# United States v. Google/Conclusions of Law/Section 2C

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    C. Google Has Monopoly Power in the General Search Services Market.
The court turns now to address whether Google possesses monopoly power within the market for general search services. “While merely possessing monopoly power is not itself an antitrust violation, it is a necessary element of a monopolization charge.” Microsoft, 253 F.3d at 51 (citations omitted). “Monopoly power is the power to control prices or exclude competition.” du Pont, 351 U.S. at 391. “More precisely, a firm is a monopolist if it can profitably raise prices substantially above the competitive level.” Microsoft, 253 F.3d at 51. Importantly, a firm need not actually have earned monopoly profits or excluded competition to possess monopoly power. “[T]he material consideration in determining whether a monopoly exists is not that prices are raised and that competition is actually excluded but that power exists to raise prices or exclude competition when it is desired to do so.” Am. Tobacco Co. v. United States, 328 U.S. 781, 811 ​(1946) (emphasis added). “It is not necessary that the power thus obtained should be exercised. Its existence is sufficient.” Id. (internal quotation marks omitted).
The possession of monopoly power may be proven through direct or indirect evidence. Direct evidence of monopoly power is rare. “Where evidence indicates that a firm has in fact profitably” raised prices substantially above the competitive level, “the existence of monopoly power is clear.” Microsoft, 253 F.3d at 51. More often, courts “examine market structure in search of circumstantial evidence of monopoly power.” Id.; see id. at 57 (observing that “direct evidence [is not required] to show monopoly power in any market”). Under this indirect, structural approach, “monopoly power may be inferred from a firm’s possession of a dominant share of a relevant market that is protected by entry barriers.” Id. at 51.
A barrier to entry is “[a]ny market condition that makes entry more costly or time-consuming and thus reduces the effectiveness of potential competition as a constraint on the pricing behavior of the dominant firm . . . regardless of who is responsible for the existence of that condition.” S. Pac. Commc’ns Co. v. AT&T, 740 F.2d 980, 1001 (D.C. Cir. 1984). “Common entry barriers include: patents or other legal licenses, control of essential or superior resources, entrenched buyer preferences, high capital entry costs[,] and economies of scale.” Image Tech. Servs., Inc. v. Eastman Kodak Co., 125 F.3d 1195, 1208 (9th Cir. 1997); see also United States v. Syufy Enters., 903 F.2d 659, 667 (9th Cir. 1990) (observing that a “network of exclusive contracts or distribution arrangements designed to lock out potential competitors” is a barrier to entry). A plaintiff must not only show that such barriers to entry exist, but that those barriers are “significant[.]” Microsoft, 253 F.3d at 82.
Certain market behaviors are not inconsistent with a defendant’s possession of monopoly power. Evidence that a dominant firm invests in research and development is not antithetical to ​monopoly power. “[B]ecause innovation can increase an already dominant market share and further delay the emergence of competition, even monopolists have reason to invest in R&D.” Id. at 57. The same is true of decreasing price: “[A] price lower than the short-term profit-maximizing price is not inconsistent with possession or improper use of monopoly power.” Id. (citation omitted). Finally, “[t]he defendant’s innocence or blameworthiness . . . has absolutely nothing to do with whether a condition constitutes a barrier to entry” evincing monopoly power. AT&T, 740 F.2d at 1001.
Plaintiffs attempt to prove that Google has monopoly power in the market for general search services through both direct and indirect evidence. Although they offer little direct evidence, the indirect evidence supporting the structural approach—a dominant market share fortified by barriers to entry—easily establishes Google’s monopoly power in search.
       1. Direct Evidence
Plaintiffs’ direct evidence is limited. They note that Google’s immense revenues and large profit margins, FOF ¶¶ 8, 57, 259, allow it to capture significant surplus from the challenged contracts, see U.S. Pls.’ Proposed Findings of Fact, ECF No. 839 [hereinafter UPFOF], at 27–28; Tr. at 4775:21-24 (Whinston) (“[T]he size of profits and . . . when firms have a really, really big advantage, that is very likely to coincide with market power.”); id. at 415:8-10 (Varian) (agreeing that in some cases, “large profit is one indicator of monopoly”).
