Big tech platforms Alphabet, Amazon, Apple, and Meta are all feeling the sting of the Biden administration's aggressive anti trust enforcers. All four have been sued by the US Department of Justice or the Federal Trade Commission for alleged monopolization, and the DOJ just notched a win in one of its cases against Google. What are these lawsuits about, where do they stand, and what's next. This is a Votes and Verdicts Brief.
Welcome to Votes and Verdicts hosted by Bloomberg Intelligence, part of Bloomberg's Research department, comprised of five hundred analysts and strategists working across all major world markets. Our coverage includes over two thousand equities and credits, as well as outlooks on more than nine d industries, one hundred market indices, currencies, and come. In this podcast series, we talk about the
intersection of business policy and law. I'm Justin Teresi, a litigation and policy analyst with Bloomberg Intelligence covering anti trust matters.
And I'm Jennifer Ree, a senior analyst that also covers US anti trust litigation and policy.
Our Votes and Verdicts Brief series highlights our research reports on the Bloomberg terminal, giving listeners a quick takeaway to help grasp key litigation or policy topics covered in that research. Today, my colleague Jen and I are going to talk about ongoing government anti trust actions against the four big tech platforms Jen mentioned at the start of the podcast, providing a snapshot of each case and where it stands. So Jen,
so much going on here. Obviously, Let's start with Google, since the company faces two anti trust monopolization suits right now brought by the United States Department of Justice, and Google just lost one of them. That was the first suit brought against the company by DOJ back in twenty twenty, and it targeted Google's conduct relation to its search engine business. Can you give us a short summary of that ruling in the suit?
Sure? Justin and you are right. That ruling was just issued against Google on August fifth. Pretty big deal since it's one of the first monopolization cases brought by the DOJ since Microsoft all the way back in the nineteen nineties. And here the judge determined that Google has monopoly power and markets for general search services and something called general
search text ads. Those are the ads that you see when you do a search and they come up at the top of the search results page and they say sponsored. They kind of look like search results. So the judge also decided that Google had engaged in illegal conduct intended to maintain those monopolies, because just having that monopoly in search isn't illegal. It's all about the conduct and what Google is doing to try to either get to that
monopoly or maintain the monopoly. So the crux of the conduct in this case was these distribution agreements Google had with a number of third parties, and Google would pay these companies a lot of money to set Google Search Engine as a default for most of the access points
on the Internet. So specifically, the company paid about twenty six billion a year to companies like Apple and Mozilla, as well as makers of Android phones and sellers of phones, so that people accessing the web using these browsers or these devices were automatically using Google Search, sometimes without even
knowing it. And the judge determined that those agreements were exclusionary because what they did is they foreclosed other search engine competitors like Being or duc duc Go, And what that did is it prevented those competitors from gaining the scale they needed to improve because essentially the more searches that are done in the search engine, the better the
search engine becomes. This decision was only on liability, so that means just deciding was Google doing something illegal or not, So there wasn't really evidence directly focused on what the appropriate remedies would be at trials should Google lose the case.
Right, So, I think a lot of people this week generally scratching their heads and they're saying, you know, given that this was just kind of a determination that Google broke the law, what really happens next? And how long do you think it'll be before there's some kind of indication about what kind of an injunction might be issued, what that might look like.
Yeah, you know, justin I even think this might be the tougher part of the case, And usually proving that somebody is engaged in illegal monopolization is pretty tall task for a plaintiff, but we managed to do that here. But right the what is the remedy going to be to fix this? I think that's very complicated. And what's going to happen here at least is we're starting out with a hearing on September sixth, But that's just to hammer out a schedule. So that's not really about what
the remedies would be. It's just to say, what's our schedule going forward in order to try to determine what the remedy should be. And I think the whole process is going to take. We should expect at least six months, probably longer. I mean, we don't have very good examples, but that's about how much time I think they'll need.
In the meantime, Google's definitely going to appeal this decision on liability, and I assume what they will also do is seek to stay this whole process pending the appeal, But that alone could take another twelve to eighteen months. So what I think is most likely is that the judge goes forward with this remedy's process just to decide on what they should be, but stays their actual implementation until the appeal has been decided.
Got it? So, I mean nothing in litigation happens overnight. I think we all know that's the case, right right, So I have to ask next, what do you think Google's chances are on the appeal?
