Photo by Benjamin Dada on Unsplash
J.P. Burleigh, Associate Member, University of Cincinnati Law Review
I. Introduction
Google has been under fire this year for alleged antitrust violations. In March, the European Commission fined Google 1.49 billion euros for breaking EU antitrust rules, the third such fine in two years.[1] The House Judiciary Committee began investigating Google and other large tech companies in June for possibly breaches of American antitrust law.[2] The Department of Justice announced in July that it would conduct a sweeping antitrust review of “market leading online platforms,”[3] and in September requested information from Google about previous antitrust investigations.[4] The attorneys general of forty-eight states, Puerto Rico, and Washington, D.C. have announced a joint probe into potential antitrust violations by Google’s advertising business.[5] And just days ago, a competitor digital advertising company sued Google in federal court, alleging that Google unlawfully forced it out of business.[6]
Google makes most of its money on digital advertising.[7] Acting as a broker for online ads, Google buys ad space on websites through AdSense and sells that space to third parties through Google Ads.[8] Much of the recent conversation has centered on the ways Google has bought ads to create a monopoly in the market for online ads generally. For example, for over ten years Google prohibited websites selling space to Google from working with competing advertising brokers.[9] However, this article will explore whether Google is using its dominance in the sale of online ads to unlawfully decrease competition in other areas. Specifically, does Google’s Ad Policy—the rules which buyers must follow in order to purchase advertising space from Google—bear out the allegations of monopolistic practices?
II. Factual Background
Nearly 90% of internet searches are conducted on Google.[10] But that service is free; Google’s revenues come almost entirely from the sale of online advertising.[11] Advertising on the internet has become a premier method of marketing, and in 2018 sales of online ads generated revenues over $100 billion.[12] Google is the largest single player in that market, bringing in roughly a third of all online ad sales revenue.[13]
Google is like an agent of online real estate for ads.[14] First Google obtains the space for online ads.[15] Some of those spaces are on Google’s own web pages—Google search results, YouTube, Gmail, Google Maps, and more.[16] But many of those spaces are also on third party websites.[17] A third party can sell space on its website to Google through AdSense.[18] Google then sells these spaces to advertisers through Google Ads.[19] Advertisers compete against each other in Google-run auctions.[20] The advertiser who offers the most money per click receives the coveted ad spot, until another advertiser outbids.[21] Not just anyone can participate in Google’s advertising business, however.
Google will only sell ad space to buyers that follow the Google Ads Policy.[22]
The stated goal of the policy is to “support a healthy digital advertising ecosystem—one that is trustworthy and transparent, and works for [everyone using it].”[23] The policies restrict the content and conduct of ads in many situations, ranging from how election ads target voters to whether an ad contains sexually explicit content.[24] These policies also regulate the ad’s destination—the website an ad links to.[25]
Although Google’s main business is digital advertising, Google’s parent entity, Alphabet, owns eight other subsidiaries operating in a range of industries.[26] In at least two situations, Google’s Ad Policy restricts markets in which a branch of the Alphabet family participates.
For example, in September of this year Google changed its Ad Policy[27] to state that “[p]romotion of speculative or experimental medical treatments/technology is prohibited.”[28] In a non-exhaustive list of prohibited products and services, Google lists “platelet rich plasma.”[29] Platelet rich plasma (PRP) is a method of isolating platelets, a solid part of the blood that helps clot blood and heal injuries in the body.[30] In recent years, some doctors have used PRP to gather a patient’s platelets and re-inject them at various locations in the body to treat conditions such as muscles injuries, arthritis, and tendonitis.[31] The medical community does not yet have a consensus on the efficacy of PRP treatment generally, but the American Academy of Orthopaedic Surgeons says PRP is effective in treating chronic tendon injuries in the elbow.[32] The medical company Eclipse produces the FDA-approved[33] Eclipse PRP system, which allows medical providers to isolate platelets from patients’ blood.[34] A Google search on December 4, 2019 for “Eclipse PRP” returned with no ads.
Alphabet also competes in the healthcare technology market through its subsidiary Verily Life Sciences.[35]Verily blends data analysis with medical technology to create devices like personal monitors for atrial fibrillation and diabetes patients.[36] One of Verily’s projects is Lumi, a partnership with Pampers to create a system for parents to monitor newborn children’s biometrics by attaching a sensor to an infant’s diaper.[37] This device is not regulated by the FDA, which has sparked concern among parents over the device’s safety.[38] A team of doctors at Children’s Hospital of Philadelphia published a study in the Journal of the American Medical Association warning that baby monitors exempt from FDA regulation were less accurate than similar devices with FDA approval.[39] However, a Google search on December 4, 2019 for “Lumi by Pampers” reveals two paid advertisements: one at the top of the search results, and one on the right hand side bar, both leading to the Pampers website.
