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Google’s Antitrust Case: Questions and Answers



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ImageThe source of Google’s riches, and its legal problems.
Credit…Don Ryan/Associated Press

The Department of Justice has filed its long-awaited antitrust lawsuit against Google, “the government’s most significant legal challenge to a tech company’s market power in a generation,” according to The New York Times’s David McCabe, Cecilia Kang and Dai Wakabayashi. It’s big, complicated and could take years to resolve — here’s the state of play:

The lawsuit targets the “cornerstones of Google’s empire,” its search tools. The Justice Department alleges that Google illegally protects a monopoly in search that harms competitors and consumers. Google pays companies like Apple billions of dollars to make its search engine the default option on their devices, shutting out rivals. Google then uses this grip to collect data from users that gives its search-based advertising business an unfair advantage, too.

  • More competition from other search engines, the Justice Department asserts, would force Google to compete on grounds that would promote better consumer protections in the digital age.

What the Justice Department said: Google “has maintained its monopoly power through exclusionary practices that are harmful to competition,” the deputy U.S. attorney general Jeffrey Rosen said at a news conference. You can read the government’s full case here.

How Google responded: “People use Google because they choose to, not because they’re forced to, or because they can’t find alternatives,” wrote Kent Walker, the company’s chief legal officer, in a lengthy blog post.

What others are thinking: “Some might try to characterize today’s filing as a partisan vendetta by the Trump administration. That is the false narrative Google wants you to hear,” said Luther Lowe, senior vice president of public policy at Yelp. “The case is clear — in fact, it could have gone further,” said Senator Elizabeth Warren. Many other business leaders, policymakers and antitrust experts have weighed in.

Why now?

A better question might be, “This again?” The F.T.C. conducted a two-year antitrust investigation into Google under President Barack Obama, which went nowhere. Bill Barr, the attorney general, pushed hard to bring this new case before the election, but even if Democrats take the White House, experts say that it is unlikely to be withdrawn — some staff attorneys at the Justice Department have taken issue with how quickly it was filed, but they still consider the evidence solid. Critics argue that antitrust regulators rely on an outdated legal framework unsuited to deal with tech giants, but as these companies’ power has grown, so too has bipartisan unease.

How long will it take?

“This legal case is going to be loud, confusing and will most likely drag on for years,” writes The Times’s Shira Ovide. And a bipartisan coalition of attorneys general from states including New York, Colorado and Iowa said yesterday that they would conclude their own probe into Google “in the coming weeks.” European antitrust regulators sued Google in 2015 based on similar facts, and settled in 2018. The U.S. Justice Department’s landmark antitrust case against Microsoft was filed in 1998 and settled in 2001.

Is this like the Microsoft case?

Yes, but not exactly. Google is charged with monopolizing search by using restrictive and exclusive deals, like Microsoft’s bundling of software programs with its operating system. Microsoft comes up a lot in the Google case, in fact: “Back then, Google claimed Microsoft’s practices were anticompetitive, and yet, now, Google deploys the same playbook to sustain its own monopolies,” the suit accuses.

Google says that other companies, including Microsoft, control prime mobile and desktop space, so it negotiates for “eye-level shelf space” to place its products like a cereal brand would with supermarkets.

Will Google get broken up?

“Nothing is off the table,” said the associate deputy attorney general Ryan Shores. A trial judge ordered a breakup in the Microsoft case, but an appeals court perceived bias in the decision and the Justice Department eventually settled the case. The E.U. has generally eschewed breakups as a remedy — it settled its antitrust case against Google for abusing its power in the mobile phone market with a fine and behavioral changes that critics say haven’t been effective. A recent House report accused Facebook, Google, Amazon and Apple of various monopoly strategies, but it didn’t call for breakups.

Whatever the outcome, investors don’t seem worried: Shares in Google’s parent, Alphabet, rose yesterday, and are also up in premarket trading today. BCA Research ran the numbers on past antitrust cases and found that companies forced to break up outperformed the market after the judgments:

Credit…BCA Research

Could Google just pay to make this go away?