In addition, Plaintiffs point to Google’s admission that it does not “consider whether users will go to other specific search providers (general or otherwise) if it introduces a change to its Search product.” UPX6019 at 365–66. Google’s indifference is unsurprising. In 2020, Google conducted a quality degradation study, which showed that it would not lose search revenue if were to significantly reduce the quality of its search product. FOF ¶ 134. Just as the power to raise ​price “when it is desired to do so” is proof of monopoly power, Am. Tobacco, 328 U.S. at 811, so too is the ability to degrade product quality without concern of losing consumers, see Andrew Chin, Antitrust Analysis in Software Product Markets: A First Principles Approach, 18 Harv. J.L. & Tech. 1, 22 n.134 (2004) (“A seller with market power may find it profitable to reduce product quality in the eyes of a captive group of consumers if the seller can thereby reduce production costs or, more generally, if the seller’s interests are adverse in some way to the consumers’ preferences.”). The fact that Google makes product changes without concern that its users might go elsewhere is something only a firm with monopoly power could do. See Microsoft, 253 F.3d at 58 (observing that Microsoft’s setting “the price of Windows without considering rivals’ prices” is “something a firm without a monopoly would have been unable to do”).
Other direct evidence presented was less persuasive. Plaintiffs submitted evidence that Google’s Senior Vice President of Knowledge and Information Products, Dr. Prabhakar Raghavan, cautioned his team against responding hastily to DDG’s privacy initiatives absent a business case for doing so. FOF ¶¶ 138, 118–119. According to Plaintiffs, Google’s ability to offer fewer privacy protections—without concern as to a rival’s superior privacy offerings—is evidence of monopoly power. See U.S. Plaintiffs’ Post-Trial Br., ECF No. 838 [hereinafter UPTB], at 53–55. But using privacy to demonstrate monopoly power is questionable for a host of reasons. For one, Plaintiffs have not established any framework for evaluating whether Google’s privacy offerings are suboptimal. Sure, there was evidence that users generally care about privacy. FOF ¶ 116. But Plaintiffs submitted little proof that identified the privacy features users value and, importantly, whether Google declined to adopt such features without any concern that its users would go elsewhere.
​Nor is it proof of monopoly power that Google considers the business case for making privacy adjustments. There is some tradeoff between privacy and search quality. FOF ¶¶ 121–125. For example, less information about a user’s search history might produce inferior results when the user returns to find more information about a previously searched topic. See id.; Tr. at 9905:1-10 (Murphy) (“Privacy is good, but it comes at a tradeoff from quality.”). Also, Google’s employees convincingly testified that Google refrained from particular privacy measures adopted by rivals to prioritize an improved user experience. FOF ¶ 120. That Google offers fewer privacy protections than DDG without losing users is thus not necessarily indicative of monopoly power. It may just be that users are willing to sacrifice enhanced privacy offerings for improved search functionality.
       2. Indirect Evidence—Market Share
Assessing monopoly power through indirect evidence begins with determining market share. Although there is no minimum percentage, the Supreme Court has recognized that two-thirds of a domestic market can constitute a “predominant share.” Grinnell, 384 U.S. at 571 (citing Am. Tobacco, 328 U.S. at 797). Duration also matters. “Monopoly power must be shown to be persistent in order to warrant judicial intervention[.]” Areeda & Hovencamp, Antitrust Law ¶ 801d (5th ed. 2022) [hereinafter Areeda]. Plaintiffs easily have demonstrated that Google possesses a dominant market share. Measured by query volume, Google enjoys an 89.2% share of the market for general search services, which increases to 94.9% on mobile devices. FOF ¶¶ 23–24. This overwhelms Bing’s share of 5.5% on all queries and 1.3% on mobile, as well as Yahoo’s and DDG’s shares, which are under 3% regardless of device type. FOF ¶ 25. Google does not contest these figures. Closing Arg. Tr. at 68:17–69:6.
​Nor is this market dominance of recent vintage. Google has enjoyed an over-80% share since at least 2009. FOF ¶¶ 23–24. That is a durable dominant share by any measure.
       3. Indirect Evidence—Barriers to Entry
Barriers to entry are essential to establishing monopoly power because the current market share may not reflect the “possibility of competition from new entrants[.]” Microsoft, 253 F.3d at 54. “[I]f barriers to entry are high, then market power can be sustainable over a long period of time.” Tr. at 4763:21-22 (Whinston). Plaintiffs identify several such barriers to the general search services market: (1) high capital costs, (2) Google’s control of key distribution channels, (3) brand recognition, and (4) scale. The court finds that these barriers exist and that, both individually and collectively, they are significant barriers that protect Google’s market dominance in general search.
          a. High Capital Costs
“[T]he need for large capital outlays and lengthy construction programs in order to enter the market” is a barrier to entry. AT&T, 740 F.2d at 1002; see Broadcom Corp. v. Qualcomm Inc., 501 F.3d 297, 307 (3d Cir. 2007) (barriers to entry include “high capital costs, or technological obstacles, that prevent new competition from entering a market in response to a monopolist’s supracompetitive prices”); Syufy Enters., 903 F.2d at 667 (structural barriers include “onerous front-end investments that might deter competition from all but the hardiest and most financially secure investors”).
