After the US Department of Justice’s antitrust victory against Google in August, the tech giant now faces legal challenges in the UK. The Competition Appeal Tribunal has approved a £7 billion case against Google, sparked by Nikki Stopford, co-founder of Consumer Voice, and the legal firm Hausfeld & Co LLP.
Google will need to defend its business practices in this significant legal battle. The complaint has two main facets. First, it critiques Google’s advertising model, specifically the way businesses pay to secure higher placement in search results. Second, it targets Google’s deal with Apple, which ensures its search engine is the default on Apple devices.
A study by the Competition and Markets Authority (CMA) highlights that Google’s parent company, Alphabet, enjoyed an average return on capital of 39% from 2011 to 2021, significantly higher than the norm. Stopford points out that Google charges advertisers 30% to 40% more than a competitive market would allow. This inflated ad cost ultimately passes down to consumers, inflating prices everywhere from online purchases to in-store shopping.
According to Stopford, businesses feel trapped because around 90% of online searches happen on Google. People typically research online before shopping in person, and the cost of advertising impacts the prices they pay for products, leading to an estimated £7 billion excess burden on consumers.
The second part of the complaint focuses on the billions Google has paid to Apple to make its search engine the default on iPhones and other Apple devices. This mirrors the US DOJ’s recent findings, where a judge deemed these payments anticompetitive.
Additionally, the CMA is considering regulations under the Digital Markets, Competition and Consumers Act, which could affect major technology providers. They’ve recently explored problems in the mobile browser market, which could have implications for both Apple and Google. Their provisional report points to features in mobile browsers that limit competition, particularly restrictions imposed by Apple’s browser engine, WebKit. This setup could hinder competitors from differentiating their browsers effectively.
The CMA’s inquiry indicates that competition among mobile browsers isn’t functioning well, which stifles innovation. Margot Daly, chair of the CMA’s independent inquiry group, stressed that effective markets rely on diverse, innovative options for consumers.
Apple has responded to these findings by asserting their commitment to innovation and user privacy, contesting the CMA’s conclusions regarding Safari and WebKit. They have expressed concern that proposed interventions could undermine their user-focused approach.
This sets the stage for heightened tension between Big Tech and regulators in both the US and UK. The looming EU Digital Markets Act, effective from March 2024, has already prompted changes in how Google and Apple operate, such as allowing users more choice in default settings.
In the US, the DOJ is pushing for significant changes, including potential divestment from Google’s Chrome browser. As investigations delve deeper into Google’s practices, especially regarding advertising technology, both companies are leaning on security arguments to defend their current setups in the face of potential regulatory upheaval. Meanwhile, regulators must grapple with whether consumers are satisfied with their current options and whether any changes will truly enhance their experience in the online landscape.