U.S. UPDATE – Bracing for the “Antitrust” Tech Storm

The widely reported lawsuit against Google, brought this week by the Department of Justice and 11 state attorneys general, marks the most significant antitrust enforcement action in the United States against a major technology company in two decades.  As set out briefly below, the suit warrants careful consideration, both for what it alleges and what it does not.  But for all the attention this litigation will command, it is important to step back and take note of the context in which it was commenced.  The antitrust scrutiny that fueled this enforcement action bears critical implications not only for “Big Tech,” but also for companies of all sizes in the technology sector and beyond.

Declaring Google to be a “monopoly gatekeeper for the internet,” the DOJ and state attorneys general brought their civil action under Section 2 of the Sherman Act, claiming the company “unlawfully maintains its monopolies” in general search services, search advertising, and general search text advertising by foreclosing competition through a range of exclusive distribution agreements.  These agreements, the complaint asserts, lock up pathways to search on everything from mobile phones and browsers to next-generation “smart” devices, depriving rivals of the distribution and scale necessary to compete and thereby harming users, advertisers, and small businesses.  In a public statement, Google responds that competitor search alternatives are “readily available.”  Analogizing its distribution arrangements to paying for “eye-level shelf space” in the supermarket, Google asserts that consumers who decline to change their default search service do so because they prefer Google’s service.

The complaint against Google attempts to be at once bold and narrow, framing its allegations on terms similar to the claims brought against Microsoft in the 1990s but, at the same time, forgoing some of the tying theories and harms that were alleged against Microsoft.  And while scrutiny by regulators and policymakers reportedly has included everything from platform access to data stewardship to privacy policies, this suit narrowly targets Google’s online search and search advertising businesses.  At bottom, what is essential for companies to recognize is that this lawsuit is just one part of a broader “antitrust” tech storm marked by complicated, high-profile, and multipronged investigations, enforcement actions, and business pressures.

In the attached Article, we explore this new breed of antitrust scrutiny that presents legal and business risks different in kind from traditional agency, tort, and business litigation.  We lay out key considerations and recommendations to assist companies in preparing for and weathering this storm.  Companies must look beyond a silo-specific focus on particular suits or investigations, and the environmental, social, and governance issues that boards address must include the regulatory, reputational, and financial risks that may arise from allegations of anticompetitive behavior and related business ethics concerns.  While attention today has been trained on the largest tech companies, these developments bear consideration by tech companies of all sizes, by companies in other industries engaged in data collection and digital operations, and by companies in other high-profile sectors that may emerge as targets in this new environment.

Ilene Knable Gotts
Ronald C. Chen
Kevin S. Schwartz