WSJ Reports: State AGs to Cooperate with Feds to Take on Google?

By Jerri-Lynn Scofield, who has worked as a securities lawyer and a derivatives trader. She is currently writing a book about textile artisans.

The WSJ ran an exclusive today, suggesting that state attorneys general may begin to cooperate more closely with the feds to take on Google, according to State Attorneys General to Meet With Justice Officials to Coordinate on Google Probe:

State attorneys general will meet with U.S. Justice Department attorneys next week to share information on their respective probes of Alphabet Inc.’s Google unit, a step that could eventually lead to both groups joining forces, according to people familiar with the matter.

The meeting is seen as the start of a periodic dialogue that could expand into more formal cooperation as the probes continue, the people said.

To date, federal and state authorities involved in the probe haven’t shared investigative materials about their concurrent probes of Google, some of the people said.
At least seven state attorneys general who are part of the investigation have been invited to the meeting, one of the people said. The group—comprising the executive committee of the states’ investigation into Google—is led by Ken Paxton, the Texas attorney general.

Recall, as does the Journal, that state AGs have in the past teamed up with the Department of Justice (DoJ) when the parties are serious about antitrust enforcement – something the feds have been loath to do for quite some time. But during the Clinton administration, the DoJ did undertake enforcement actions, such as its suit against Microsoft, which was brought with the cooperation of several state GAs. According to the WSJ:

State antitrust enforcers often team up with their federal counterparts, including when the Justice Department and a group of 21 attorneys general worked together when they sued Microsoft in the late 1990s.

Silicon Angle reports in DOJ and state attorneys general could join forces in Google antitrust probe that the state probe  of Google began last year:

Attorneys general from 48 U.S. states, plus the District of Columbia and Puerto Rico launched a formal antitrust investigation into Google last year, headed by Texas Attorney General Ken Paxton. At least seven of those attorneys general are expected to attend this week’s meeting.

Attorney General William Barr commented on the significance of the size of the coalition of state AGS. Per the WSJ:

The size of the coalition reflects “the importance of these issues to Americans across the country, regardless of location or political persuasion,” U.S. Attorney General William Barr said last month in a speech to the National Association of Attorneys General in Washington.

Now, what, pray tell, are these state AGs and the DoF looking to investigate? The Journal reports:

The state and federal investigations have given considerable focus to Google’s powerful position in the lucrative market for online advertising. The company’s dominant position in online search and possible anticompetitive behavior by Google in its Android mobile operating system have also drawn scrutiny, according to the people familiar with the matter.

To clarify that latter statement, Bloomberg takes a bow in State AGs, U.S. Justice Lawyers to Discuss Google Probe: WSJ:

A coalition of 48 states opened an antitrust investigation that will dig into Google’s operations in search and mobile software, going beyond an initial focus on the company’s advertising business, Bloomberg News said in November, citing two people familiar with the probe.

The state officials met privately in Denver in November to help prepare for an investigation that will likely present challenging competition issues, one of the people said at the time. The states were also planning to map out a strategy for dividing the workload of the investigation, said two of the people.

Now, I should note here, that no less an authority than Bill Black has noted that the 48-state  investigation may actually not be all it’s cracked up to be; see 48 States to Investigate Google: Anti-Trust or Politicking? One thing Black zeroed in on – and which leapt out at me also, is that the Texas AG, Ken Paxton, is taking a lead role in the state probe. But Republicans, and particularly conservative ones, are inherently hostile to the notion of aggressive anitrust enforcement. The wrinkle here is that Paxton appears to have targeted the tech companies for ideological reasons – because they’re “liberal” – rather than for any antitrust principle. How this plays out in the realm of antitrust enforcement is anybody’s guess.

Another point that  Black highlights is the dependence of state AGs on campaign contributions – a reason that California didn’t sign on to take on Google, a major source of funds.Will the state AG’s follow through on a tough antitrust agenda, with all that implies for circumscribing their ability to raise raising campaign funds? Again, the answer is unclear. I think.

What that means is that we must watch very carefully to see whether this state investigation of Google is intended to draw blood, or whether it will remain just some elaborate form of kabuki.

That all being said, and despite the basic Republican hostility, going back at least to the Reagan years, for aggressive antirust enforcement, the WSJ quotes US AG Barr as expressing support for a broad focus, according to the WSJ:

Mr. Barr hinted that a broad approach might be best.