In another example, Google has restricted ads related to cryptocurrency. In early 2018, cryptocurrency advertisers reported that Google was denying their ads and suspending their accounts, without any official reason or policy.[40] Later that year, Google announced a total ban on all ads for “cryptocurrencies and related content (including but not limited to initial coin offerings, cryptocurrency exchanges, cryptocurrency wallets, and cryptocurrency trading advice).”[41] Google has since relented on this total ban and carved out two exceptions: cryptocurrency mining products and services are permitted, and cryptocurrency exchanges can advertise if Google certifies them.[42] All other cryptocurrency related ads are banned.[43] However, Google also participates in the market for digital currency.[44] First, Google has developed resources in its paid Google Cloud service for users of Ethereum, a popular cryptocurrency.[45] Second, Google has launched its own digital wallet called Google Pay, which allows users to exchange money online and in stores through an app.[46]
III. Legal Background
The Sherman Antitrust Act protects competition and efficiency in the market.[47] There are two key provisions: §1 bans any contract, combination or conspiracy in restraint of trade, and §2 forbids any person or combination from monopolizing or attempting to monopolize interstate commerce.[48]
Parties violate §1 when they agree to unreasonably restrain trade.[49] Certain agreements are per se unreasonable, such as setting prices at a fixed level.[50] In all other cases, courts make a “rule of reason” inquiry into whether the challenged agreement promotes or suppresses competition.[51] Illegal monopolization occurs under §2 when a firm has monopoly power in the relevant market and purposefully acquires or maintains that power.[52] In analyzing a possible §2 violation, courts first define the relevant market: the smallest product and geographic market which, if one party controlled the entire market, that party could arbitrarily raise prices and consumers would simply pay them. [53] Courts then examine whether the defendant has monopoly power in that market; 75% or more of market share routinely constitutes monopoly power, and 90% almost always qualifies.[54] The last step is to establish whether the defendant exercised that power to exclude competition.[55]
A violation of either provision requires intent. In criminal prosecutions of the Sherman Act the government must prove monopolistic purpose,[56] but a civil plaintiff can satisfy intent merely by demonstrating the challenged action’s anticompetitive effects.[57] Conduct is anticompetitive if it forecloses competition in any market.[58] This could occur when a monopoly shuts out competitors in its own market, or when it uses “monopoly power attained in one market to gain a competitive advantage in another.”[59]
A refusal to deal can constitute anticompetitive conduct in certain circumstances. The Colgate doctrine famously states: “In the absence of any purpose to create or maintain a monopoly, the act does not restrict the long recognized right of a trader or manufacturer engaged in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal. And, of course, he may announce in advance the circumstances under which he will refuse to sell.”[60] Thus the default rule is that businesses can choose the parties, prices, terms, and conditions, of their dealings.[61] However, that right is qualified: no right of refusal exists where the refusal violates antitrust law.[62] Courts are hesitant to impose a duty to deal if doing so would require unreasonable judicial supervision of private business. [63]Nevertheless, courts have recognized a duty to deal in two relevant contexts.
First, courts have held that some dominant newspapers must sell ad space to advertisers.[64] In the landmark case Lorain Journal Co. v. United States, the Supreme Court affirmed that a newspaper serving 99% of Lorain could not refuse to sell ads to advertisers who also bought ads from a local radio station.[65] This refusal forced advertisers in the newspaper to boycott a competing source of news and advertising.[66] Because the paper had used its market power in advertising to exclude competition, the court found the paper violated §2.[67] Similarly, the Sixth Circuit in Home Placement Service, Inc. v. Providence Journal found that a dominant newspaper violated the Sherman Act by refusing to sell ads to for a home rental referral service.[68] The court found that the newspaper competed with the referral service for housing ads.[69] Because the newspaper had market power over daily newspaper ads in the Providence area, refusing to sell ads to a competitor was anticompetitive conduct of a monopoly in violation of §2.[70] Further, the referral service eventually agreed to stop charging for its service in order to advertise in the paper; that coerced deal violated §1 as an agreement in restraint of trade.[71]
Courts have also found that some providers of “essential facilities” must deal with others.[72] For instance, in Otter Tail Power Co. v. United States, the Supreme Court affirmed that an electric utility company had a duty to deal with municipalities who wanted to buy power.[73] Because the company also operated power distributors in competition with the municipalities, the company’s refusal to deal with the municipalities excluded competition in violation of §2.[74] The Supreme Court has since limited the essential facilities doctrine to contexts where the defendant fully owns and sells something that rivals cannot supply to themselves, where selling to rivals would be profitable, and there is no regulatory agency requiring the sharing of the facility.[75]
IV. Analysis
The restrictions Google’s Ad Policy imposes on advertisers might violate the Sherman Act under a refusal to deal theory. Under the case law concerning refusal to sell ads and refusal to provide essential facilities, a court might find that Google unlawfully excludes competition by only selling ads to parties who satisfy Google’s Ad Policy.
