U.S. Justice Department hits Google with biggest antitrust lawsuit in two decades

The U.S. Justice Department and 11 states filed an antitrust lawsuit against Alphabet Inc's Google on Tuesday for allegedly breaking the law in using its market power to fend off rivals.

The lawsuit marks the biggest antitrust case in a generation, comparable to the lawsuit against Microsoft Corp filed in 1998 and the 1974 case against AT&T which led to the breakup of the Bell System.

Google, whose search engine is so ubiquitous that its name has become a verb, did not immediately respond to a request for comment. The company had revenue of $162 billion in 2019, more than the nation of Hungary.

Republican Senator Josh Hawley, a vociferous Google critic, accused the company of keeping power through "illegal means" and called the lawsuit "the most important antitrust case in a generation."

The Microsoft lawsuit was credited with clearing the way for the explosive growth of the internet since the antitrust scrutiny prevented the company from attempting to thwart competitors.

Tuesday's federal lawsuit marks a rare moment of agreement between the Trump administration and progressive Democrats. U.S. Senator Elizabeth Warren tweeted on Sept. 10, using the hash tag #BreakUpBigTech, that she wanted "swift, aggressive action."

Coming just days before the U.S. presidential election, the filing's timing could be seen as a political gesture since it fulfills a promise made by President Donald Trump to his supporters to hold certain companies to account for allegedly stifling conservative voices.

Republicans often complain that social media companies including Google take action to reduce the spread of conservative viewpoints on their platforms. Lawmakers have sought, without explaining how, to use antitrust laws to compel Big Tech to stop these alleged limitations.

Shares of Alphabet rose nearly 1% after news the government lawsuit was imminent. There was some doubt in the markets that Washington lawmakers will actually come together and take action, according to Neil Campling, head of tech media and telecom research at Mirabaud Securities in London.

"It's like locking the proverbial door after the horse has bolted. Google has already got the monopolistic position, has invested billions in infrastructure, AI, technologies, software, engineering and talent. You can’t simply unwind a decade of significant progress."

The 11 states which joined the lawsuit all have Republican attorneys general.

More lawsuits could be in the offing since probes by state attorneys general into Google's broader businesses are under way, as well as an investigation of its broader digital advertising businesses. A group of attorneys general led by Texas is expected to file a separate lawsuit focused on digital advertising as soon as November, while a group led by Colorado is contemplating a more expansive lawsuit against Google.

The lawsuit comes more than a year after the Justice Department and Federal Trade Commission began antitrust investigations into four big tech companies: Amazon.com Inc , Apple Inc, Facebook Inc and Google.

Seven years ago, the FTC settled an antitrust probe into Google over alleged bias in its search function to favor its products, among other issues. The settlement came over the objections of some FTC staff attorneys.

Google has faced similar legal challenges overseas.

The European Union fined Google $1.7 billion in 2019 for stopping websites from using Google's rivals to find advertisers, $2.6 billion in 2017 for favoring its own shopping business in search, and $4.9 billion in 2018 for blocking rivals on its wireless Android operating system.

Google calls Justice Department lawsuit 'deeply flawed'

Alphabet Inc's Google said the U.S. Justice Department's antitrust lawsuit against the company was "deeply flawed" and that users would find it more difficult to access superior search tools and affordable smartphones if the government wins its case. 

"American antitrust law is designed to promote innovation and help consumers, not tilt the playing field in favor of particular competitors or make it harder for people to get the services they want," Google senior vice president Kent Walker said in a blog post on Tuesday.

The lawsuit by the Justice Department and 11 states alleges Google used its market power to fend off rivals, including through distribution agreements that gave its search engine prominent placement on phones and internet browsers.

Google says those agreements, in which it shares revenue from search ads with distributors such as iPhone maker Apple Inc, help subsidize phones. 

Companies could carry other search engines, but users have repeatedly shown a preference for Google's search tools, Walker said. Consumers who prefer an alternative are able to switch the default search tool on iPhones and other devices, he said. But forcing device and browser makers to set "lower-quality search alternatives" as the default was not beneficial to consumers, Walker added.

He also described as incorrect the Justice Department's conclusion that topic-specific search tools such as travel services Kayak and Expedia or shopping giant Amazon.com Inc were not competitors to Google search.

Google contends the popularity of those narrow search tools lowers its market share than when counting only Microsoft Corp's Bing and other "general" search tools as competition.

(Reporting by David Shepardson, Diane Bartz, Paresh Dave; Editing by Chris Sanders, Edward Tobin and Matthew Lewis)