“Many online platforms are not only big, but also offer a wide breadth of products and services,” he said. “Antitrust enforcers therefore must take an equally broad view of these platforms’ offerings, and the relationships between different markets, products and business practices.”

Both the Justice Department and the states have been beefing up their legal teams. Some state attorneys general have said publicly they need close cooperation with the Justice Department in order to take on Google successfully.

But I should note that such talk is cheap.

The attention of American regulators has not been limited to alleged anti-competitive behavior by Google alone. As the WSJ notes:

In addition to probes by the states and Justice Department, the Federal Trade Commission is examining certain practices at Facebook Inc., including whether it acquired potential rivals such as Instagram and WhatsApp to head off competition. The House Judiciary Committee is looking at Facebook, Google, Apple Inc. and Amazon.com Inc. for possible anticompetitive practices.

There are signs of a partisan divide emerging as to how to pursue the Google probes, with the WSJ noting:

It is possible partisan divisions could re-emerge in the Google investigation. When it comes to large tech companies, some Democrats are privately skeptical that a Republican-led administration will take what Democrats view as sufficient action to curb perceived abuses of market power.

Fueling that sentiment is the outcome of two recent federal investigations of Facebook and Google’s YouTube. Officials on the Federal Trade Commission split along party lines about whether settlements with the firms were tough enough, with Republicans casting the settlements as historic victories and Democrats calling them weak.

Where is the Google investigation going? I’m not sure. But I point out that while the Journal  notes “some Democrats are privately skeptical that a Republican-led administration will take what Democrats view as sufficient action to curb perceived abuses of market power” – we didn’t see the DoJ, when led by either by AG Eric Holder or AG Loretta Lynch taking an aggressive stance regarding antitrust enforcement against any of these Big Tech firms, either.

The reality is, both parties have colluded in letting the situation get as far out of control as it has – so that Amazon, Apple, Facebook, and Google have been able to achieve such overwhelming market dominance, so that each can squelch inconvenient competition.

India’s Competition Probe

On a related note, I would like to reiterate that when we look aboard, we do find regulators taking a more  critical stance towards the possible anti-competitive practices of  local subsidiaries of American technology behemoths. Take  India as an example. Earlier this month, Jeff Bezos visited India.

Things did not go well, And despite a request, he was unable to meet with prime minister Narendra Modi, or any of his ministers. And that was not the only problem. As I wrote in Jeff Bezos’ Not So Excellent Indian Adventure: Modi Government Disses Inept Amazon.

The day before he arrived, the Competition Commission of India initiated an investigation into Amazon, for alleged violations of competition law, as reported by livemint  in Amazon, Flipkart to be probed for abuse of competition law

The Competition Commission of India (CCI) on Monday ordered a probe into alleged competition law violations by Amazon and Walmart-owned Flipkart over allegations that the e-commerce majors promoted and gave discounts to “preferred” sellers, entered into exclusive partnerships with smartphone brands and abused their dominant position.

CCI noted four alleged practices on both the marketplaces—exclusive launch of mobile phones, preferred sellers on the platforms, deep discounting and preferential promotion of private labels.

The antitrust body said such exclusive arrangements between smartphone or mobile phone brands and e-commerce platforms or select companies selling exclusively on either of the platforms merit an investigation.

“It needs to be investigated whether the alleged exclusive arrangements, deep-discounting and preferential listing by the OPs (opposite parties) are being used as an exclusionary tactic to foreclose competition and are resulting in an appreciable adverse effect on competition contravening the provisions of Section 3 (1) read with Section 3(4) of the Act,” the CCI order stated.

The Bottom Line

Whether the Trump DoJ can be bothered to enforce US antirust laws vigorously remains to be seen. If it chooses to “cooperate” more closely with state probes that are not going anywhere, that’s not exactly news, either. It’s been quite some time before the US was truly serious about antitrust enforcement. That’s a bipartisan failing, and not just something that can be pinned on Republicans.

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13 comments

  1. Frank Little

    Do other countries use anything like the consumer welfare standards that the US uses in anti-trust enforcement?