Building and maintaining a competitive GSE require an extraordinary upfront capital investment, to the tune of billions of dollars. FOF ¶¶ 50–55. Apple’s Chief of Machine Learning and AI Strategy, John Giannandrea, testified that “a startup could not raise enough money . . . to build a very good, large-scale search engine” because “to build a competitive project is very ​expensive,” amounting to a “multi-billion dollar investment.” Tr. at 2261:11-19, 2268:6-7 (Giannandrea); DX374 at 301; see also UPX266 at 986 (“[A] world class search engine is at least a $2–4B/year R&D investment[.]”). Neeva founder, Dr. Sridhar Ramaswamy, testified to the same effect. Tr. at 3672:7 (Ramaswamy) (stating that Neeva required “two substantial [venture capital] funding rounds”). Google’s internal estimates also are consistent with this testimony. FOF ¶ 51 (assessing that it would cost Apple billions to compete in the search market). And those capital expenditures are required before the additional, multi-billion-dollar investment needed to build and maintain an ad platform or other means of monetization. FOF ¶ 55.
High capital costs thus constitute a substantial barrier to entry. See Marathon Oil Co. v. Mobil Corp., 669 F.2d 378, 381 (6th Cir. 1981) (concluding that the relevant market was “characterized by high barriers to entry because of capital requirements” of about $1 billion, rendering it “unlikely that a new vertically integrated company would enter the market to take [the defendant’s] place as a competitor and supplier for independent dealers”).
          b. Google’s Control of Key Distribution Channels
The D.C. Circuit has described a dominant firm’s “control of interconnection with its local distribution facilities” as perhaps the “most critical” barrier to entry, which should be considered by looking at the “realities of control[.]” AT&T, 740 F.2d at 1002. Plaintiffs point to two sources of Google’s control: the challenged contracts and its ownership of Chrome.
Without descending into the contested issues of exclusivity and anticompetitive effects at this juncture, see infra Section IV.C & Part V, it suffices to say that Google controls the most efficient and effective channels of distribution for GSEs. It is the exclusive preloaded GSE on all Apple and Android mobile devices, all Apple desktop devices, and most third-party browsers (Edge and DDG are the exceptions). FOF ¶ 59. Rivals cannot presently access these channels of ​distribution without convincing Google’s partners to break existing agreements, all of which are binding for a term of years. FOF ¶¶ 291, 349, 364; see infra Section V.A.1.b; Syufy Enters., 903 F.2d at 667 (a “network of exclusive contracts or distribution arrangements designed to lock out potential competitors” is a barrier to entry). Even if a new entrant were positioned from a quality standpoint to bid for the default when an agreement expires, such a firm could compete only if it were prepared to pay partners upwards of billions of dollars in revenue share and make them whole for any revenue shortfalls resulting from the change. Infra Section IV.A. No current search engine in the market can compete on those terms. It is even harder to envision a new entrant doing so.
It is also a “realit[y] of control” that Google is the sole default on Chrome. AT&T, 740 F.2d at 1002. Queries on user-downloaded Chrome make up 20% of searches conducted in the United States. FOF ¶ 63. Though the Chrome default is not alleged to be exclusionary conduct, it is a market reality that significantly narrows the available channels of distribution and thus disincentivizes the emergence of new competition. Google’s near-complete control of the most efficient search distribution channels is a major barrier to entry.
          c. Brand Recognition
“[T]he need to overcome brand preference established by the defendant’s having been first in the market or having made extensive ‘image’ advertising expenditures also constitute[s] barriers to entry.” AT&T, 740 F.2d at 1002; U.S. Anchor Mfg., 7 F.3d at 998 (“[I]t is settled that customer brand loyalty may constitute an impediment to competition and thus an aid in the exercise of market power.”); cf. Am. Council of Certified Podiatric Physicians & Surgeons v. Am. Bd. of Podiatric Surgery, Inc., 185 F.3d 606, 623 (6th Cir. 1999) (“[E]stablishing credibility naturally seems to be a significant barrier to entry, particularly for an enterprise that depends heavily upon reputation, such as certification of medical specialists.”). As U.S. Plaintiffs’ expert in behavioral ​economics, Dr. Antonio Rangel, opined: “If you have a brand that is so dominant and consumers are not familiar with the others, it’s already at ceiling.” Tr. at 649:19-21 (Rangel).
