Market Design Failure: The Google Search Antitrust Case

On August 5, 2024, U.S. District Court Judge Amit Mehta ruled that Google was in violation of the Sherman Act, Section 2 for monopolizing the search engine market via a multibillion dollar yearly payment in return for exclusive assignment on Apple device operating systems. 

The magnitude of the payment -- $20 Billion in 2023 -- surprised most followers of the case. However, the actual basis of Google’s payment was an ad revenue sharing percentage, which we have estimated to be 36%. Compared to the 30% in-app revenue sharing percentage Apple charges developers for a 1 in 380,000 video game shared position in the Apple Store, the Google payment for an exclusive search engine position does not seem excessive.

In searching for a remedy that is not overreaching, case law suggests that a judge start by asking a “but-for” question: But for this $20 Billion payment exclusive deal between Google and Apple, how can a search engine market be structured to be competitive?

The purpose of this paper is to suggest a market design remedy. This is opposed to remedies involving divestiture of the Chrome browser or elimination of all payments to Apple. The market design remedy mandates that Apple conduct an annual combinatorial auction for positions on a search engine choice screen. For the first few years, the remedy should require Google to maintain its 36% revenue share percentage.  The one hard structural choice is that the auction never include an exclusive position, given decades for Google to develop its current technical superiority in both search and AdTech without much competition.

In the first year, invite Microsoft, Mozilla, and others to bid the same 30% revenue sharing percent as the Apple Store.  Possibly, create new niche positions for AI search buttons.  Give Apple discretion to choose among bidders willing to bid  30% revenue sharing for a position on the basis of potential to execute.  Mandate Apple give new entrants multi-year terms, but allow Apple to include a liquidated damage clause, approved by an outside arbitrator,  to facilitate efficient breach due to poor performance.

Review all contracts after the courts rule on pending antitrust cases involving Google's AdTech