    I ask because as someone with no expertise in this area it seems like the fact that services provided by Google or FB are nominally “free” gives them lots of legal wiggle room to argue that their consolidation doesn’t harm consumers because it’s not raising prices even if they actually are doing harm. I’m wondering if stronger/different legal standards for anti-trust abroad might have something to do with more aggressive actions being taken elsewhere compared to the US.

    Reply
  2. Carolinian

    Don’t forget Trump is feuding with Bezos and since Trump takes everything personally that may supersede free market ideology. Google too is on thin ice by acting politically and since many of the conservative objections are about censorship then maybe they are, in this instance, right. Both Google and Facebook at first resisted pressure to block so called “fake news” and that was the right decision including from a business standpoint. Given their semi monopolistic power the last thing we need is for private parties to start controlling internet speech using their private status as an excuse.

    Reply
      1. Jerri-Lynn Scofield Post author

        Thanks for highlighting the clip. I read Common Dreams every day, but somehow missed this post.

        Reply
  3. DHG

    Last thing I would do is get involved with anything to do with this admins DOJ. Its become a rogue agency in service to the fake president.

    Reply
  4. John Zelnicker

    Good information, Jerri-Lynn.

    I’m glad you posted this in light of Matt Stoller’s new book, Goliath, which seems to be getting good press.

    Perhaps the problems with monopolies is beginning to get more traction.

    I don’t think we are going to be able to make a lot of headway against the neoliberal project until these huge companies are broken up. They are so profitable that they give their owners too much wealth and therefore too much political power, which they mostly use to maintain the status quo.

    Although breaking them up is made more difficulty by their deep integration into the surveillance state. DoJ and the state AG’s may end up being thwarted by the agencies the companies are tied to.

    I also think Bill Black is spot on. We are most likely to end up with a whitewash or a slap on the wrist level fine that leaves the companies basically intact.

    Reply
    1. Jerri-Lynn Scofield Post author

      I bought Goliath when I was recently in the US, and can recommend it highly. Learned a lot and it’s a good read: neither dry nor turgid like a lot of writing on political economy. I also follow Stoller’s twitter feed and his posts on his BIG site (as well as link to them).

      Reply
  5. curlydan

    The company I work for does paid search advertising on Google. For years, we tested being in 1st, 2nd, or (I think) 3rd place on Google paid search, i.e. how far down the page we are on paid search results. Note: they never took my suggestion to completely abandon paid search–chickens!

    Of course, we found out that we could save money and improve margins by bidding on 2nd or 3rd place instead of 1st place. Our clients didn’t really care if they had to look one more link down. This probably started costing Google money.

    I’m sure a lot of other companies were doing the same thing. So it turns out that now Google has removed bidding on “places”. Now, it’s some new method where you bid on what % you want to be the “headliner” in paid search. I’m not exactly sure on the exact details because it’s not my field or department.

    Nonetheless, we’re going to test various Headline percent rates now. Except, and here’s the kicker, we need to go to Google to ask them of the markets we’re testing in, how much traffic we’ll get. In other words, we basically alert Google that we’re testing their system to see how we can save money. Google can then use this information to probably re-do their bidding to their advantage.

    Total freakin’ monopoly. Judge, jury, and executioner.

    Reply
    1. JTMcPhee

      Is there any way to just stop using Google?

      My sister does a fair amount of online research and she had never heard of DuckDuckGo or other search engines. How typical? And I have no idea if there are other ways to starve the beast by lots of people opting out of their silo,, probably not since they are mainlining MMT money And have so many other resources.

      My sense is that the antitrust legislation does not begin to provide “legal” pathways to demolish this and the other monopolies. Too tired any more to research what the EU is doing, or India or other places facing the same kind of monopoly power.

      As to all those AGs chatting with the DoJ, I was involved years ago in one of those Great Big All The Attorneys General Of Many States pieces of litigation. That was the litigation against General Motors for selling Oldsmobiles sold as “Rockets,” once a valuable brand, with not the robust Olds Rocket V-8s and transmissions, but crappier Chevrolet engines and weaker transmissions. Not just the consumer fraud aspect of this scam, but actual provable harm to purchasers as the Chevy products had nowhere near the durability of the Oldsmobile product. GM of course claimed that the engines and transmissions were “equivalent.” Their lead counsel condescendingly told a state court judge that GM could use whatever engines it wanted to in whatever cars it cared to, since they were all GM products. I loved the judge’s telling him that “Mr. Gottschal, Engine Charlie Wilson has been dead quite a few years, and in my courtroom it is not the case that what is good for General Motors is good for the United States.” On “Engine Charlie,” a real mover and shaker in industry and as SecDef and other roles: https://en.wikipedia.org/wiki/Charles_Erwin_Wilson

