Highly anticipated, it’s now official. State attorneys general have launched formal probes of Google and Facebook. Texas Attorney General Ken Paxton will lead an investigation of alleged anti-competitive behavior by Google and, separately, New York Attorney General Letitia James is spearheading another multistate probe into Facebook. The latter was announced last week.
All 50 states pile on. The Google investigation, made formal today, is supported by all 50 state attorneys general — every single state. The Facebook investigation so far has the support of Colorado, Florida, Iowa, Nebraska, North Carolina, Ohio, Tennessee and the District of Columbia.
According to the statement issued today by the Texas attorney general’s office, “The bipartisan coalition announced plans to investigate Google’s overarching control of online advertising markets and search traffic that may have led to anti-competitive behavior that harms consumers.”
AGs will cooperate and coordinate with the feds. The Texas AG also said that the multistate Google investigation will “work in cooperation with Federal authorities.” The House and Senate are both investigating the major technology companies and the Justice Department and Federal Trade Commission have divided up jurisdiction over investigations pending into Google, Facebook, Apple and Amazon.
But Google is clearly getting the lion’s share of attention.
According to legal experts the states have a range of tools, tactics and potential remedies at their disposal. Among them:
- Push the feds to be tougher in their investigation and negotiations with Google
- Engage in their own discovery and settlement talks with Google
- Sue in federal court under federal antitrust laws seeking an independent remedy, if they don’t like any potential deal struck between Google and the feds and they can’t strike a deal
Online advertising and ‘consumer harm’ under scrutiny. As indicated, the investigations will focus on whether and how much control Google (and Facebook) are exercising over the digital advertising market and whether they have acquired companies to thwart competition. Google’s share of online advertising this year will be roughly 37% and Facebook’s is 22% according to eMarketer estimates. But when Amazon is included, the combined share of digital ad dollars flowing to the big three reaches nearly 70%.
One way to see the state AG action is as a kind of insurance policy against insufficiently aggressive federal action. In 2013, the FTC settled its antitrust case against Google with what some considered a slap on the wrist. Others believed it was the right outcome. The multistate action will be “looking over the shoulder” of the feds even as the two seek to coordinate their efforts.
Past and current statements issued by several individual state AGs also suggest that at least some of them have already decided Google is harming competition and are looking beyond liability to remedies. But proving liability in the context of potential litigation is another matter.
Why we should care. Google takes the position that it operates in a highly competitive environment, with Facebook, Microsoft, Apple and Amazon (and others) all competing intensely with the company in different markets. Google will point to the eMarketer 37% figure as per se evidence that it doesn’t dominate or control digital advertising in the U.S.
Google has also historically argued that its behavior is intended to and does benefit consumers. Indeed, it will be challenging to show consumer harm from Google’s actions, the traditional antitrust standard. But the apparent absence of consumer harm has not stopped the European Commission from fining Google roughly $9 billion and seeking changes in the company’s business practices (these fines and rulings are being appealed by Google).
As mentioned, there’s a presumption of liability among some of the investigating authorities. Let’s say the investigators determine there is anti-competitive behavior, the question of remedies, which the Europeans have been struggling with, is what will be most challenging here. How tough will they be? And will they involve “unwinding” any acquisitions?
If Google doesn’t negotiate a settlement, then we could be in for years of court battles. But it’s a safe bet that the company wouldn’t settle unless terms were relatively favorable for the company — as they were in 2013 — something the states are probably intervening to prevent.
About The Author
Greg Sterling is a Contributing Editor at Search Engine Land. He writes about the connections between digital and offline commerce. He previously held leadership roles at LSA, The Kelsey Group and TechTV. Follow him Twitter or find him on LinkedIn.