The ban on ads for speculative and experimental medical technology and treatment might be a §2 violation. The relevant market would be the narrowest possible to maintain a monopoly: the market for healthcare technology search ads in the United States. In a world where “Just Google it” is an everyday phrase, search engines are the first place people go to research new products and services. Searching the name of a person, company, product, or services does not guarantee it will be the first result; thus, competitive firms place ads on search result pages to catch consumers’ attention. There is no substitute. Because Google maintains 90% of the entire search engine market, Google likely has substantial market power in the market for healthcare technology search ads in the United States.
Acting to exclude competition is necessarily a fact-specific analysis. Google may well have acted for legitimate business reasons to prohibit ads for experimental healthcare technology. Protecting consumers from deceptive advertising, particularly in an area as important as health, is surely reasonable for a broker of ads. But the nature of the healthcare technology industry, Google’s monopoly power in that industry’s search advertising, and Google’s relationship with Verily are important considerations.
“Speculative” and “experimental” are meaningless terms in this context. Healthcare technology is inherently experimental because it is driven by innovation. New medical devices are untried at first until they gradually gain acceptance by the scientific and medical community; the entire process is “experimental.” Rather than protecting consumers, this restriction presents an additional hoop that healthcare technology producers must jump through to bring their goods to market. This policy gives Google the power to deny ads for competing technologies it deems to be too speculative—an arbitrary standard in a market where successful products necessarily do what has never been done. Because Google is a monopoly in search ads, its decision as to what is too speculative has ripple effects down the supply chain. If Google labels a certain company as peddling speculative or experimental healthcare technology, that company will be essentially shut out of the search ad market. Further, suppliers of that technology will have to purge their websites of all references to that technology in order to maintain their own Google ads.
This is problematic because Alphabet’s Verily is in direct competition with other healthcare technology companies. Although Google and Verily are separate entities, §2 applies to both unilateral and joint actions. Google might employ its Ad Policy to advantage Verily and disadvantage competing healthcare technology companies. Google has already permitted an ad for the Lumi baby monitor, a product that consumers might reasonably regard as experimental. Any Verily ad that Google approves in the future would further the argument that Google is not using its standard fairly. Particularly, a plaintiff who could show an ad denied for a similar product to Verily’s would have a strong case under §2. Precisely because Google and Verily are not the same company, such a scenario also might violate §1 as an agreement in restraint of trade.
Google’s restriction on cryptocurrency ads might present a §2 violation. The relevant market would be search ads for digital currency in the United States. Google likely has a monopoly in this market for the same reasons discussed above. Reasonable justifications for restricting cryptocurrency ads might include shielding consumers from an unpredictable, unregulated industry. Although paternalistic, this might be within Google’s right under the Colgate doctrine. The problem is that again, there are anticompetitive effects because Google itself competes with the very entities this rule touches. Google is actively trying to gain business on its Google Cloud service from cryptocurrency users. At the same time, Google is placing a bet that cryptocurrency is not the digital currency of the future; Google’s alternative to cryptocurrency is the Google Wallet. That service offers the perks of exchanging money digitally coupled with the reliability of government-backed traditional currency. Google has created a win-win situation: profit on cryptocurrency while it lasts, and capture cryptocurrency’s users when it fails. By restricting ads for cryptocurrency, Google inhibits cryptocurrency platforms from fully reaching consumers, thus furthering cryptocurrency’s demise. Google is thus using its monopoly power in the market for search ads for digital currency to foreclose competition in the market for digital currency.
