Last week, US District Judge Amit P. Mehta handed down a significant ruling, finding that Google unlawfully maintained a monopoly in general internet search and search text advertising. This decision marks another chapter in a four-year saga initiated during the Trump administration, with Google already signaling its intent to appeal. The Department of Justice (DOJ) is spiking the proverbial football, calling the decision a “historic win for the American people” that “paves the path for innovation… and protects access to information for all Americans.” Perhaps the DOJ should read the decision more carefully. Customers, competition, innovation, Google, Apple, and the neo-Brandeisian (NB) movement are all losers in this decision.

Judge Mehta found that Google’s innovations and quality of search are superior to its rivals’: “Google is widely recognized as the best [general search engine] available in the United States.” The company “has hired thousands of highly skilled engineers, innovated consistently, and made shrewd business decisions. The result is the industry’s highest quality search engine, which has earned Google the trust of hundreds of millions of daily users.” Google’s rivals “have not succeeded in part due to their inferior quality,” according to Mehta. Mozilla’s CEO called Google’s quality “miraculous.” Judge Mehta believes that the rivals are so inferior that “Google has no true competitor” and “is the only real choice.”

This is why the judge believes Google is a monopolist. But being a monopoly – and especially such a beneficial one – isn’t illegal. What is illegal is foreclosing rivals from being able to compete. According to Mehta, Google foreclosed Bing, Yahoo, and others by entering into multi-year contracts, primarily with Apple and web browser providers, to be the default search engine in their products. These contracts represent about half of US search queries.

It’s the contract length – often as long as five years with options for renewal – that creates foreclosure, according to the judge. He said a contract must be no longer than one year to be presumptively lawful in antitrust. But that doesn’t make longer contracts presumptively unlawful. Rather, he concluded that contracts were negotiated too infrequently to give rivals a chance.

The judge’s logic is questionable. While shorter contracts do provide more frequent opportunities for rivals, they also increase negotiation costs and business risk without creating value for the negotiating partners. Even if the contract periods were shorter, the phone and browser providers would likely stick with Google because of its value. Apple held discussions with Microsoft and decided that it was unwilling to switch regardless of how much money Microsoft might offer. Mozilla made Yahoo its default search engine in 2016, but revenue dropped, leading Mozilla to switch back to Google.

The effects of the court’s decision will depend on the remedies the judge eventually orders and on Google’s success with appeals. If the judge bans Google’s contracts, Google will remain the default search engine in many instances because it provides strategic advantage. Bing and Yahoo would have to pay for default status, putting them at a financial disadvantage relative to Google. Any legal remedy will decrease options for Apple, Mozilla, and other contractors and perhaps affect some of their important revenue sources.

If the remedies create more churn in who provides default search engines, iPhone and browser customers lose because they will have to endure search engines with “inferior quality.” Customers could change their default settings, but the DOJ’s behavioral economist argued that this is a costly inconvenience.

Given the superiority of Google’s products and its pace of technology advancement, no remedy could increase innovation or information access. And any remedy would damage competition as the industry would become regulator driven and less customer driven.

Interestingly, the NB movement loses too. Mehta’s ruling is deeply rooted in traditional antitrust analysis, a stark contrast to the simplistic big-is-bad approach favored by the NBs that dominate Biden’s antitrust team. Some leaders in the NB movement have hoped that courtroom losses would galvanize Congress to pass sweeping anti-Big Tech legislation and motivate the appointment of NB-friendly judges. Mehta’s ruling, despite its problems, demonstrates the value of traditional approaches.

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