and “trusts” they owned effectively controlled whole sectors of the economy, using their accumulated power to prevent other companies from competing with them.

“The Sherman Antitrust Act, which remains the foundation of antitrust law to this day, was passed in 1890 in an effort to ensure that our economy gives choices to people through competition,” Holt said. “When you have a company that has a monopoly over an entire sector of the economy, the typical result is higher prices, lower quality, and less innovation. That is what is being claimed against Amazon and Google.”

Ryan explained that antitrust law isn’t about punishing companies simply for being big and successful.

“There is a difference between a company doing well because it offers a great product or service and one that uses its accumulated power and influence to block other companies from entering into the market through anticompetitive business practices,” he said. “That is the fundamental distinction upon which antitrust cases turn, including the ones against Amazon and Google.”

Claims Against Google

Google is actually facing two antitrust claims, one relating to its search engine and one pertaining to online advertising. Both cases were filed by the U.S. Department of Justice (DOJ) and several state attorneys general.

In the search engine case, the government is challenging Google’s agreements with cell phone manufacturers and web browser designers that make Google’s search engine the default on their devices in exchange for revenue-sharing contracts worth billions of dollars. The government claims these deals allow Google to maintain its monopoly over online search and the advertising that appears alongside search results, shutting out potential rivals and hurting innovation. In the currently pending trial, Microsoft CEO Satya Nadella testified that her company can’t compete with Google and that the search engine’s market share is so large that the internet has basically become the “Google web.”

Google claims it won those contracts because it has the best product and, therefore, customers want to use Google instead of other search engines. In other words, consumers have a choice, Google claims, and they keep choosing Google.

In the other case against Google, the DOJ and the states that joined it allege that Google has manipulated its dominant position in the online advertising world to squeeze out rivals and control both the supply and demand side of the advertising market. According to the complaint, Google thwarted fair competition by manipulating fees, punished advertisers for using alternative retail platforms and ad exchanges, and engaged in a host of further anticompetitive behavior to monopolize the marketplace.

Case Against Amazon

The case against Amazon, recently filed by the Federal Trade Commission and 17 state attorneys general, claims that Amazon engages in illegal anticompetitive conduct in both its online marketplace that serves shoppers and the market for online marketplace services purchased by sellers. The lawsuit alleges these tactics include:

• Anti-discounting measures that punish sellers and deter other online retailers from offering prices lower than Amazon, keeping costs higher for products across the internet.
• Conditioning sellers’ ability to obtain “Prime” eligibility for their products—a virtual necessity for doing business on Amazon—on sellers using Amazon’s costly fulfillment service.
• Biasing Amazon’s search results to prefer Amazon’s own products over others that Amazon knows are of better quality.
• Charging exorbitant fees to the hundreds of thousands of sellers who currently have no choice but to rely on Amazon to remain in business.

You can listen to Holt’s appearance on OpenLine here.

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