Former U.S. chief technology officer Aneesh Chopra joins ‘Closing Bell’ to talk about his thoughts on the recent antitrust lawsuit against Google for dominating market share on search and search advertising. Subscribe to CNBC PRO for access to investor and analyst insights on Google and more:
The crux of the complaint is that Google has allegedly used its monopoly power to tie up distribution channels for online search and related markets. The Justice Department claims that Google has “foreclosed competition for internet search” through exclusionary agreements that deny rivals the opportunity to achieve the necessary scale to challenge its dominance.
The DOJ claims Google holds 88% of the U.S. search market, with 94% of mobile searches occurring on its services. The department claims Google’s conduct has harmed consumers by lowering the quality of search services and reducing choice.
It also claims Google owns more than 70% of the search ads market and has used its monopoly power to charge more for lower-quality services than would be possible in the face of competition.
According to the lawsuit, Google has used its monopoly power to keep competitors out of the search distribution channels they need to scale up. It claims Google has “locked up” distribution through exclusionary contracts with Apple and distributors of its Android mobile operating system. As a result, the lawsuit claims, Google has suppressed innovation in the search market.
The government said one example of such exclusionary contracts is the kind Google requires Android device manufacturers to sign. According to the lawsuit, Google requires phone manufacturers who use its operating system to agree to strict limits on their ability to sell Android devices that don’t comply with Google’s standards. It then gives the manufacturers access to its “vital proprietary apps” in exchange for their agreement to take several other Google apps and prevent users from being able to delete some of them.
The complaint says Google has used its revenue-sharing model for distributors to expand its dominance. One senior executive allegedly told enforcers that revenue sharing in Google’s app store “is a bitter pill for carriers, and a generous revenue share is the sugar that makes it go down smoother.”
Google’s revenue-sharing agreements extend to rival browsers and device manufacturers, including Apple, according to the suit. Google reports traffic acquisition costs in its quarterly financial filings that amount to billions of dollars. That figure represents the payments Google makes to companies like Apple to be the default search provider on their platforms. The suit says that as a practical matter, consumers largely do not shift away from default settings.
In the U.S., according to the suit, more than half of search queries are “covered by Google’s exclusionary agreements” — 60% overall and 80% on mobile devices. Almost half of search queries aren’t covered by those contracts take place on “access points” owned by Google, like its Chrome browser and Pixel phones, giving it effective control of about 80% of general search queries in the U.S., the DOJ said.
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