Google has long defended itself against charges of monopoly by stressing that its products are free and that no one has to use them.
And it’s avoided tough government scrutiny for years based in part on the idea that people searching the internet are not Google’s true customers.
We’re its product. Advertisers are its real customers. That complicates the question of who, if anyone, is hurt by Google’s dominance in selling ads off the world’s search queries and through its array of affiliated businesses, from its Android phone software to its YouTube video platform and digital maps.
The U.S. Justice Department’s new antitrust lawsuit against Google argues that both advertisers and regular people are harmed by the tech giant’s position as “the unchallenged gateway to the internet for billions of users worldwide.”
“As a consequence, countless advertisers must pay a toll to Google’s search advertising and general search text advertising monopolies,” the government wrote in Tuesday’s landmark complaint, which asks a federal court to intervene to protect competition. “American consumers are forced to accept Google’s policies, privacy practices, and use of personal data; and new companies with innovative business models cannot emerge from Google’s long shadow.”
The government argues that Google has abused its monopoly power through agreements with other companies that promote Google’s apps and place its “search access points” as a default on browsers, phones and other devices. All of this drives more searches of Google at the expense of its rivals, the complaint alleges.
Google’s critics have been making similar arguments for years in calls to break up the tech giant or curtail its behavior, but U.S. antitrust enforcers have long relied on a traditional standard of judging a monopoly by whether it’s making consumers pay too high a price for its products.
Google controls about 90% of global web searches and dominates search-based advertising, but it holds a smaller share of the overall digital advertising market.
“This is an argument we can expect Google to make a lot and make it loudly, that its customers are the advertisers,” said Rebecca Allensworth, a law professor at Vanderbilt University.
“But there are a lot of antitrust law professors who would say that consumers pay a real price for something like a search engine,” Allensworth said. “There’s a real cost to us, in terms of privacy, attention and data. It may not be dollars and cents. But it’s that price we should be concerned about.”
Google’s business works by scooping up personal data from billions of people who are searching online, watching YouTube videos, following digital map routes, talking to its voice assistant or using its phone software. That data helps feed the advertising machine that has turned Google into a behemoth.
The assistant U.S. attorney general in charge of antitrust enforcement, Makan Delrahim, has repeatedly said that zero-price business models — Google and Facebook are the best-known examples — should not get “a free pass” from antitrust scrutiny because it’s not just about ensuring price competition. It’s about promoting “consumer welfare in all its forms, including consumer choice, quality, and innovation,” he said in a speech at Harvard Law School last November.
Delrahim recused himself from the Google probe because he represented the company as a lobbyist in 2007 when it faced antitrust scrutiny over its acquisition of DoubleClick, then a competitor in digital advertising.
Google has long denied claims of unfair competition and is expected to fiercely oppose any attempt to force it to spin off its services into separate businesses. The company argues that although its businesses are large, they are useful and beneficial to consumers.
“People use Google because they choose to — not because they’re forced to or because they can’t find alternatives,” the company said in a Tuesday tweet that called the lawsuit “deeply flawed.”
But the Justice Department argues that Google “deprives rivals of the quality, reach, and financial position necessary to mount any meaningful competition to Google’s longstanding monopolies,” and that foreclosing competition has reduced the quality of search services.
The complaint mentions loss of privacy and the use of consumers’ data as quality issues, although without elaborating.
While Google dominates search advertising, it’s likely to point to tighter competition in the broader market for online advertising. Google takes in about 29% of all digital ad spending, according to a June report from eMarketer, and faces growing competition from rivals such as Facebook and Amazon — each of which holds about 23% of the digital ad market and is also under antitrust scrutiny.
Rivals that run more specialized search businesses, such as Yelp, Expedia and Tripadvisor, have been among the most vocal in arguing that they’re harmed by Google’s business practices.
Seth Kalvert, Tripadvisor’s senior vice president and general counsel, said that the antitrust charges are good for consumers and could help preserve a vision of the internet as a place of transparency, “the wisdom of crowds” and vibrant competition.
“They provide the framework for meaningful action to stop Google from leveraging its gatekeeper position to benefit its owned services and increase its profits at the expense of competition and consumers,” Kalvert said in a statement.
At the same time, it’s never been certain how much the average American cares about the impacts of Google’s market dominance and the way it uses people’s information. The company has historically ranked high in surveys of user trust, though growing public awareness about the loss of digital privacy and President Donald Trump’s repeated and unfounded claims of tech industry bias have left some dents in its reputation.