Record evidence firmly establishes that Google’s brand is widely recognized and valued. FOF ¶¶ 130–131. After all, “Google” is used as a verb. Even on Bing, “google.com” is the number one search. FOF ¶ 132. The “entrenched buyer preferences” enjoyed by Google are a major deterrent to market entry. Lenox MacLaren Surgical Corp. v. Medtronic, Inc., 762 F.3d 1114, 1126 (10th Cir. 2014).
Google’s brand recognition also provides its distribution partners with a powerful incentive to retain Google as the default GSE. FOF ¶ 133. Google considers its brand as a benefit to its contracting partners, incentivizing them to choose Google. See Tr. at 7780:21-23 (Pichai) (“Apple benefits and sells more iPhones by having their brand associated with the quality . . . [of] Google Search.”). The Google brand also benefits from the “seal of approval” it receives from its partners. See id. at 7780:23-24 (Pichai) (“Our brand gets validated by being present as a default in iPhones.”); id. at 2619:24–2620:4 (Cue) (“It’s a great product for our customers, and we wanted our customers to know that they’re getting the Google search engine. I think one of the benefits, for example, that Google gets from Apple is that we are telling the world that Google is the best search engine, because that’s what they would expect Apple to pick.”). This mutuality of branding interests makes market entry that much harder.
To be sure, Google’s brand recognition is due in no small part to its product quality. FOF ¶ 130. But as previously stated, “[t]he defendant’s innocence or blameworthiness . . . has absolutely nothing to do with whether a condition constitutes a barrier to entry” evincing monopoly power. AT&T, 740 F.2d at 1001.
          d. Scale
Finally, Plaintiffs identify scale as a barrier to entry. A lengthy discussion on the relationship between scale and search engine quality is unnecessary at this stage. See infra Section V.A.2. It is enough to say for now that scale is an important factor in search quality. As Google admits, “the volume and availability of user interaction data is one factor that can affect search quality[.]” Google’s Proposed Findings of Fact, ECF No. 835, ¶ 256 [hereinafter GFOF]. Google has a lot of scale, and new entrants struggle to obtain it. FOF ¶¶ 87, 89. As Dr. Ramaswamy testified, acquiring users and getting them into the “habit” of using a new product is “tricky.” Tr. at 3699:22 (Ramaswamy). Securing users to generate scale, in order to then exploit the benefits of scale, is a significant barrier to entry. See Microsoft, 253 F.3d at 55–56 (identifying as an entry barrier that “most developers prefer to write for operating systems that already have a substantial consumer base,” such that developers would not similarly support rival operating systems without scale); see also FTC v. Surescripts, LLC, 665 F. Supp. 3d 14, 45 (D.D.C. 2023) (same).
       4. Google’s Counterarguments
Google counters that the barriers to entry are not as high as Plaintiffs suggest. It points to (1) evidence of new entrants; (2) the emergence of nascent technology like artificial intelligence; and (3) its own emergence in a market that, prior to its entry, was dominated by other firms, most notably Yahoo. Google also cites the growth of search output (measured by number of queries) as inconsistent with its monopoly power. None of these contentions demonstrate low barriers to entry.
​First, Google identifies Neeva and DDG as two market entrants during the alleged monopoly maintenance period. Neeva, it argues, “was able to build and develop a search engine in a relatively short period of time that [Dr. Ramaswamy] believed rivaled Bing and Google with a much smaller venture capital funding.” Closing Arg. Tr. at 59:25–60:3. Also, “DuckDuckGo exists and . . . they believe they compete in the market.” Id. at 60:4-5; see GRFOF ¶ 25 (DDG CEO “Gabriel Weinberg testified that he built, and continues to operate, DuckDuckGo at a fraction of Plaintiffs’ estimated cost.”).
These market entries are not inconsistent with high barriers to entry and Google’s possession of monopoly power. “The fact that entry has occurred does not necessarily preclude the existence of ‘significant’ entry barriers. If the output or capacity of the new entrant is insufficient to take significant business away from the [monopolist], they are unlikely to represent a challenge to the [monopolist’s] market power. Barriers may still be ‘significant’ if the market is unable to correct itself despite the entry of small rivals.” Rebel Oil Co., Inc. v. Atl. Richfield Co., 51 F.3d 1421, 1440 (9th Cir. 1995) (citations omitted); McWane, 783 F.3d at 832 (“Although the limited entry and expansion of a competitor sometimes may cut against such a finding, the evidence of McWane’s overwhelming market share (90%), the large capital outlays required to enter the domestic fittings market, and McWane’s undeniable continued power over domestic fittings prices amount to sufficient evidence” to support the conclusion that McWane had monopoly power.).
