Bruising antitrust battle

DOJ takes step toward a bruising antitrust battle with Google

A potential investigation of the search and advertising giant comes after years of rising political heat on Silicon Valley. But an antitrust case would pose huge hurdles for the government.

By NANCY SCOLA

The Justice Department has taken the initial steps toward an antitrust investigation of Google, a clear signal that two years of a bipartisan anti-Silicon Valley backlash in Washington may be yielding concrete action.

But such a case, if it comes to pass, would represent a major new antitrust test for the Trump DOJ, which tried, and failed, to block to the merger of AT&T and Time Warner. And any attempt to break up Google — as Sen. Elizabeth Warren (D-Mass) and others are proposing — would be a daunting challenge for the government, whose last big split up of a corporate giant was AT&T's former telephone monopoly in 1984.

Even so, DOJ officials have begun laying the groundwork for an antitrust probe of Google's search practices, having wrested jurisdiction over the issue away from the Federal Trade Commission, two people close to the situation confirmed to POLITICO late Friday. The Wall Street Journal first reported the development.

The department’s move intensifies the already considerable political pressure on Google at a time when lawmakers, regulators and government leaders in Washington, Brussels and beyond are turning a critical eye on the once-favored U.S. tech industry over everything from its mishandling of user data to its role in the subversion of democratic elections. And the action quickly got bipartisan cover with a statement of praise from Warren, a presidential candidate who called earlier this year for breaking up Google, Facebook and Amazon.

"I've been talking for years about how Google is locking out competition," Warren said Friday night, adding that it and its fellow online giants "have too much power and they're using that power to hurt small businesses, stifle innovation, and tilt the playing field against everyone else. It's time to fight back."

Google dominates the markets for online advertising and search, and has major footholds in email, streaming media, photos, e-books, television, car navigation and even its own branded smartphones. Its parent company, Alphabet, has also ventured into fields like drones and self-driving cars.

A move against Google would be in keeping with the agenda of DOJ antitrust chief Makan Delrahim, a Trump nominee who has been talking up the idea of subjecting internet firms to closer examination. In a speech last year, he said that "if there is clear evidence of harm to competition in digital platforms, enforcers must take vigorous action and seek remedies that protect American consumers."

Representatives for the DOJ, the FTC and Google declined to comment.

The decision to move a possible antitrust probe to the Justice Department instead of the FTC may be bad news for Google, which survived a previous FTC inquiry that ended in 2013 with no serious repercussions for the company.

But Trump’s Justice Department suffered a high-profile loss in a previous attempt at aggressive antitrust action, when it tried to argue that AT&T's acquisition of Time Warner would cause higher prices and reduced choice for media consumers. The courts ruled in favor of the companies, which were allowed to merge.

The DOJ has a range of enforcement tools to address anti-competitive behavior, and it’s not clear yet which it might seek to use in the case of Google. If the DOJ eventually goes the route of trying to break up the company, however, legal experts have cautioned that today’s online behemoths pose even bigger challenges for antitrust enforcers than age-old corporate giants such as Standard Oil.

For one thing, courts have become more conservative since the 1970s when it comes to antitrust doctrine, requiring the government to prove that anti-competitive behavior has a real economic impact on businesses or consumers. DOJ failed to meet that standard in the 1990s when it tried to separate Microsoft’s operating system and browser products, a case that Microsoft won on appeal.

And even successful antitrust cases can be lengthy and expensive. It took a decade for the Justice Department to break up AT&T’s old Bell System in 1984, and another decade for the government to wage its unsuccessful fight against Microsoft. The Bell telephone case began under President Gerald Ford and ended when Ronald Reagan was in the White House — and similarly, any attempt to break up Google could last years beyond Trump’s presidency.

Still, Trump, who frequently alleges that Google is biased against conservatives, has shown interest in subjecting internet giants to government scrutiny, saying in August that Google, Amazon and Facebook could be in a "very antitrust situation." He added of Google: "I tell you, there are some moments where we say, 'Wow, that really is bad, what they're doing.'"

Google came under further attack in Washington this year when Gen. Joseph Dunford, chairman of the Joints Chiefs of Staff, publicly criticized the company for pursuing research projects in China while withdrawing from work with the Defense Department. Google decided not to renew an artificial intelligence contract with the military after an internal backlash from employees upset that the technology could be used for warfare.

Amid the increasing heat on Google, the company's CEO, Sundar Pichai, met with Trump at the White House in March, with Trump later tweeting that Pichai "discussed political fairness and various things that @Google can do for our Country." He added: "Meeting ended very well!"

A full-blown antitrust investigation of Google would bring the U.S. more in line with the European Union, where antitrust enforcers have punished the search giant over how it does business.

In March, EU competition chief Margrethe Vestager levied a $1.7 billion fine against Google over its online advertising practices, bringing the total penalties against the company in the European Union to nearly $10 billion.