      This started as the lawsuit the Illinois AG filed against GM for pulling this switcheroo under the state’s Consumer Fraud Act (since amended to remove its teeth), then amending and moving into federal court under the Magusson-Moss Warranty Act. The ball really got rolling when mass tort lawyers got involved, basically cutting and pasting our pleadings and in a couple of cases not even bothering to change the name of the plaintiff or the IL AG’s signature block on the complaint they filed. Almost all state AGs eventually joined in, eventually steamrollered the Illinois AG who wanted some serious relief for Illinois buyers, and by the time the horse trading was done, the people who got suckered into buying these cars got a puny little warranty extension and a couple of bucks, the tort lawyers got millions in fees (a small fraction of the supportable damage claims (early breakdown, worse fuel mileage, etc.), and GM “settled” the fraud claim by adding a couple of lines to the new-car window stickers: “This contains GM power train components that have been manufactured to GM specifications in one or more GM production plants.” Case closed.

      Here’s an NYT synopsis of the situation: “Jury Orders GM to Pay 10,000 [purchasers of Chevymobiles] in Switch of Engines,” https://www.nytimes.com/1981/06/28/us/jury-orders-gm-to-pay-10000-in-switch-of-engines.html The case was filed originally by IL AG William J. Scott (Diana Dilling and I were the assistant AGs who first recognized the scam and the legislation that should have provided a remedy. The case originated from a consumer complaint letter from a gentleman named Joseph Siwak, who had been buying a new Oldsmobile with a Rocket V-8 since they first came out. As a trained mechanic, he knew what the significant differences between the Olds 350 V-8 and associated transmission and crappier Chevy 350 and tranny were. He wrote of his new 1976 Oldsmobile, “I got Rockets (labeling) on my dashboard, there’s a Rocket on my steering wheel, Rockets on the fenders, but there is no Roicket under the hood!” Trust, once lost, is hard to regain…

      I second the notion that it is unlikely at best that having a bunch of AGs working hand in glove with the Justice Department, a den of iniquity even in the 70s and 80s when I was doing environmental enforcement with the US EPA, will produce anything other than another steaming t_urd outcome.

      Can I mention the most dogged of the private attorneys, who fought the crappy settlement and litigated to the bitter end with GM to get real relief for his clients? Charles “Pat”
      Boyle lost his marriage and his health by his tenacity. He sold his house to fund his work on contingency for his clients. Lots of lessons there…

      Reply
      1. Jerri-Lynn Scofield Post author

        Thanks for sharing this history – sad to see that the enforcement rot started so long ago. Can’t promise anything on EU developments, but I’ve been following Amazon’s travails in India, have posted on the subject twice, and intend to continue to do so, when there’s a noteworthy development.

        Reply
      2. curlydan

        I think there are many ways to avoid using Google search for individuals. I love duckduckgo. I think a “starve the beast” strategy would work, but it would need court enforcement to direct traffic to other search sites.

        Unfortunately, no company will stop advertising with Google because that’s where almost all the people are. Companies would be at a severe disadvantage to competitors if they did not use Google. Bing, Yahoo, and duckduckgo combined do not even come close to Google’s traffic.

        Reply
  6. Jen

    It’s weird how we setup a game where a company is first incentivised to dominate and when it does we cry and shout about it and try to enforce all kinds of legal shenanigans to reverse it’s domination. Hasn’t this been the history of antitrust/monopoly? We desperately need to think up better economic systems and I suggest NC starts posting about such rather than endless whining about corporate misbehaviour.

    Reply
  7. Oh

    J-LS, Thanks for this post.
    The best place to start on companies like Google, Amazon and others is to prevent them from buying other companies and restricting their growth and size. The frenzy in Silicon Valley by venture capitalists begins the stampede; this raises stock prices and the frenzy to buy during the public offering accelerates the madness. The companies themselves then buy up smaller entities in a effort to show positive earnings (case in point – Cisco). And the snowball effect of this cycle of activity results in monopolies which are hard to break up because of politics.

    Reply

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