The Jury is Out: DOJ’s Filing Against Google Unlikely to Enhance Consumer Welfare

On Friday, October 30, 2020, lawyers from both the Department of Justice (DOJ) and Google will meet to start proceedings in the DOJ’s antitrust suit against the tech giant. In their filing with attorney’s general from eleven traditionally Republican states, the DOJ alleges Google entered into a series of short and long-term exclusionary agreements that harmed “competition and consumers” by “reducing the ability of innovative new companies to develop, compete and discipline Google’s behavior.” As a remedy to Google’s alleged anti-competitive behavior, the DOJ is seeking a record-breaking $1 trillion, as well as a court-imposed “structural relief” to break up the company into smaller constituent pieces. 

While the DOJ may be acting, as it claims, to protect consumers from anti-competitive practices, they have failed to accurately consider the profoundly damaging effects breaking up Google would have for consumers. More specifically, the antitrust filing against Google largely ignored the consumer welfare standard that allows large companies to exist, “so long as no consumers are harmed,” instead the DOJ’s filing assumes that big is automatically bad. 

One of the major flaws in the DOJ’s filing against Google is that it ignores the widespread consumer popularity the company has among its consumers. In August 2020, Statistica reported that 79% of Google consumers were satisfied with the service they received. Google’s nearest competitor, Yahoo, only achieved 72% satisfaction. 

What satisfaction data shows is that consumers believe Google in its current form is providing the best service compared to its competitors. Were the U.S. District Court for the District of Columbia to side with the DOJ and mandate the breakup of Google, the court would be breaking up a company that provides services that consumers want.

If the DOJ were successful in achieving the breakup of Google, consumers could also likely be forced to pay for services they currently receive for free. Currently, Google offers a range of services to consumers such as its search engine, Gmail email service, web browser, maps service, and YouTube for no fee. Google is only able to offer these services for free because of the significant advertising revenue it earns, totaling an estimated $39.58 billion by the end of 2020, a fact noted by Sundar Pichai in his opening statement to the U.S. Senate Committee on Commerce, Science and Transportation hearing on Section 230.

Were Google to be broken up by the DOJ, it simply would not be able to generate the same levels of revenue from its advertisements. This would undoubtedly force Google to find alternative streams of revenue to maintain the services it currently provides for free. Any potential fee for a service would affect the 130.9 million active Gmail users and 73% of American adults who use YouTube

Breaking up Google would also see consumers lose out as Google has effectively grown once small platforms into large ones. Since acquiring YouTube and splitting advertising revenue with producers to encourage content generation, YouTube has grown from a website that had 2000 unique visits in May 2005 to one that now has over 2 billion active users. Arguably, this growth for YouTube would simply not have been possible had Google not bought YouTube in 2006 for $1.65 billion.

Put simply, if Google were to be broken up, the business structure and investments that made YouTube the preeminent video sharing software would be lost.  Given the current political hostility toward big tech companies, it is unsurprising the DOJ brought the case against Google. Unfortunately, the lawsuit in its current form ignores the significant harm to consumers a breakup of Google could cause consumers.

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