In the ongoing antitrust case United States v. Google LLC, the central question is whether Google’s agreements to secure default status for its search engine with device manufacturers like Apple, browser developers and mobile carriers are part of a strategy to maintain its monopoly position. Google is accused of using this strategy to effectively block competitors from reaching a sufficient user base to achieve minimum efficient scale. A central question in the case is what role substantial payments to secure default status can play in such a foreclosure strategy.
This theory looks at first sight like a standard foreclosure theory of harm for an exclusive dealing arrangement along the lines of the US Microsoft case, which the court explicitly refers to. We show in this paper that this is only superficially the case and that the issues are in fact significantly more complicated in this case than in either the US or EU Microsoft cases. This does not become clear in the judgement because of an insufficiently precise analysis of market definition and a limited use of the cited evidence. Furthermore, the lack of counterfactual analysis leads to a mistaken assessment of default payments necessarily being anticompetitive for a dominant company. We show that these flaws complicate the assessment of adequate remedies that address actual anticompetitive behaviour while not distorting the efficient operation of the market.
Section 2 of the paper sets the legal foundation by outlining the legal framework under Section 2 of the Sherman Act, focusing on the doctrine of monopolization, and the need to prove causation. Section 3 reexamines the evidence presented in the judgment and shows that the market definition analysis is flawed. Section 4 then builds on this foundation to critically review potential theories of harm. In Section 5 we discuss the challenges for designing remedies based on the insights from the market analysis in the previous two sections. Section 6 concludes.