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Factbox: Key arguments in U.S. antitrust suit vs Google

(Reuters) - The U.S. Justice Department filed an antitrust lawsuit against Alphabet Inc’s Google on Tuesday, claiming the $1 trillion company uses its market power to fend off rivals and said nothing was off the table, including a breakup of the internet search and advertising company.

A Google sign is pictured on a Google building in the Manhattan borough of New York City, New York, U.S., October 20, 2020. REUTERS/Carlo Allegri

“Today, millions of Americans rely on the Internet and online platforms for their daily lives,” Attorney General William Barr said in a statement. “Competition in this industry is vitally important, which is why today’s challenge against Google — the gatekeeper of the Internet — for violating antitrust laws is a monumental case both for the Department of Justice and for the American people.”

“Over the course of the last 16 months, the Antitrust Division collected convincing evidence that Google no longer competes only on the merits but instead uses its monopoly power – and billions in monopoly profits – to lock up key pathways to search on mobile phones, browsers, and next generation devices, depriving rivals of distribution and scale,” he added.

“The end result is that no one can feasibly challenge Google’s dominance in search and search advertising.”

The following are key quotes from the lawsuit:

“Google is a monopolist in the general search services, search advertising, and general search text advertising markets. Google aggressively uses its monopoly positions, and the money that flows from them, to continuously foreclose rivals and protect its monopolies.”

“In sum, Google deprives rivals of the quality, reach, and financial position necessary to mount any meaningful competition to Google’s longstanding monopolies. By foreclosing competition from rivals, Google harms consumers and advertisers.”

“Absent a court order, Google will continue executing its anticompetitive strategy, crippling the competitive process, reducing consumer choice, and stifling innovation. Google is now 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; 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.

“For the sake of American consumers, advertisers, and all companies now reliant on the internet economy, the time has come to stop Google’s anticompetitive conduct and restore competition.”

“Google’s practices are anticompetitive under long-established antitrust law. Almost 20 years ago, the D.C. Circuit in United States v. Microsoft recognized that anticompetitive agreements by a high-tech monopolist shutting off effective distribution channels for rivals, such as by requiring preset default status (as Google does) and making software undeletable (as Google also does), were exclusionary and unlawful under Section 2 of the Sherman Act.”

“Although it is possible to change the search default on Safari from Google to a competing general search engine, few people do, making Google the de facto exclusive general

search engine. That is why Google pays Apple billions on a yearly basis for default status.

Indeed, Google’s documents recognize that “Safari default is a significant revenue channel” and that losing the deal would fundamentally harm Google’s bottom line. Thus, Google views the prospect of losing default status on Apple devices as a “Code Red” scenario.

In short, Google pays Apple billions to be the default search provider, in part, because Google knows the agreement increases the company’s valuable scale; this simultaneously denies that scale to rivals.”

The complaint pointed to the billions of dollars that Google pays to smartphone makers such as Apple, Samsung and others to be a default search engine on their devices. “Some of these agreements also require distributors to take a bundle of Google apps, including its search apps, and feature them on devices in prime positions where consumers are most likely to start their internet searches,” the complaint said.

“Google’s anticompetitive practices are especially pernicious because they deny rivals scale to compete effectively. General search services, search advertising, and general search text advertising require complex algorithms that are constantly learning which organic results and ads best respond to user queries,” the government said in its complaint.

“By using distribution agreements to lock up scale for itself and deny it to others, Google unlawfully maintains its monopolies.”

Reporting by Diane Bartz and David Shepardson; Editing by Edward Tobin

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