Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Yelp alleges Google uses ‘heavy thumb’ on local search, (Aug 29, 2024)

By Justin Marcus Smith, J.D.

Yelp contends Google should not be both the monopoly provider of general search results and the self-preferencing curator of its own local search content.

Yelp, Inc. has filed an antitrust action against Google LLC (Google) under Section 2 of the Sherman Act and the California Unfair Competition Law, arguing the suit is necessary to “safeguard competition, protect consumer choice, recover damages, and prevent Google LLC from engaging in various anticompetitive practices” allegedly designed to monopolize the markets for local search services and local search advertising. The press release accused Google of having placed its “heavy thumb on the scale to stifle competition and keep consumers within its own walled garden.” The complaint said Google is in the unique position of being able to make or break any web-based business. The seven count complaint requested injunctive and declaratory relief and money damages (YELP, Inc. v. Google LLC, No. 3:24-cv-06101 (N.D. Cal. Aug. 28, 2024)).

The Yelp complaint contended Yelp has aimed to connect consumers with local businesses through local search as a specialized vertical provider (SVP) since going “live” in October 2004. Yelp faulted Google’s “own inferior local search product” as Google’s motive for a putative strategy to “make sure that users never get to local search competitors in the first instance[.]” Yelp said Google “openly admits” to self-preferring its own products in all aspects of search, a departure from its origins in the late 1990s, when it was “lauded as an unbiased and impartial matchmaker sitting between consumers and all the web had to offer.” Yelp suggested that its problems with Google began after Yelp rebuffed a Google acquisition attempt.

More specifically, Yelp alleged that Google now engages in numerous anticompetitive practices, including:

• Stealing information from Yelp’s website and passing it off as Google’s own;

• Preferring Google local search results over Yelp’s;

• Implementing a “OneBox” feature to prioritize Google’s own inferior local search results as top results with an especially pronounced effect on mobile displays;

• Tweaking the Google algorithm to steer customers away from Yelp.

Yelp said Google undertook these practices not to provide a better product or to compete fairly, but to enhance its own bottom line and stifle competition. Yelp said Google has thereby harmed consumers and competition “in myriad ways” with an inferior product.

Counts. Yelp pleaded seven counts, paraphrased here, all in violation of the Sherman Act, 15 U.S.C. § 2, apart from the California unfair competition count:

1. Monopolization of local search;

2. Attempted monopolization of local search;

3. Attempted monopolization of local search advertising;

4. Unlawful tying of local search services to general search services;

5. Illegal monopoly leveraging in local search services;

6. Illegal monopoly leveraging in local search advertising; and

7. Violation of the California Unfair Competition Law, Cal. Bus. & Prof. Code § 17200, et seq.

Relief requested. Yelp requested the following relief:

• injunctive relief prohibiting Google from continuing to engage in the alleged anticompetitive practices and any others of the same purpose and effect;

• declaratory relief that the alleged restraints are unlawful;

• money damages, including trebling, with expenses and costs including attorney’s fees and expenses;

• pre-and post-judgment interest.

• restitution;

Relevant markets. The complaint defined three relevant markets, all in the United States:

• general search services;

• local search services;

• local search advertising.

General search services. Citing to Judge Mehta’s recent conclusion in United States v. Google, the complaint defined general search services in the United States as the first of three relevant antitrust markets. It said Google has “long recognized” that SVPs complement and do not cannibalize general search services, and customers “likewise recognize GSEs [General Search Engines] as a distinct product.” The complaint designated the United States as a relevant geographic market for general search services.

Local search services. The complaint defined local search services as a second relevant market with peculiar characteristics and uses such that general search services are not a reasonable substitute. The complaint stated that Google routinely recognizes local search services as a distinct product and a separate market, as shown by its creation of a “local search vertical.” The complaint said more than 50% of smartphone searches involve local intent. Again, the United States would be the relevant geographic market here.