You know, I think they're low. I think it's a really well reasoned decision. It wasn't really novel or unique. It wasn't really a stretch under the antitrust laws. It was based on a traditional anti trust theory of harm. And I think also to the extent that some of the judges calls were based on his view and interpretation of the evidence that was presented, such as his rejection
of Google's offered justifications for these default agreements. The appellate judges will have to give those calls deference because it's based on an interpretation of the evidence that the trial court heard, not the appeals court judges. And that's a pretty high standard.
For rehearsal Right, it makes sense, makes sense. So with this behind us, now, so there's this second case against Google by the DOJ that I have to say, from my own perspective, is super complicated. I'm still diving into this case, and says you and I have discussed. I'll be attending the trial in September for the next Google case while you're attending the trial here in New York for FTC's case against Tapestry and Capri looking to break to block that merger. But the suit against Google, it
deals with ad tech products. And still I am very much still getting up to speed on the case itself. Can you tell us about that suit and where it stands right now?
I'll tell you justin I'm so glad you're going to that trial because it really.
Be careful what you wish for. Jed the careful what you wish for.
So in this case, the DOJ and a number of states along with it, sue Google. This was in the first quarter of twenty twenty three. Over how it operates, As you said, it's ad tech business. Ad tech products are pretty complicated, and you know, they're not used by everyday people like us, so we don't really know how
they work, not at all. Really. They're used by digital advertisers and publishers to buy and sell the ads and impressions that we see on the websites when we're on the internet, right, And these products basically consist of sort of what we call a stack of products. There's an AD server that's used by large publishers to manage their inventory of I think of it as sort of space
on their websites. And then they're ad buying tools on the other end that are used by advertisers to connect to an ad exchange, and the ad exchange is what sits right in between, and it's a real time auction marketplace that matches multiple buyers and multiple sellers to actually complete a transaction. Show that ad when you justin go to let's say CNN dot com or some other website. All of this is called the ad tech stack, and
Google owns products across that entire stack. So the allegation here, because remember I said in the other case, it's all about conduct. Really, I mean, obviously you have to first prove that a company has a monopoly position, but once
that's done, it's about conduct. And the allegation here is that Google's engaged in this very long list of sort of different strategies, initiatives and product changes that sort of all in different ways end up kind of manipulating this process to favor Google, so it keeps them, it keeps customers within Google stack using its products, kind of ensures that the actual transaction takes place on Google's at exchange,
and then extracts fees all along the way. And that's kind of a general way of talking about a lot of allegations that are actually quite nitty gritty and complicated. The case is going to trial, as you mentioned in September in the Eastern District of Virginia. It's going to be a bench trial before a judge, and the judges in that district. I mean, as you know, justin move pretty.
Fast, right right, rocket docketive sorts.
Rocket docket, right. So I'm thinking, I mean guessing maybe a decision could even be issued within six months or so of trial completing. But we know that's just a guess. And once that trial's done, we're going to be asking you what you think is going to happen case I haven't. I think it's a good case for the DOJ, But as you know, we have to see what happens in trial and what the evidence look like looks like to make a better call. And I can't wait to hear what you think of it.
Yeah, and I'm really hoping to have some of some opinions sorted out by then too, That is my hope anyway. So there are other lawsuits really similar to this one pending against Google as well, and we know there's one brought by a group of state attorneys general and a proposed class action by publishers and advertisers. It's pretty much the same issues. So how come there's some simultaneous litigations happening over the same thing in different courts.
It's really a crazy situation, and I don't endy Google for the position it's in. So usually, as is the case when the government sues a large company, or even when the reports break that the government's investigating a company from monopilization, the aggrieved buyers of the products in this case, the publishers and advertisers will sue for monetary damages. In this case, they did actually sue first while the dj
was still investigating and hadn't yet filed their suit. All of those suits were consolidated into one litigation, but the federal government is exempt from that consolidation process, so when the Department of Justice brought their own suit, it was separate and they were able to keep it separate. Now. Also, seventeen states that were led by Texas also sued, and this is all pretty much over the same products, the
same conduct, the ad tech stack, the manipulation. These states sued before the DOJ as well, and originally their suit was consolidated with the publishers and advertisers suit in a New York court, but then the states were able to move it back to Texas, where it was originally filed after a new law went into effect in December of twenty twenty two. That was called the State Antitrust Enforcement Venue Act, and it was signed into law as part of the omnibus spending bill at the end of twenty
twenty two. So what that did is it made the state attorney general anti Truss actions exempt from consolidation just like the federal government. Right, so Texas got their case moved back. Means we have three different suits in three different courts, and even though the DOJ suit was brought after all of these, as I mentioned, it's in the
Rocket docket, so it's moving faster. The Texas suit is scheduled to go to trial in March of twenty twenty five, and the private suits are way behind that and don't have a trial scheduled yet. But the upshot is that Google's in this unfortunate position of having defended the same case in three different courts and three different trials, assuming no settlements of any of them.