The lawsuit is in some ways a repeat of the Justice Department’s last big antitrust case against a tech giant. The government sued Microsoft more than 20 years ago accusing it of leveraging a monopoly position to lock customers into its products so they wouldn’t be tempted by potentially superior options from smaller rivals.
By MATT O’BRIEN AP Technology Writer.
AP technology writers Frank Bajak and Michael Liedtke contributed to this report.
Virus keeps Black Friday crowds thin, shoppers shift online
The raging coronavirus pandemic kept crowds thin at malls and stores across the country on Black Friday, but a surge in online shopping offered a beacon of hope for struggling retailers after months of slumping sales and businesses toppling into bankruptcy.
In normal times, Black Friday is the busiest shopping day of the year, drawing millions of people eager to get started on their holiday spending.
But these are not normal times: A spike in coronavirus cases is threatening the economy’s fitful recovery from the sudden plunge in the spring. Crowds at stores were dramatically diminished as shoppers shifted online.
Game consoles, cookware, robotic vacuum cleaners, slippers and pajamas were popular among shoppers preparing to spend a lot of time indoors this winter. Many were still eager to get into the holiday spirit and delight their loved ones after a tough year.
Eric Kelly, a boxing gym owner, camped outside a store on Black Friday for the first time in his life, trying to score a PlayStation 5 for his 13-year-old twin sons as a reward for persevering through remote learning during the pandemic.
“They’ve been away from their friends,” said Kelly, who failed to get the console at a GameStop in New York City’s Union Square but said he would keep trying online. “They’ve done everything they had to do in school and outside of school, so I have to award them for being exceptional kids.”
Before Black Friday, GameStop teased that it would have a limited supply of the new $500 PlayStation 5 game console for sale only at its stores, in contrast to other retailers that sold it only online.
Kelly said “people were on top of each other” in the line. At a Garden State Plaza mall in Paramus, New Jersey, police monitored a crowd outside a GameStop, but few people kept their distance.
GameStop said it was taking several safety precautions, including contactless pickup.
Many retailers beefed up their safety protocols to reassure wary customers about coming in on Black Friday. But stores also catered to those shopping digitally by moving their doorbuster deals online and ramping up curbside pickup options.
“We have been intentional to try to not create the frenzy, the doorbusters, the long lines and the crowds you typically see on a Black Friday, ” said Stephen Lebovitz, CEO of CBL, which operates about 100 malls and filed for Chapter 11 bankruptcy in November.
Several hundred shoppers lined up ahead of opening at Mall of America in Bloomington, Minnesota, which normally attracts several thousand on Black Friday. The mall spread out the Black Friday deals over eight days, and many retail tenants pivoted more to online and curbside pickup, said Jill Renslow, Mall of America’s senior vice president of business development.
“It feels good, and it’s the right thing to do to keep everybody safe,” Renslow said “Everyone is shopping a little differently but that’s OK.”
Only a trickle of shoppers showed up at Macy’s Herald Square in New York an hour after it opened, offering 50% off handbags and 60% off women’s and men’s coats. Workers sanitized door knobs and windows.
A Christmas tree towered over the largely empty streets around The Domain, the most popular outdoor mall in Austin, Texas. Store employees counted masked shoppers trickling in to stay within the state’s 75% capacity limit.
The U.S. Centers for Disease Control and Prevention has labeled shopping in crowded stores during the holidays a “higher risk” activity and says people should limit any in-person shopping.
The National Retail Federation, the nation’s largest retail trade group, predicted that shoppers will be looking for reasons to celebrate. The trade group expects sales for the November and December period to increase between 3.6% and 5.2% over 2019, compared with a 4% increase the year before. Holiday sales have averaged gains of 3.5% over the past five years.
“We think there’s going to be a psychological factor that they owe it to themselves and their families to have a better-than-normal holiday,” said NRF Chief Economist Jack Kleinhenz.
Thanksgiving Day hit a new record online as spending reached $5.1 billion, up 21.5% compared to a year ago, according to Adobe Analytics, which measures sales at 80 of the top 100 U.S. online retailers. Among the most popular items were Lego sets, Barbie toys, and kid scooters, HP laptops, and Apple Watches, according to Adobe. The popularity of Netflix’s “Queen’s Gambit” has boosted sales for chess-related items.
Walmart, which spread out its Black Friday deals over several weekends, said its most popular deals included this year’s new gaming consoles, wireless headphones, home appliances like the Edufy Robotic Vacuum.
