Late last year, we observed that the Department of Justice’s (DoJ’s) proposed remedies in its lawsuit targeting Google search went much further than necessary. We pointed out that if adopted by the Court, they would amount to a significant intervention into a number of markets that ACT | The App Association members generally need to remain competitive, rather than cast under the long shadow of sweeping court remedies. Now, as the Trump Administration and the 119th Congress leave the starting blocks, there appears to be a renewed focus in Washington, DC, on how foreign governments are targeting American technology companies. As President Trump said last week at the annual World Economic Forum (WEF) event in Davos, “[the European Union (EU)] took court cases with Apple and they supposedly won a case . . . . They won 15 or 16 billion from Apple, they won billions from Google. I think they’re after Facebook for billions and billions. These are American companies . . . and [the EU] shouldn’t be doing that. And as far as I’m concerned, it’s a form of taxation. So, we have some very big complaints with the EU.”
The President is referring here to lawsuits brought under European laws like the Digital Markets Act (DMA), among others, which are directed primarily at American companies that operate the world’s largest online marketplaces and platforms. But in the meantime, the federal government has filed ongoing lawsuits against some of the same companies DMA targets. In at least in a couple of cases, the policy and legal outcomes the previous Administration sought are strikingly similar to the aims articulated in the European regulatory frameworks. For example, a few of the federal lawsuits seek to bar “self-preferencing” both as it emerged in the marketplaces being targeted and in any future markets or arrangements the defendants might enter. The DMA similarly seeks to broadly eliminate self-preferencing. This is despite the fact that self-preferencing is not always a problem. In fact, it can be an attractive feature of digital marketplace management that benefits small businesses leveraging those marketplaces, and is not usually considered anticompetitive under U.S. antitrust law.
For the United States v. Google search case, we break down how DoJ’s proposed remedies stack up against DMA’s provisions, and in general, DoJ’s proposals are more extreme than DMA itself:
Divestiture of Chrome and possible divestiture of Android. DoJ states that these structural remedies would prevent self-preferencing, one of DMA’s shared goals. But DMA stops short of ordering structural separation of designated gatekeeper business units, the large online marketplaces within the law’s scope. Instead of requiring Google to divest Google Flights, for example, DMA requires that Google search results display Google Flights results on terms that are not “more favourabl[e], in ranking and related indexing and crawling,” than those that apply to third-party flight search services. Similarly, Google must apply “transparent, fair and non-discriminatory conditions” to such ranking.
To be clear, DMA’s mandates could easily lead to search services that are less attractive to consumers and, therefore, less powerful for small businesses. The exercise of placing in the hands of regulators the determination of how ranking criteria might meet the “not treat more favourably” and “shall apply transparent, fair, and non-discriminatory conditions” in such a dynamic market is an open invitation to bog down its evolution with constant investigation and ultimately rent seeking by Google competitors vying for a government-granted advantage. Consumers also generally like that Android devices come pre-installed with Chrome, Google Play, a camera app, a wallet app, and the list goes on—all examples of supposedly anticompetitive self-preferencing to overzealous enforcers, but hallmarks of convenience for smartphone buyers. And yet, DMA’s prescription is primarily behavioral, not structural. It seeks a change in Google’s business practices—albeit a set of changes that are difficult to understand or define—rather than a complete removal of one of its business lines.
Such a drastic measure, whether applied to Chrome or Android, would introduce a host of problems into the relevant markets as DoJ seeks a viable owner of either service that is supposedly better positioned than Google to operate those business units. Since the integration of Android with Google Play and Chrome with Google Ads and Analytics has generally benefited users, potential buyers likely have a steep hill to climb just to get back to where consumers expect the services to be. As consumers of Google search (including search ads) and Chrome, small businesses in the app economy would be unpleasantly surprised to see degradation in those products because of less capable ownership. Here, small businesses in the app economy might actually prefer the DMA provision over DoJ’s divestiture plan.
Prohibition on partnering with or investing in any AI company. DoJ proposes to prohibit Google from “owning or acquiring any investment or interest in any search or search text ad rival, search distributor, or rival query-based AI product or ads technology.” The proposal further argues that “[i]nvestments in or acquisitions of potential rivals would stifle emerging competition . . .” (emphasis added). This prohibition is much broader than it sounds at first, as it could empower DoJ to block any partnership with a potential competitor in a range of nascent markets, including AI services. Notably, DMA does not appear to have any analogous restrictions on investment or acquisition by designated gatekeepers, leaving DoJ far out on a limb by itself on this point. DoJ’s proposed measure is an especially bad fit for AI markets because investment by larger, adjacent market incumbents into startup AI companies is happening across the board and around the world. Forcing Google to the sidelines of this activity both deprives emerging and growth-stage companies of investment from a well-positioned potential partner and robs the broader marketplace and consumers of more credible competition from startups armed with investment or partnership from Google. European regulation may dampen investment conditions in other ways, but DMA has DoJ beat on this front.
Syndication of search results and unfettered data access. DoJ’s proposed remedies would require Google to make its “search index [the entirety of searchable web data] available at marginal cost, and on an ongoing basis, to rivals and potential rivals” and provide rivals and potential rivals both user-side and ads data for a period of 10 years, with “proper privacy safeguards” designed by a “Technical Committee.” This proposed remedy goes further than DMA’s analogous provision, Article 6(10), in a couple of ways. First, while Article 6(10) focuses more narrowly on access by a platform’s business user (or third parties authorized by a business user), the DoJ remedy would mandate broader access by any “potential rival.” Second, while Article 6(10) is limited to data generated in the context of end users’ interaction with the business user’s services, DoJ’s remedy would allow third parties to access the entire search index and user-side data regardless of whether the data pertains to the requesting party’s business activities or not. The upshot of this is that while DMA’s mandated access to personal data presents both massive new privacy and security risks and crippling new disincentives to invest in search and search-adjacent product development, DoJ’s proposed remedies could introduce even worse versions of these same problems. For small businesses that leverage Google search and Google’s ad services, the company’s ability to protect security and privacy is fundamental to their usefulness—if consumers believe their data will be exposed, they will turn away from the service, and our members will be unable to reach them. Similarly, App Association members know that innovation depends on investment and removing the incentive to invest in a set of services that needs to evolve to meet their needs is a good way to degrade the offerings available to small businesses.
In summary, as Trump Administration officials seek to translate the President’s mandate to advance American competitiveness globally and elevate “Little Tech” in the process, they must look closely at DoJ’s proposed remedies. Comparing them directly to DMA’s provisions reveals much about how badly they fit with the overarching goal of prioritizing growth and unleashing small business innovation.