The tales of DDG and Neeva illustrate Rebel Oil’s point. Both entered the market notwithstanding Google’s dominance, but neither has “taken significant business” from Google and they therefore have not posed any meaningful threat to its “market power.” DDG, though in operation since 2008, has barely reached a 2% market share. FOF ¶ 25; Surescripts, 665 F. Supp. ​3d at 46–47 (“[T]he ability of one competitor to capture [a relatively minor percentage] of the market does not undermine [the dominant firm’s] durable monopoly power protected and perpetuated by barriers to entry.”). As for Neeva, it entered and exited within four years. FOF ¶ 14. Google argues that Neeva’s failure was caused by its subscription-based model, see GRFOF ¶ 25, but that is not the full story. The lack of access to efficient channels of distribution diminished Neeva’s ability to grow its user base and significantly contributed to its demise. FOF ¶ 76; see Multistate Legal Stud., Inc. v. Harcourt Brace Jovanovich Legal & Pro. Publ’ns, 63 F.3d 1540, 1555–56 (10th Cir. 1995) (significant entry barriers existed notwithstanding three attempted entries, given that two of them were “largely unsuccessful”). These firms’ experiences confirm that high barriers prevent entry of new competitors.
Second, the advent of artificial intelligence (AI) has not sufficiently eroded barriers to entry—at least not yet. New technologies may lower, or even demolish, barriers to entry, but such innovation is meaningful only if it can change the market dynamic in the “foreseeable future.” Microsoft, 253 F.3d at 55 (“[W]ere middleware to succeed, it would erode the applications barrier to entry. . . . [But] middleware will not expose a sufficient number of APIs to erode the applications barrier to entry in the foreseeable future.”). Currently, AI cannot replace the fundamental building blocks of search, including web crawling, indexing, and ranking. FOF ¶¶ 114–115. Neeva’s experience is again illustrative. Despite building a search engine enhanced by AI technology, FOF ¶¶ 110–111, Neeva could not ride it to market success. AI may someday fundamentally alter search, but not anytime soon. FOF ¶¶ 114–115.
Third, Google’s early success in dethroning Yahoo as the dominant market player says nothing about the barriers to entry as they exist today. For that same reason, Microsoft’s impression in 2009 that barriers to entry were low in search carries little weight here. See GTB at ​33 (citing DX430 at 2). The internet of today is a far different animal. Hundreds of millions of dollars is just the opening ante to enter the search market in part because of the internet’s dramatic growth; billions are needed to acquire meaningful market share. See infra Section IV.A. The next great search engine (if there is to be one) will not be built in a rented garage like Google. See Microsoft, 253 F.3d at 56 (stating that this case is not about Microsoft’s “initial acquisition of monopoly power,” but about its “efforts to maintain this position through means other than competition on the merits”).
Finally, Google argues that regardless of its market share and any barriers to entry, its lack of monopoly power is confirmed by the dramatic growth in search output and its numerous innovations that have increased search quality. Cf. Qualcomm, 501 F.3d at 307 (“The existence of monopoly power may be proven through direct evidence of supracompetitive prices and restricted output.”).
Dr. Israel opined: “A firm has monopoly power if it can act like a monopol[ist], which means reduce market-wide output. So to establish market power directly, you would need to show that the firm has reduced output relative to some but-for world[.]” Tr. at 8439:8-11 (Israel). But restricted output is simply a form of direct proof. Its absence is not fatal, as indirect evidence suffices to establish monopoly power. See Mylan Pharms. Inc. v. Warner Chilcott Pub. Ltd. Co., 838 F.3d 421, 435–36 (3d Cir. 2016) (treating as direct evidence the absence of “markedly restricted output” but then evaluating indirect evidence of monopoly power). Also, reduced output is an ill-fitting indicia of monopoly power in a market like search. Google’s marginal cost of responding to one additional query is near zero. In such a market, a dominant firm has no incentive to restrict output to earn monopoly profits. See H. Øverby & Jan Arlid Audestad, Introduction to Digital Economics § 6.2 (2d ed. 2021) (For a digital good like search, “because the marginal cost is zero and there is no limit to the number of units that ​can be produced without increasing the fixed costs[,] . . . the cost per unit produced will be zero independently of the production volume.”); cf. Pac. Eng’g & Prod. Co. of Nev. v. Kerr-McGee Corp., 551 F.2d 790, 796 (10th Cir. 1977) (recognizing that in the face of “decreasing marginal costs,” a firm “would be tempted to lower price and expand output to reach a lower point on its marginal cost curve”). So, the fact that search output has grown is not inconsistent with monopoly power in search.
For these reasons, the court concludes that Google has monopoly power in the general search services market.