Google Is at the Center of a Storm Brewing Over Big Tech

By David Streitfeld, Cecilia Kang, Katie Rogers and Stephanie Saul

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That the Justice Department is exploring an investigation of Google underlines a major shift in the United States’ attitude toward the big technology companies.CreditCreditAmy Osborne/Agence France-Presse — Getty Images

SAN FRANCISCO — Google, one of the most successful companies in history, has generally gotten its way with American regulators. That may be changing.

Politicians on the right and left are decrying the tech company’s enormous power. President Trump and other Republicans have focused on whether the company’s online search results are biased. Democrats have focused on whether the company stifles competition. And now, the Justice Department is exploring an investigation of the advertising and search firm, according to several people with knowledge of the discussions.

It is a small and preliminary step, and it could easily come to nothing. But if the agency pursues a case, it will almost certainly inspire reams of bad publicity, promote consumer distrust, sink employee morale and remind everyone that Google, with its early motto of “Don’t be evil,” held itself to standards it sometimes could not match.

A prospect that should really worry Google is a replay of the government’s case against Microsoft in the 1990s. Microsoft did not have to break itself into two, which was the government’s goal. But the company was distracted for at least a decade, which allowed space for start-ups like Google. Microsoft’s reputation took a dive.

“The damage to the monopolist’s position comes from the public airing of the facts,” said Gary Reback, a Silicon Valley lawyer who was instrumental in the case against Microsoft and has worked with companies that argue they have suffered unfair competition from Google.

Even without a formal government investigation, Google’s reputation started to fray over the weekend as politicians jumped on the news.

“It’s time to fight back,” said Senator Elizabeth Warren of Massachusetts, a popular condender for the Democratic nomination for president. Senators Josh Hawley, Republican of Missouri, and Richard Blumenthal, Democrat of Connecticut, each said the scrutiny was overdue.

The White House did not respond to questions about whether the president would support an investigation by the Justice Department. But according to two people familiar with his thinking, Mr. Trump would probably welcome any action.

Mr. Trump, like many other Republicans, has repeatedly complained publicly that Google suppresses positive news about conservatives in search results. He has also criticized big tech companies like Amazon, Facebook and Twitter.

Google, whose parent company is Alphabet, declined to comment, as did representatives for the Justice Department and the Federal Trade Commission.

Like Amazon, Apple and Facebook, Google is awash in cash, data and ambition, and increasingly controversial. The F.T.C. announced in February an antitrust task force to look at the technology field. But in an unusual move, the commission has now agreed to give oversight of Google to the Justice Department. That puts pressure on the department’s head of antitrust, Makan Delrahim, to follow through with a robust investigation.

In the past, Mr. Delrahim has said that “credible evidence” would need to exist before antitrust officials would step in. Inside the White House, broader discussions about regulating Google have not taken place, one of the people close to Mr. Trump said Saturday. But that person said that Mr. Delrahim had built up “a lot of authority” in the Trump administration, and that there would be comfort with what the agency recommends.

In exchange for the Justice Department’s claim over the antitrust issues related to Google, the F.T.C. took over antitrust oversight of Amazon, according to two people familiar with the decision.

The online retailing giant has been criticized for using its massive online sales site to edge out competitors and harm third-party sellers that use the platform to sell goods. Amazon has argued it was not a monopoly in retail and that Walmart and other companies made up a big chunk of the retail market.

The decision to divide antitrust oversight of the two tech giants was part of negotiations a few weeks ago between the agencies’ antitrust divisions. To avoid overlap, the agencies routinely negotiate to determine which one will take on merger reviews and antitrust cases.

The oversight of Amazon was earlier reported by The Washington Post.

It is unclear what the F.T.C. will explore in its scrutiny of Amazon and it does not appear that the agency has started a formal investigation into the company, the two people said.

The two people familiar with the decision warn that the decision to divide responsibilities over the two companies is a nascent step toward antitrust scrutiny of Google and Amazon.

The debate between the agencies suggests that “whoever wins will open a significant investigation,” said Michael Kades, the director for competition issues at the Washington Center for Equitable Growth and a former F.T.C. official.