Got I got it, so really complicated issues, and I think some really complicated procedure to go along with it. It sounds like that really doesn't look to be resolved for maybe the next few years.
Yeah, I think so.
Yeah, yeah, but so I should ask too, how about meta or we'll go with a Facebook for the purposes of this podcast. But I understand Facebook was first hued by the Trump administration's FTC quite a while ago, now obviously from monopolization, and that matter is still being continued by the current FTC. What's going on in that case and where does that stand?
Yeah, so that has been pretty slow moving when you think about it long it's been out there. The allegation in this case, I think that doesn't get a lot of press attention these days, but it is a big deal. The allegation is that Facebook has engaged in strategies to target potential competitive threats to its social networking dominance. Now I'm going to say dominance because at the time this was brought it was dominant, but TikTok has changed for a little bit in the meantime.
The whole New world, yes, the whole New world.
But anyway, what Facebook was doing was looking for new startups in social networking. Our companies are kind of adjacent to social networking, and then buying them up before they could become a competitive force. At least that's the allegation, and the FTC is targeting two specific acquisitions that Facebook
has made, Instagram and WhatsApp. So the FTC claims Facebook originally tried to compete with Instagram by improving its own product, but then ultimately chose just to buy it rather than to compete with it, and likewise with What's App, and the allegation is that both could have eventually become competitors in social networking over time. In the lawsuit, the FTC is seeking a court order that one or both of
these companies be divested. Now, I should say this lawsuit's pretty controversial because it wasn't a unanimous decision by the FTC. Unlike the Department of Justice, the FTC is run by five commissioners when they have a full slate, and when they decide to sue, it's by vote and it has
to be a majority vote. So this was a three to two vote, with two Republicans of the three dissenting, and they had policy concerns because the FTC had previously evaluated these acquisitions, it had the authority to review mergers before they close, right it still does, and had cleared both of the deals so one commissioner at least wrote that it's bad policy to undermine the integrity of this pre merger notification review process, particularly given that these companies
rely on a clearance decision and then move forward as a merging business. Right now, we're in what's called the summary judgment phase of this case, and that's where the defendants can once again try to get the case dismissed. And I actually think there's some possibility here Facebook could win a dismissal before trial in this phase. And I say that because when the judge sustained the second complaint early on in a motion to dismiss, what he said was that the agency is going to face a tall
task to prove its allegations. And he noted that what the FTC has to show is that these acquisitions harmed the competitive process and harmed consumers. But because Facebook, Instagram, and WhatsApp are all free to consumers, what the FDC is going to have to show is that the harm is that it resulted in poorer quality, less choice, less innovation. And these are hard to prove, and that's particularly hard given that Facebook's invested in the products and grown them
since having acquired them. And they're both really very popular. Consumers like those products. So the briefing is ongoing, as I said, and I would expect a decision maybe toward the end of this year or in the first half ultimately. In terms of a trial, there is no trial date set yet in this case.
Okay, So moving on to the next big bad tech platform. Apparently the antire trust enforcers didn't want Amazon or Apple to feel left out, it looks like so they've both been accused of monopolistic conduct as well, but the cases are not as developed as the ones against Google and Facebook, right, I mean, let's start with Apple. What's going on there? Right now?
This is the newest case, and I actually think one of the weakest to get the big tech platforms. It was just filed this past March after a really long investigation by the DOJ, and like the other suits, a number of states have joined it. And Apple's basically accused of engaging in a series of actions that profit the company but aren't useful or beneficial for customers, and are intended to make it hard to switch to an Android phone.
