States target Google in new antitrust investigation

Attorneys general from every U.S. state except California and Alabama have announced an investigation into Google’s “potential monopolistic behavior.”

The announcement follows one from a separate group of states Friday that disclosed an investigation into Facebook Inc.’s market dominance. The two probes widen the antitrust scrutiny of big tech companies beyond sweeping federal and congressional investigations and enforcement action by European regulators.

Google’s parent company, Alphabet Inc., has a market value of more than $820 billion and controls so many facets of the internet that it’s fairly impossible to surf the web for long without running into at least one of its services. Google’s dominance in online search and advertising enables it to target hundreds of millions of consumers for their personal data.

Google expects the state authorities to ask it about past similar investigations in the United States and internationally, the company’s senior vice president of global affairs, Kent Walker, said in a blog post Friday.

Critics often point to Google’s 2007 acquisition of online advertising company DoubleClick as pivotal to its advertising dominance.

Europe’s antitrust regulators slapped Google with a $1.7-billion fine in March for unfairly inserting exclusivity clauses into contracts with advertisers, disadvantaging rivals in the online ad business.

One outcome antitrust regulators might explore is forcing Google to spin off search as a separate company, experts say. Regulators also could focus on areas such the popular video site YouTube, which Google acquired in 2006.

The states’ investigation is being led by Texas Atty. Gen. Ken Paxton, a Republican. Joining him are the attorneys general of almost all U.S. states, the District of Columbia and Puerto Rico.

Google has long argued that although its businesses are large, they are useful and beneficial to consumers.

“Google is one of America’s top spenders on research and development, making investments that spur innovation,” Walker wrote. “Things that were science fiction a few years ago are now free for everyone — translating any language instantaneously, learning about objects by pointing your phone, getting an answer to pretty much any question you might have.”

But federal and state regulators and policymakers are growing more concerned with the company’s impact not just on ordinary internet users, but also on smaller companies striving to compete in Google’s markets.

“On the one hand, you could just say, ‘Well, Google is dominant because they’re good,’” said Jen King, the director of privacy at Stanford’s Center for Internet and Society. “But at the same time, it’s created an ecosystem where people’s whole internet experience is mediated through Google’s home page and Google’s other products.”

Experts believe the probe could focus on at least one of three areas that have caught regulators’ eyes.

A good first place to look might be online advertising. Google will control 31.1% of global digital ad dollars in 2019, according to EMarketer estimates, far surpassing second-place Facebook. And many smaller advertisers have argued that Google has such a stranglehold on the market that it becomes a system of whatever Google says, goes — because the alternative could be not reaching customers.

“There’s definitely concern on the part of the advertisers themselves that Google wields way too much power in setting rates and favoring their own services over others,” King said.

Another visibly huge piece of Google’s business is its search platform, often the starting point for people when they go online. Google dwarfs other search competitors and has faced harsh criticism in the past for favoring its own products over competitors’ at the top of search results. European regulators also have investigated in this area, ultimately fining Google for promoting its own shopping service. Google is appealing the fine.

Google’s smartphone operating system, Android, is the most widely used in the world.

European regulators have fined Google $5 billion for tactics involving Android, finding that Google forced smartphone makers to install Google apps and thereby expanding its reach. Google has since allowed more options for alternative browsers and search apps to European Android phones.

The U.S. Justice Department opened a sweeping investigation of big tech companies this summer, looking at whether their online platforms have hurt competition, suppressed innovation or otherwise harmed consumers. The Federal Trade Commission has been conducting its own competition probe of Big Tech, as has the House Judiciary subcommittee on antitrust.