With more than $120 billion in cash and an army of lawyers, it has the power to drag this out for a long time if it wants to. Or it could dip into the funds to settle the case with a fine and some promises to behave differently. State attorneys general fear this sort of anticlimactic ending, which is part of why they’re filing separate suits, giving them leverage to move independently if they think the Justice Department might settle too soon or too leniently.

Further reading:

Today’s DealBook newsletter was written by Andrew Ross Sorkin and Lauren Hirsch in New York, Ephrat Livni in Washington, and Michael J. de la Merced and Jason Karaian in London.

The stimulus drama drags on. House Speaker Nancy Pelosi said she hoped to reach an agreement with the White House by the end of the week, and is expected to speak again with Treasury Secretary Steven Mnuchin today. But Senator Mitch McConnell, the majority leader, told colleagues he had advised the Trump administration not to strike a deal before the election. Separately: Why the Fed’s $4 trillion lifeline never materialized.

Revelations about President Trump’s business ties to China. A Trump-owned company controls a previously undisclosed Chinese bank account, according to a Times analysis of the president’s financial records. It highlights his family’s efforts to win business there, even after he took office.

British scientists plan to deliberately infect volunteers with the coronavirus. The testing strategy, known as a human challenge trial, is meant to speed up testing of vaccines. But using it in this context has spurred debate, given that Covid-19 has no cure and few widely used treatments. Also on vaccine development, here’s how the F.D.A. stood up to the White House on the approval timeline.

Leon Black asks Apollo’s board to examine his ties to Jeffrey Epstein. Mr. Black requested the review, which will be conducted by the law firm Dechert, after The Times reported on at least $50 million in payments he made to entities controlled by the financier and sex offender, who died last year. In other news, a federal judge said that the deposition transcripts of the Epstein associate Ghislaine Maxwell should be made public.

Chinese tech giants try to thwart Nvidia’s deal to buy ARM. Companies like Huawei have reportedly urged regulators in Beijing to block the $40 billion acquisition of the chip designer, Bloomberg reports. It’s the latest potential regulatory roadblock for the blockbuster transaction.

An Asian subsidiary of Goldman Sachs plans to plead guilty to settle a U.S. investigation into the company’s role in a corruption and bribery scandal involving 1MDB, a Malaysian investment fund, The Times’s Matt Goldstein reports.

It would be the first time Goldman had pleaded guilty in a federal investigation. The bank’s parent company would admit mistakes in its dealings with the fund, which has been accused of stealing money for powerful Malaysians, including a former prime minister. But it has avoided having to make a guilty plea at the parent-company level, which could have hurt its ability to work with clients like pension funds. Still, the facts of the case will challenge the firm’s contention that rogue employees participated in the 1MDB schemes without approval.

  • The firm will pay over $2 billion in penalties to the U.S. authorities, on top of the $2.5 billion that it agreed to settle an investigation by the Malaysian government a few months ago.

Goldman’s legal troubles aren’t over. A federal magistrate judge ruled yesterday that its former C.E.O. Lloyd Blankfein and former president Gary Cohn must testify in a gender-discrimination lawsuit filed by former employees, one of the biggest such cases in Wall Street history. Goldman’s current C.E.O., David Solomon, may also have to testify.

Business is good, just not as good as investors thought. The streaming giant reported 2.2 million new memberships for the third quarter, about one million lower than expected, and said that subscriptions for the fourth quarter would be lower than analysts’ estimates, too. But thanks to its subscription surge earlier in the pandemic, Netflix expects to close the year with a record number of new members, about 34 million, giving it just over 200 million subscribers around the world.

Steven Davidoff Solomon, a.k.a. the Deal Professor, is a professor at the U.C. Berkeley School of Law and the faculty co-director at the Berkeley Center for Law, Business and the Economy.

The long-predicted tidal wave of coronavirus-driven corporate bankruptcies has yet to arrive.