There are several examples. I'm not going to run through all of them, but there are things like Apple refusing to allow super apps. Super apps are apps that provide broad functionality in a single app, and the DOJ claims that super apps would reduce the users dependence on the iPhone and the operating system and the app store because if they act as sort of a middleware, right, allow developers to kind of go around the operating system and
the users to go around the operating system. And then one other example, because gaming is so popular, are cloud streaming game apps. So Apple allows games on the device obviously, but not the apps that allow you to play games stream through the cloud. So according to the DOJ, these kinds of apps would decrease the importance of expensive hardware for people who want to play high compute games, and it would allow a serious gamer to play on a
less expensive smartphone. So again it's the idea of keeping people on the Apple phone and getting them not to switch those. As I said, those are just a few examples, So this is a really new case. We're just in the motion to dismiss stage. I think they're still a few years of litigation ahead of us. The briefing on the motion to dismiss won't be done till October you know, maybe we'll get in an opinion probably at some point
next year, maybe in the first half. You know. So it's pretty easy to surpass, survive in motion to dismiss. There's a very low bar there, and so I would suspect the case will survivive. I don't know about its long term survival, but I think it'll least get into the thick of litigation. And we've got a couple of years ahead of us on that one.
Okay, okay, another drawn out litigation. It sounds like, I mean, so the last but certainly not least you know, how about Amazon? It seems like Amazon is consumer friendly at least in terms of the convenience and involves for users and quick delivery. I know, I use Amazon Prime myself. I mean, you know, I think a lot of folks do. But what is it that Amazon is doing that the FTC particularly have views as a violation of monopolization laws.
Yeah, you know, justin it's probably shameful how many Amazon boxes show up at my house.
All the time, all the time. I can't keep track anymore. J I really wow.
Right, so we are back to the Federal Trade Commission now, right, So this suit was brought by the Commission in September of twenty twenty three, like the others, joined by several state and in this case, the FTC is accusing Amazon of engaging in anti competitive conduct to maintain a monopoly in two different markets. One of them is the online superstore market that encompasses the e commerce business that's us
buying products right. And then the other market is an online marketplace service market, and that's Amazon's third party business that connects sellers with online buyers, so allowing third party sellers to sell on its platform. So Amazon allegedly has illegally monopolized these markets through two distinct practices, and the first is what the FTC is calling anti discounting conduct. I kind of think of it as as price parity
or most Favored Nation clause. But in the allegation here is that Amazon generally requires or pushes sellers to offer the lowest price on Amazon, and they can't offer the product on some other website for a lower price, but it might be less expensive for them to sell it on that other website. And what this does is artificially
inflates prices on these other rival retailers. Then the second conduct that the FTC's targeting is that Amazon allegedly coerces sellers to use its fulfillment services for a fee, of course, if they want to be eligible for Amazon Prime, and Prime is obviously really valuable for companies that are selling products on the platform. Now, the really interesting thing to me about this case is that very similar claims were made against the company in the UK and the EU, and Amazon managed.
To settle both of those cases, okay.
Right, and it agreed to a bunch of behavioral changes. It'll give vendors equal placement alongside Amazon's own goods near what's called the buybox. That's a feature that's very beneficial for sellers. It also pledged that it wouldn't use rival sellers marketplace data to gain an unfair advantage when it sells its own products. And it's also going to allow third party businesses to negotiate the rates directly with other providers of Prime delivery services, so that way, essentially they
don't have to use fulfillment by Amazon. So it seems like this case could settle at some point in the future because that's kind of a blueprint, and we'll know, you know, as time goes by, how things are working out with all of those commitments that Amazon made in Europe as the months go by, and I think there's particularly a potential for a settlement if the personnel of the FTC changes with a change in administration. But you know, like the DOJ's case against Apple, this one is in
early stages. It's got a long way to go. It does have a trial date set in October of twenty twenty six. We do have a motion to dismiss the suit pending. The briefing on that finished up in March of twenty twenty four, and maybe we could get a decision on that this year, but I wouldn't be surprised if it pushed into next year one que or even the first half. And as I said, those are sort
of tough to win. So I don't think the case would get dismissed at this stage, and I think we'll be watching the We'll be watching the suit for a long time yet. So anyway, for now, justin that's it with respect to suits by the government against tech platforms. I should note that the Department of Justice has also sued Live Nation from anobilization, a very popular suit with Taylor's wife fans.
Yes, it is right, but.
That's gonna have to be the subject for a future podcast because today we were just focusing on meta alphabet, Amazon and Apple.
All right, Jen, Never a dull moment in antitrust, I think, especially as it relates to big tech these days. But thanks so much for your quick overview of the anti trust cases pending against the four big tech platforms in the US and where they stand. And with that that's today's briefs. For Jen's full reports on the topic and all of our research, please visit BI laws on the Bloomberg terminal and of course, most importantly thanks to you the listener for tuning in. This was Votes and Verdicts.