Black Friday is projected to generate $10 billion in online sales, a 39% bump from the year ago period, according to Adobe. And Cyber Monday, the Monday after Thanksgiving, will remain the biggest online shopping day of the year with $12.7 billion in sales, a 35% jump.
Big box stores like Walmart and Target, which were allowed to stay open during the spring lockdowns, have enjoyed further gains from ramping up their online services, analysts say.
But stores deemed non-essential that were forced to close have struggled to recover. More than 40 chains, including J.C. Penney and J.Crew, filed for bankruptcy.
“Is there going to be a surge in apparel gifting, footwear gifting to help out any of the specialty retailers and do they have the digital presence to actually capture the attention of the consumers?” said Sonia Lapinsky, managing director in AlixPartners’ retail practice. “That remains to be seen, and I think it will be more on the grim side.”
There are also fewer deals to be had this year. Non-essential retailers were forced to halt production at the onset of the pandemic, leading to lower inventory. As a result, holiday promotions are tracking below last year’s levels for clothing, consumer electronics, power and hand tools and home goods, according to Numerator, a market research firm.
Erika Mendez usually heads to the mall every Black Friday to shop at clothing brands Zara, H&M or Forever 21. But this year, the New Jersey journalist student ended up shopping on Amazon, scoring a Nike track suit for 25% off, as well as Nike sneakers that were 20% off.
“It’s just easier ordering online than going out,” says Mendez.
And Black Friday was the last thing on the minds of some hurt the most by the pandemic. At a popular shopping area in St. Petersburg, Florida, several storefronts were empty, and the only line was at a plasma donation center.
Leonard Chester, 58, said he hoped to get at least $55 for the donation, saying that he needed to eat. When reminded that it was Black Friday, he let out a laugh and pointed to the line around him.
“This says that people are hurting. The economy’s bad,” said Chester, who was laid off from his job as a bouncer at a strip club two months ago.
NEW YORK (AP) — By ALEXANDRA OLSON, ANNE D’INNOCENZIO and JOSEPH PISANI AP Retail Writers
AP Staff Writers Tamara Lush in St. Petersburg, Florida, Acacia Coronado in Austin, Texas, and Desiree Mathurin in New York contributed to this report.
For Big Tech, Biden brings a new era but no ease in scrutiny
The Obama-Biden administration was a charmed era for America’s tech companies — a moment when they were lionized as innovators, hailed as job creators and largely left alone.
Now Joe Biden is coming back, this time as president. But times have changed. The halcyon days of an adoring Washington are unlikely to return when Biden takes the oath of office in January, with mounting legislative and regulatory challenges to the industry — including stronger enforcement of antitrust laws — nearly certain to outlast the tenure of President Donald Trump.
“The techlash is in full force,” said Eric Goldman, a law professor at Santa Clara University and co-director of its High Tech Law Institute.
In the years since Barack Obama and Biden left the White House, the tech industry’s political fortunes have flipped. Facebook, Google, Amazon and Apple have come under scrutiny from Congress, federal regulators, state attorneys general and European authorities. Twitter has found itself in frequent run-ins with lawmakers over its policies for moderating content on its platform. And companies have seen their political support in Congress erode.
Lawmakers on both sides of the aisle champion stronger oversight of the industry, arguing its massive market power is out of control, crushing smaller competitors and endangering consumers’ privacy. They say the companies hide behind a legal shield to allow false information to flourish on their social media networks or to entrench bias.
In steps Biden, who may aim to take a bite out of the dominance of Big Tech and may welcome an opportunity to work with the opposing side to curb the power of a common adversary.
As a presidential contender, Biden said the breakup of big tech companies should be considered. Dismantling the tech giants is “something we should take a really hard look at,” he told The Associated Press in an interview. He said he wants to see quickly crimped the social media companies’ long-held legal protections for speech on their platforms. And he singled out Facebook CEO Mark Zuckerberg for scorn, calling him “a real problem.”
The Biden administration is also expected to press forward with the Trump Justice Department’s new antitrust lawsuit against Google, though its shape likely could be changed.
But if Biden decides to pursue major legislation to overhaul the laws governing tech competition, he’ll have to navigate a tricky congressional and political landscape.
Democratic lawmakers in the House, after a sweeping investigation by a Judiciary Committee panel, called last month for Congress to rein in Big Tech, possibly forcing the giants to break up their businesses while making it harder for them to acquire others and imposing new rules to safeguard competition.
Those kinds of mandated breakups through a legislative overhaul would be a radical step for Congress to take and could be a bridge too far for most Republicans.
