ContractsProf Blog

Editor: Jeremy Telman
Valparaiso University Law School

Thursday, October 22, 2020

Anti-competitive Contracting

In what promises to one of the biggest fights of the decade, the Justice Department has accused Google of engaging in illegal, monopolistic practices.  At stake are billions of dollars, a battle over what consumers want and -- contracts!  Despite what some of our colleagues might think, it’s not all about constitutional law.  As contracts profs have always known, in a free market capitalist society, it’s all about contracts and contracts are everywhere.  The sure-to-be expensive and lengthy lawsuit claims that Google entered into business contracts with partners, namely makers of mobile phones, which hindered competition.  These “anticompetitive and exclusionary” agreements, according to the Justice Department complaint, make Google the default search engine on Android phones and iPhones in exchange for a share of the advertising revenue that it derives from search queries on those devices.  The amounts are nothing to sneeze at according to the complaint– Google’s payments to Apple accounted for “roughly 15 to 20 percent of Apple’s profits.”  Given that Apple’s gross profit last year was something around $100 billion dollars, that’s a lot of $$$.  (I had to check that ginormous profit number from a few different sources to make sure I was reading that correctly).  In other words, Google thinks the value of being the default search engine on iPhones is worth approximately $15-20 billion dollars (the Justice Dept. filing says public estimates are a bit lower, $8-$12 billion dollars).  Apparently, Google thought losing its status as the default search engine on iPhones would be a “Code Red” situation.  We’ll be hearing more about the terms of these agreements as the case heats up.  

Of course, I couldn't help wondering about the political motivations of this filing given the timing and recent complaints from conservatives about Big Tech bias.  Especially noticeable was the line-up of Attorney Generals who were all from red states and the total absence of any blue state AGs.  It's ironic given the way that conservatives/progressives traditionally line up when it comes to antitrust and consumer protection issues.  In any event, I think it would be a mistake to think that this is a partisan issue (even if politics affected the timing of the filing) - concerns have been raised by both sides for years about the increasing power of Big Tech companies over our lives.  It will be interesting to see how all of this plays out.

https://lawprofessors.typepad.com/contractsprof_blog/2020/10/anti-competitive-contracting.html

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