Local search advertising. The complaint again cited to Judge Mehta in defining local search advertising as the third relevant antitrust market, wholly contained within the broader search advertising market. The complaint alleged that display ads and social media ads are not reasonable substitutes because they only refer to user latent intent, and advertisers do not substitute to such significantly. Again, the United States would be the relevant geographic market here.

Monopoly power. The complaint asserted that Google has monopoly power in the United States general search services market based on market share of about 88 percent, up from about 68 percent in 2007. Bing ostensibly trails at about 6 percent; Yahoo with less than 4 percent; and DuckDuckGo with less than 2 percent. The complaint said Google has been using its dominance to steadily increase its dominant position. Most recently, the complaint said Google accounts for “almost 95 percent of queries on mobile.”

According to the complaint, barriers to entry encompass capital investment intensity, highly complex technology, access to effective distribution, and adequate scale. Crawling, indexing, and ranking pose significant challenges that elevate the entry barriers for general search providers. Exclusive distribution contracts with browser manufacturers, cell-phone carriers, and hardware manufacturers, said to cost Google about $26 billion annually, allegedly establish and fortify entry barriers. Overwhelming Google brand recognition also helps: “’Google’ has become a verb[.]” The complaint continued that Google’s “persistently high profits and ability to raise prices or decrease quality without user flight or competitive challenges from rivals are also sure signs of monopoly power.”

The complaint asserted that Google also has monopoly power in local search. A Yelp extrapolation allegedly shows that Google “performs over 1.1 billion local searches in the U.S. every day, dwarfing any other competitor.” A 2022 study also allegedly found that Google’s share of local business reviews has climbed to 73% compared to Yelp’s 6%. The study was said to attribute Google’s dominant market share to Google’s ability to induce zero-click searches, such that a user searching for local content might not have to leave Google’s search engine results page (SERP), due to placement of Google’s local vertical. Among other things, the complaint said network effects provide barriers to entry.

The complaint continued that Google has market power in the local search advertising market in the United States with market share, by ad revenue, exceeding 50% and growing. Yelp alleged Google is able to raise prices “without facing competitive consequences.” Again, network effects, in addition to accumulated data, provide barriers to entry here.

Anticompetitive conduct. The section of the complaint devoted to conduct began with an extensive description of interactions between Google and Yelp in the 2000s. All according to the complaint, Google began to recognize that it had an “unhealthy dependency” on Yelp for local review content critical to winning local search. Then, in 2007, Google launched a review feature and began competing with Yelp. To populate its local vertical, Google allegedly “scraped” Yelp and other local search site reviews “into one destination” and claimed all of them as Google’s own. Google allegedly responded to Yelp and others’ concerns about this by telling them they could submit or else not appear in Google search results at all.

Yelp recounted how the FTC opened an investigation and condemned Google’s practices in a staff memo, but it ultimately did not sue Google. Google entered into certain commitments, but Yelp said this ultimately did not deter Google efforts to “hamstring” competitors. Among other alleged actions, Yelp said Google adjusted its algorithm in 2015 to decrease traffic to local search competitors “causing yelp to have its first ever decline in year-over-year traffic.”

Today, Google allegedly “self-preferences” over all competitors across all verticals. The complaint stated that European Commission action initiated in 2015 and a €2.42 billion fine in 2017 about its shopping vertical, along with a more recent investigation this year, has not changed Google behavior.

Harm. In addition to consumer harm through loss of choice, the complaint stated that Google’s self-preferencing harms Yelp and other SVPs by diluting the value of their advertising dollars. SVPs must increase ad loads to offset traffic losses caused by Google self-preferencing. Yelp said its damages are quantifiable and ongoing.

The Case is No. 3:24-cv-06101.

Judge: Keulen, S.

Attorneys: Sathya S. Gosselin (Hausfeld LLP) for Yelp Inc.

Companies: Yelp Inc.; Google LLC

News: Antitrust CaliforniaNews