Courts might also view Google’s search engine as an essential facility. Public opinion increasingly treats the internet—and searching things on the internet—as a public utility that should be open to all. A progressive court might find that Google has a duty to deal non-arbitrarily with advertisers because the service it provides is only available through Google. Although other search engines exist, Google maintains a near total monopoly, with no strong competitor in sight. Searching the internet might be an essential facility for consumers, and advertising on search results might be an essential facility for providers of goods and services. If that is the case, then Google would have a heightened duty to deal with advertisers.
V. Conclusion
Google’s Ad Policy might violate the Sherman Act under a refusal to deal theory. Following cases imposing a duty to deal on newspapers selling ads and on providers of essential facilities, a court could find that Google is using its market dominance to exclude competition in healthcare technology and in cryptocurrency. Further developments might reveal anticompetitive restrictions in Google’s Ad Policy beyond those discussed here. As a major player in digital advertising, and as the dominant player in digital search advertising, Google should be careful not to create rules which violate antitrust law.
[1] Antitrust: Commission fines Google €1.49 billion for abusive practices in online advertising, European Commission (Mar. 19, 2019) https://ec.europa.eu/commission/presscorner/detail/en/IP_19_1770
[2] Adi Robertson, Congress just asked big tech companies for private emails about their biggest controversies, The Verge (Sep. 13, 2019) https://www.theverge.com/2019/9/13/20864135/congress-house-judiciary-committee-antitrust-probe-letters-apple-google-amazon-facebook.
[3] Tony Romm, Elizabeth Dwoskin, & Craig Timberg, Justice Department announces broad antitrust review of big tech, The Washington Post (Jul. 23 2019, 7:34 PM) https://www.washingtonpost.com/technology/2019/07/23/justice-department-announces-antitrust-review-big-tech-threatening-facebook-google-with-more-scrutiny/
[4] Brian Fung, Google hit by DOJ demand for antitrust records, CNN Business (Sep. 6, 2019, 7:14 PM) https://www.cnn.com/2019/09/06/tech/justice-department-antitrust-google/index.html.
[5] Steve Lohr, Google Antitrust Investigation Outlined by State Attorneys General, The New York Times (Sep. 9, 2019) https://www.nytimes.com/2019/09/09/technology/google-antitrust-investigation.html.
[6] David McLaughlin, Google Accused of Antitrust Violations in Digital Advertising Market, Fortune (Nov. 26, 2019) https://fortune.com/2019/11/26/google-accused-antitrust-digital-advertising-market/.
[7] J. Clement, Google: ad revenue 2001-2018, Statista (Aug. 9, 2019) https://www.statista.com/statistics/266249/advertising-revenue-of-google/.
[8] Eric Rosenberg, How Google Makes Money (GOOG), Investopedia (Dec. 5, 2018) https://www.investopedia.com/articles/investing/020515/business-google.asp.
[9] Id.
[10] J. Clement, Global market share of search engines 2010-2019, Statista (Dec. 3, 2019) https://www.statista.com/statistics/216573/worldwide-market-share-of-search-engines/.
[11] J. Clement, Google: ad revenue 2001-2018, supra.
[12] IAB internet advertising revenue report, PricewaterhouseCoopers (May 2019) https://www.iab.com/wp-content/uploads/2019/05/Full-Year-2018-IAB-Internet-Advertising-Revenue-Report.pdf.
[13] J. Clement, Google’s market share of global digital ad revenues 2016-2019, Statista (Jul. 23, 2019) https://www.statista.com/statistics/193530/market-share-of-net-us-online-ad-revenues-of-google-since-2009/.
[14] Rosenberg, supra note 8.
[15] Id.
[16] Id.
[17] Id.
[18] Id.
[19] Id.
[20] Id.
[21] Id.
[22] Google Ads policies, Google https://support.google.com/adspolicy/answer/6008942.
[23] Id.
[24] Id.
[25] Google Ads Policies, Google https://support.google.com/adspolicy/answer/1704381
[26] Rakesh Sharma, Why Google Became Alphabet, Investopedia (Oct. 24, 2019) https://www.investopedia.com/articles/investing/081115/why-google-became-alphabet.asp.
[27] A new policy on advertising for speculative and experimental medical treatments, Google (Sep. 6 2019) https://support.google.com/google-ads/answer/9475042.
[28] Healthcare and medicines, Google https://support.google.com/adspolicy/answer/176031.
[29] Id.
[30] Frank B. Kelly, Platelet-Rich Plasma (PRP), American Academy of Orthopaedic Surgeons (Sep. 2011) https://orthoinfo.aaos.org/en/treatment/platelet-rich-plasma-prp.
