Google’s Monopoly: Who’s to Blame?

Google Logo Atop Building by Pawel Czerwinski is licensed under Unsplash.

Since the United States entered the age of the internet in 1991, Silicon Valley has been America’s golden child and its black sheep. The innovations that have come out of the region have created millions of jobs, destroyed millions more, and (to use the language favoured by its technocrats) disrupted the global economy, for better or worse. Many politicians have a near-reverential attitude for tech’s megalithic darlings. Still, it was no surprise when, in early October 2020, the U.S. Department of Justice  (DOJ) announced that they would be bringing forth an antitrust lawsuit against Google Inc. Antitrust laws, which exist to protect consumers from predatory business tactics such as price-fixing and monopolization, are difficult to enforce in court. The last time the American government leveraged such a case was in 1998 when the DOJ accused Microsoft of similar monopolization tactics.

Google’s Charges

The DOJ’s case is multifaceted, charging Google with suppressing competition through exclusive deals with companies like Apple, inhibiting consumers and business partners from using other platforms, and manipulating search results to favour Google-provided services and advertisements. “For many years,” said the report, “Google has used anti competitive tactics to maintain and extend its monopolies in the markets.”

Google spends between $8 billion and $12 billion per year to ensure it’s the default search engine on all Apple products. Google search engines also place its own ads and services, such as hotel recommendations, above those of competitors. Further, Google’s alleged monopolization of the internet kills promising startups before they get the chance to grow. By replicating new ideas or buying out new technologies, Google effectively kills the free market. This, the DOJ argues, harms consumers and stifles competition, restricting access to the best options available and reducing the capacity for new entrepreneurs to innovate. 

Each of these charges will likely take years to investigate and even more time to argue in court. But, according to Bill Baer, former Chief of the DOJ’s antitrust division, “it’s the most newsworthy monopolization action brought by the government since the Microsoft case in the late ‘90s.”

The Bigger Picture

Though Google may be the one on trial right now, the DOJ’s case is a sign of a greater shift for other tech giants and investors across North America. After all, Google is the product of a larger economic culture of ravenous growth and conglomeration, led by a handful of tech executives and billion-dollar venture capital funds.

The American myth of entrepreneurship as a bootstrapped-Cinderella story has never been further from reality.  It is undeniable that many of the companies backed by venture funding have revolutionized the modern world. The creation of synthetic insulin by Genentech in the late 70s and the introduction of the iPhone in the early 2000s have changed the way people live, increasing access to information, accuracy in medical testing, and the efficiency of overall global communication. These successes have painted venture capitalists and their Unicorns (privately held startups with valuations that exceed $1 billion) as the engines of economic growth and innovation, benevolent Midases with a knack for elevating the quality of life for eight million people. 

But the financial systems that led to these early gains are not the financial systems that back promising companies today. “I’ve watched the industry become a money-hungry mob. V.C’s today aren’t interested in anything except optimizing their own profits and chasing the herd,” said Steve Blank, of Stanford University’s engineering school.

When an investment’s goal is to see returns of 1000% or more, investors have begun using a strategy of merciless domination. When a firm identifies a promising founder or company, it is common practice to demand that the company accepts tens and even hundreds of millions of dollars in funds to scale at light-speed, lower prices, and crush competitors in a short period of time (often hemorrhaging cash in the process), so that it can emerge five years or so down the line as the only player in its niche and finally become profitable. “You approach an entrepreneur and say, ‘Hey, either take a billion dollars from me right now, or I’ll give it to your competitor and you’ll go out of business,’” explained a former executive from the VC fund Softbank.

It’s an anti-free market strategy, but one that both Presidents Obama and Trump supported for its incredible ability to generate money and scale companies at a speed that would be untenable in a traditional competitive landscape. When winners are determined by years of strategy and competition, growth is slow. Bypassing competition and letting the richest companies win might be unethical, but it certainly is faster.

Who’s really at fault?

It’s easy to look at a company like Google and heap blame on its investors, executives, and general practices. Anyone who uses its platforms (which is everyone, or at least 90% of internet users) can attest to the fact that it is inescapable. Certainly, one could download a different browser, stop using its apps, and attempt to buy from other digital companies, but the level of effort required to extricate oneself from Google’s web would be impractical, not to mention inconvenient. But who let Google get their power?

For years, critics have been calling for stricter regulations on monopolistic practices. In 2017, the European Union fined Google $2.7 billion for breaking antitrust laws. In America, however, due to a lack of political will, “regulators have been totally defanged from doing real investigations of venture-capital firms,” said Professor Martin Kenney of the University of California Davis.

Is the DOJ’s suit against Google a sign that the company has broken laws, or that legislators were too slow or reluctant to keep pace with a rapidly changing economic landscape? It's difficult to forget Mark Zuckerberg’s  2018 Senate Judiciary Committee hearing, in which Senators (attempted to) investigate Facebook’s culpability in the Cambridge Analytica data breach: 

“How do you sustain a business model in which people don’t pay for your service?” asked Senator Hatch. 

“Senator, we run ads,” replied Zuckerberg.

These politicians’ incompetence would be funny if it weren’t so terrifying.

Designing the Future

It’s difficult to say who shoulders the blame for tech's monopoly problem. However, the fact remains that monopolies in tech exist and are antithetical to a free market’s proper functioning.

Ultimately, legislators across North America and the world need to be more proactive about the rules they set for competition in the digital space. Nearly thirty years have passed since the internet became publicly available, and yet it is still something of a Wild West in terms of its development and lack of regulation. 

To rely on corporations to determine the rules for best-practice is naïve and unethical. If countries like Canada and America aim to be places for free and fair discussion, innovation, and opportunity, then legislators need to have a vision for what the future of the internet will look like. Without oversight, monopolistic practices are inevitable, where the biggest companies win through money, not merit. Citizens should set the terms of their digital communities, and legislators should back them up.