“An investigation of Google is significant for Google and other major players in the tech space,” Mr. Kades said.

The F.T.C. is near the end of negotiations with Facebook about the size of a fine for violating a 2011 privacy settlement. It might be as high as $5 billion. Facebook faces other investigations on multiple continents as governments seek to rein in the social media site.

As Mr. Reback pointed out, it does not always take a trial to improve behavior. After two professors explained in a paper how Amazon was restricting its third-party sellers from selling their goods more cheaply on other platforms, an anti-competitive move, Mr. Blumenthal picked up on the issue. He wrote a four-page letter to the F.T.C. and the Justice Department saying he was “deeply concerned,” and Amazon quietly dropped the practice.

Mr. Reback said the Justice Department’s move was significant. “They wouldn’t open something unless they at least thought there was smoke,” he said.

That view was challenged by Barry Lynn, director of the Open Markets Institute, a Washington think tank that has played a leading role in raising antitrust concerns.

“Until we see what they intend to do, none of this means anything,” Mr. Lynn said. “Maybe they are simply blowing smoke so the president gets happy for a moment so they can go back to doing nothing.”

The F.T.C.’s highest-profile technology antitrust case in the past decade involved Google. In 2011, the commission opened an investigation into whether the company ranked the search results of competing shopping, travel and reviews sites unfairly low. It closed the investigation in 2013 in a unanimous vote of the five-member commission that left Google largely unscathed outside of some minor voluntary commitments.

In 2015, The Wall Street Journal obtained the original F.T.C. staff report, which was much more critical than what was publicly revealed at the time. Google’s “conduct has resulted — and will result — in real harm to consumers and to innovation in the online search and advertising markets,” the report concluded.

Consumer groups have chastised the F.T.C. decision as a failure of American antitrust enforcement that set the pace for tech giants to grow into monopolies. Google, Facebook and Amazon control the online advertising market, and Google has grown from $38 billion in revenue in 2011 to $136 billion last year.

Since the F.T.C. investigation closed, the complaints against Google have expanded. Competitors that have complained to American regulators include Yelp, the consumer review site, and travel sites like TripAdvisor.

European regulators have accused Google of abusing its dominance in the smartphone industry with its Android operating system, which is used in 80 percent of the world’s smartphones. In July, European regulators fined Google $5.1 billion for automatically installing its search engine and other apps on Android phones.

Sundar Pichai, the company’s chief executive, has rebutted allegations of antitrust violations, as well as the accusations of biased results. After the European decision, he said on Twitter that “rapid innovation, wide choice, and falling prices are classic hallmarks of robust competition.”

“Android has enabled this and created more choice for everyone, not less,” he added.

The reference to “falling prices” points to a hurdle for any investigation. John Sherman, the Ohio senator for whom the Sherman Antitrust Act of 1890 is named, was able to decry monopolistic overcharges as “extortion which makes the people poor.” Modern antitrust theory revolves around the notion that unless there is direct harm to consumers, there is no case. And Google’s services are free to consumers.

The queasiness over the big tech companies is more spiritual than financial. Polls show a growing anxiety about the influence of technology on American lives, and the issue has emerged as a litmus test for the 2020 Democratic presidential field.

Ms. Warren said Saturday that she had been “talking for years about how Google is locking out competition.” A billboard her campaign erected last month near a train stop in San Francisco was designed to appeal to Silicon Valley commuters, particularly those who have been squeezed to distant housing by the area’s tech-fueled property boom.

It asks passers-by to “join our fight” to “Break Up Big Tech” by sending a text message.

On Saturday, a spokesman for Senator Bernie Sanders of Vermont, another leading contender, said the senator “has been trying to sound the alarm for years that the concentration of economic power in the hands of a few threatens our democracy and leads to rigged political and economic systems.”

Follow David Streitfeld on Twitter: @DavidStreitfeld.

David Streitfeld reported from San Francisco, Cecilia Kang and Katie Rogers from Washington, and Stephanie Saul from New York.