[31] Id.
[32] Id.
[33] 510(k) Premarket Notification, U.S. Food and Drug Administration, https://www.accessdata.fda.gov/scripts/cdrh/cfdocs/cfpmn/pmn.cfm?ID=BK110035.
[34] Eclipse PRP, Eclipse https://eclipsemed.com/eclipse-prp/.
[35] How Google Plans To Use AI To Reinvent The $3 Trillion US Healthcare Industry, CB Information Serviceshttps://www.cbinsights.com/research/report/google-strategy-healthcare/.
[36] Verily Projects, Verily https://verily.com/projects/.
[37] Lumi by Pampers, Verily https://verily.com/projects/sensors/lumi/.
[38] Patrick Coleman, The Big Problem with Baby Trackers, Fatherly (Aug. 12, 2019 5:03 PM) https://www.fatherly.com/health-science/problem-with-baby-trackers-smart-monitors/.
[39] Two Consumer Baby Monitors Show Worrisome Results in Measuring Vital Signs, Children’s Hospital of Philadelphia https://www.chop.edu/news/two-consumer-baby-monitors-show-worrisome-results-measuring-vital-signs.
[40] Molly Jane Zuckerman, Crypto Advertisers On Google Report Ad Suspensions and Account Terminations, Cointelegraph (Mar. 11, 2018) https://cointelegraph.com/news/crypto-advertisers-on-google-adwords-report-ad-suspensions-and-account-terminations.
[41] Google Support Policies, Google https://support.google.com/adspolicy/answer/76488035
[42] Financial products and services, Google (https://support.google.com/adspolicy/answer/2464998?hl=en&ref_topic=1626336).
[43] Id.
[44] Allen Day, Building hybrid blockchain/cloud applications with Ethereum and Google Cloud, Google (Jun. 13, 2019) https://cloud.google.com/blog/products/data-analytics/building-hybrid-blockchain-cloud-applications-with-ethereum-and-google-cloud.
[45] Id.
[46] Start using Google Pay today, Google https://pay.google.com/about/learn/.
[47] The Antitrust Laws, Federal Trade Commission https://www.ftc.gov/tips-advice/competition-guidance/guide-antitrust-laws/antitrust-laws.
[48] Klor’s v. Broadway-Hale Stores, 358 U.S. 207, 210-211 (1959); 15 U.S.C. §§1-2.
[49] Nynex Corp. v. Discon, 525 U.S. 128, 133 (1998).
[50] Id.
[51] National Soc. Of Professional Engineers v. U.S., 435 U.S. 679, 691 (1978).
[52] United States v. Grinnell Corp., 384 U.S. 563, 570-71 (1966).
[53] Herbert Hovenkamp, Principles of Antitrust 65 (West Academic 2017).
[54] Id.
[55] Id. at 250.
[56] U.S. v. U.S. Gypsum Co, 438 U.S. 422, 435 (1978).
[57] McLain v. Real Estate Bd., 444 U.S. 232, 243 (1980).
[58] U.S. v. Griffith, 334 U.S. 100, 107 (1948).
[59] Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 276 (2d Cir. 1979).
[60] United States v. Colgate & Co., 250 U.S. 300, 307 (1919).
[61] Pac. Bell Tel. Co. v. linkLine Communs., Inc., 555 U.S. 438, 439 (2009).
[62] Official Airlines Guides, Inc. v. FTC, 630 F.2d 920, 927-28 (1980); Aspen Skiing Co. v. Aspen Highlands Skiing Corp, 472 U.S. 585, 601 (1985).
[63] Byars v. Bluff City News Co., 609 F.2d 843, 864 (6th Cir. 1979); Verizon Communs., Inc. v. Law Offices of Curtis V. Trinko, LLP, 540 U.S. 398, 415 (2004).
[64] 342 U.S. 143, 155 (1951).
[65] Id. at 152-53.
[66] Id. at 153.
[67] Id.
[68] 682 F.2d 274, 279 (1st Cir. 1982).
[69] Id.
[70] Id.
[71] Id.
[72] Hovenkamp, supra, at 282.
[73] Otter Tail Power Co. v. United States, 410 U.S. 366, 380 (1973).
[74] Id. at 368.
[75] Verizon Communications, Inc. v. Law Offices of Curtis v. Trinko, LLP, 540 U.S. 398, 410-11 (2004).