Though it hasn’t been settled, Biden faces the possibility of becoming the first Democrat in modern history to take office without his party controlling Congress. Republicans would retain control of the Senate by winning one of two runoff elections in Georgia in January. Democrats have already won the House.
Republican control of the Senate would force Biden to curb his ambitions and pursue a different legislative agenda, one rooted in bipartisanship. Legislation on the tech industry could be one area of possible agreement.
“Biden’s strength as a senator was exactly trying to broker those kinds of deals,” noted Santa Clara University’s Goldman.
But what may emerge in the end is a heavy reliance on executive power through more vigorous enforcement of existing antitrust laws, said Jerry Ellig, a former government official and professor at George Washington University’s Regulatory Studies Center. Republican lawmakers are likely to hang together in opposing fundamental changes to the tech industry, which also could affect smaller companies, while Democrats could be pulled in different directions.
The Justice Department’s landmark suit last month accused Google of abusing its dominance in online search and advertising to boost profits — the government’s most significant attempt to protect competition since its groundbreaking case against Microsoft over 20 years ago.
Then there’s the issue of legal protection for speech on the social media platforms of Facebook, Twitter and Google: another area of agreement between the two parties, though for different reasons.
Momentum has built in Congress toward curbing some of the bedrock protections that have generally shielded the companies from legal responsibility for what people post on their platforms. Republicans accuse the companies of anti-conservative bias that erases those viewpoints on social media while allowing what they describe as extreme leftist and anti-American rhetoric to thrive.
Democrats’ concern focuses on hate speech and conspiracy theories that have sometimes incited physical violence and on the amplification on tech platforms of falsehoods from Trump — most notably allegations of fraud in ballot counting in the recent election.
The social media companies’ CEOs rebuffed accusations of anti-conservative bias at a Senate hearing last month and promised to aggressively defend their platforms from being used to sow chaos in the Nov. 3 election.
Critics in both political parties say the immunity under Section 230 of a 1996 telecoms law enables the social media companies to abdicate their responsibility to impartially moderate content.
Biden has said that Section 230 “immediately should be revoked.”
Given the landscape in Congress and the factions of views on material seen by nearly everyone on the planet, quick action may be difficult.
If consensus legislation does emerge, suggests George Washington’s Ellig, “They’ll make it vague enough so everyone can claim victory.”
WASHINGTON (AP) — By MARCY GORDON AP Business Writer
UK to launch new watchdog next year to police tech giants
By KELVIN CHAN AP Business Writer
LONDON (AP) — Britain plans to create a new watchdog to police big tech companies including Google and Facebook to counter their market dominance and prevent them from exploiting consumers and small businesses.
The U.K. government said Friday that it’s setting up a “Digital Markets Unit” next year to enforce a new code of conduct governing the behavior of tech giants that dominate the online advertising market.
The Digital Markets Unit, scheduled to launch in April, will oversee a new regulatory regime for tech companies that’s aimed at spurring more competition.
The measures were foreshadowed in findings by former Obama economic adviser Jason Furman, who was commissioned by the U.K. Treasury to carry out a review of the digital economy.
It’s part of a wider push by governments in the U.S. and Europe to constrain the power of big tech companies amid concern about their outsize influence. The European Union this week unveiled proposals to wrest control of data from tech companies and is set to release details next month of a sweeping overhaul of digital regulations aimed at preventing online gatekeepers from stifling competition. In the U.S., authorities are pursuing an antitrust case against Google and lawmakers have proposed breaking up big tech companies.
U.K. Digital Secretary Oliver Dowden said online platforms bring benefits to society, “but there is growing consensus in the U.K. and abroad that the concentration of power among a small number of tech companies is curtailing growth of the sector, reducing innovation and having negative impacts on the people and businesses that rely on them.”
The government still needs to consult on how the digital markets unit will operate and approve legislation for it.
Under the new code, tech companies would have to be more transparent about how they use consumers’ data. They would have to let users choose whether to receive personalised advertising, and wouldn’t be allowed to make it harder for customers to use rival platforms.
The Digital Markets Unit could be given the power to suspend, block or reverse any decisions made by big tech companies, and order them to take certain actions to comply with the code. If companies don’t comply, the watchdog could fine them, though the maximum penalty hasn’t yet been spelled out.
Google said online tools competition in the ad tech industry has been increasing and noted it gives users tools to manage and control their data.
“We support an approach that benefits people, businesses and society and we look forward to working constructively with the Digital Markets Unit so that everyone can make the most of the internet,” said Ronan Harris, the company’s vice president for U.K. and Ireland.
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