Following on from the US Department of Justice’s (DOJ) antitrust win against Google in August, legal battles facing the tech giant have turned to the UK, with news that the Competition Appeal Tribunal (CAT) has paved the way for a £7bn case against Google to proceed.
Google will now have to defend its business practices in a landmark legal action brought by Nikki Stopford, co-founder of Consumer Voice, and legal firm Hausfeld & Co LLP.
The complaint against Google has two parts. The first concerns Google’s advertising model and sponsored searches, whereby advertisers pay to appear higher in Google Search results. The second relates to Google’s commercial agreement with Apple.
Regarding its advertising model, a market study by the Competition and Markets Authority (CMA), presented in its Online platforms and digital advertising report, found the return on capital employed by Google parent Alphabet was 39% on average between 2011 and 2021. The CMA analysis concluded that this figure had been well above any reasonable competitive benchmark for many years.
“Google was charging more for ads – somewhere in the region of 30% to 40% more than they would be if they were behaving in a competitive environment,” she said. “A higher price for ads means more cost, which is then factored into the cost of products and services.”
Businesses have little choice, according to Stopford, as 90% of web searches use Google Search. Even if a product is purchased on the high street, people tend to search online before visiting a store, she said, and whether it is purchased online or in-store, the cost of online advertising is reflected in the price consumers pay.
“We think that because the cost of advertising is higher for businesses because most businesses are using Google ads to advertise their products, then the impact of those higher costs is impacting all consumers, whether they’re bought in a store or online, through higher prices,” said Stopford, adding that this has meant that, as a whole, “people are paying in the region of £7bn more than they should”.
Regarding the second part of her complaint, Stopford said through its commercial agreement with Apple, Google has paid “billions to ensure that Google Search is the default search on iPhones and other Apple devices that use iOS”.
This is the same argument used by the US DOJ, which recently won a landmark legal victory against Google. The judge, Amit Mehta, ruled that the billions paid to Apple and Samsung to ensure Google Search is the default internet search engine on their devices was anticompetitive (see In the US box).
Browser policies under scrutiny
Another potential legal battle facing the tech giant is that the Digital Markets, Competition and Consumers Act could be used by the Competition and Markets Authority to regulate the major digital technology providers.
The CMA recently announced it was looking at whether intervention was needed in the mobile browser market. This would impact both Apple and Google parent Alphabet. The CMA’s Mobile browser and cloud gaming provisional decision report has identified several features in mobile browsers, browser engines and in-app browsing technology that restrict competition.
“We have provisionally found that various types of policies implemented by Apple are holding back innovation from other browsers,” the report authors wrote.
One of the areas highlighted in the provisional report was that web browsers that run on iOS need to use Apple’s browser engine, called WebKit, which determines what competing mobile browsers can do on iOS. “We have provisionally found that this limits the extent to which competitors can differentiate their browsers and offer enhanced features to iOS users,” the authors noted.
They also provisionally found that Apple may have withheld access or delayed giving competing mobile browsers using WebKit the same level of access and functionality as its own browser, Safari.
Google’s product design choices also make it “significantly harder” for consumers to drive competition by actively choosing which browser they use, the provisional report stated.
Under the Digital Markets, Competition and Consumers Act, the CMA can look at whether competition among digital giants such as Apple and Google is working.
Margot Daly, chair of the CMA’s independent inquiry group, said: “Markets work best when rival businesses are able to develop and bring innovative options to consumers. Through our investigation, we have provisionally found that competition between different mobile browsers is not working well and this is holding back innovation in the UK.”
Apple responded to the findings of the provisional report, saying: “Apple believes in thriving and dynamic markets where innovation can flourish. We face competition in every segment and jurisdiction where we operate, and our focus is always the trust of our users. We disagree with the findings in the report regarding Safari, WebKit and in-app browsing on iOS.
“We are concerned that the interventions discussed in the report for future consideration under the Digital Markets, Competition and Consumers Act would undermine user privacy and security, and hinder our ability to make the kind of technology that sets Apple apart. We will continue to engage constructively with the CMA as their work on this matter progresses.”
A battle of wills
The stage is now set for a confrontation between Big Tech, used by billions of people around the world, and regulators in the US and UK, seeking to put some controls over their power.
Earlier this year, the EU Digital Markets Act (DMA), which came into force in March 2024, resulted in Google making changes to Android to give users a choice of default browser, search engine and payment provider. Apple has needed to make equivalent changes on iOS.
Meanwhile, in the US, following a ruling in which Alphabet was found to have acted in an anti-competitive manner, the US DOJ is now looking to force the company to offload its Chrome browser.
There are similarities between the regulators’ investigations and Stopford’s complaint. Beyond its investigation into Google’s business practices relating to the Google search engine, the US DOJ is also investigating whether Google has monopolised the advertising technology (adtech) market.
Both Apple and Alphabet are using security as a key reason for keeping the status quo. The CrowdStrike global outage faced by Windows users in July 2024 is likely to play a part in balancing openness with the risk of major security breaches.
But the question facing regulators is whether consumers are happy with their existing mobile browser choices and whether they will truly benefit from disruption in the internet search and adtech markets.
This post is exclusively published on eduexpertisehub.com
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