To be sure, the pandemic has pushed some famous names into Chapter 11, including Chuck E. Cheese, J.C. Penney and Neiman Marcus. S&P Global Market Intelligence says that 527 companies with public debt have filed for bankruptcy so far this year, more — but not that much more — than the 477 that filed over the same period last year. It also notes that the weekly totals have been slowing recently.

What happened?

While the coronavirus recession has pushed many companies over the edge, many of these were already embattled, from oil and gas drillers like Chesapeake Energy to retailers like Neiman Marcus. And others forced into Chapter 11, including the rental-car company Hertz and the circus operator Cirque du Soleil, were struggling under big debt loads.

There are other factors:

  • Many parts of the U.S. remain open, keeping economic activity up.

  • Markets are still awash in liquidity, giving many companies access to sorely needed financing. And interest rates are so low that the risk of taking on too much debt is reduced.

  • The private sector has adapted remarkably well to the new normal. While many restaurants have been devastated, others are thriving on takeout. And even movie theaters, which are clearly on the brink, are at least beginning to rent out their venues for private screenings.

The pandemic will force more bankruptcy filings, particularly if a vaccine is delayed. And S&P does not track bankruptcies of smaller businesses, which have suffered more, particularly in states with tougher lockdowns.

But let’s be clear: That flood of huge bankruptcies? It’s probably never coming.


  • The movie theater chain AMC plans to sell stock to raise money, while warning it may still be forced to file for bankruptcy protection. (CNBC)

  • The French media conglomerate Vivendi plans to stage an I.P.O. for Universal Music Group, the label behind Taylor Swift and Lady Gaga, in 2022. (Reuters)

  • Blank-check funds run by private equity firms have struggled to attract investor interest. (Axios)

Politics and policy

  • Federal officials and tech giants are trying to send a message that Russian efforts to interfere in the 2020 elections are no hoax. (NYT)

  • Elliott Broidy, a former top fund-raiser for President Trump, pleaded guilty to conspiring to violate foreign lobbying laws. (NYT)

  • All the weak points of American health care are working against the rollout of antibody treatments for Covid-19. (NYT)


  • At least 2,000 law enforcement agencies have tools to break into encrypted smartphones, a study found. (NYT)

  • Uber said it might overhaul its business if voters rejected a California ballot initiative that would prevent gig-economy workers from being classified as employees. (WSJ)

Best of the rest

  • Travis Kalanick, the Uber founder, is now a corporate real-estate mogul. (WSJ)

  • Tom Friedman asks if the pandemic will transform American education, health care and attitudes toward switching professions. (NYT Opinion)

  • The pandemic has produced a spike in applications to top business schools. (Bloomberg)

We’d like your feedback! Please email thoughts and suggestions to dealbook@nytimes.com.


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The Trump campaign celebrated a growth record that Democrats downplayed.



The White House celebrated economic growth numbers for the third quarter released on Thursday, even as Joseph R. Biden Jr.’s presidential campaign sought to throw cold water on the report — the last major data release leading up to the Nov. 3 election — and warned that the economic recovery was losing steam.

The economy grew at a record pace last quarter, but the upswing was a partial bounce-back after an enormous decline and left the economy smaller than it was before the pandemic. The White House took no notice of those glum caveats.

“This record economic growth is absolute validation of President Trump’s policies, which create jobs and opportunities for Americans in every corner of the country,” Mr. Trump’s re-election campaign said in a statement, highlighting a rebound of 33.1 percent at an annualized rate. Mr. Trump heralded the data on Twitter, posting that he was “so glad” that the number had come out before Election Day.

The annualized rate that the White House emphasized extrapolates growth numbers as if the current pace held up for a year, and risks overstating big swings. Because the economy’s growth has been so volatile amid the pandemic, economists have urged focusing on quarterly numbers.

Those showed a 7.4 percent gain in the third quarter. That rebound, by far the biggest since reliable statistics began after World War II, still leaves the economy short of its pre-pandemic levels. The pace of recovery has also slowed, and now coronavirus cases are rising again across much of the United States, raising the prospect of further pullback.

“The recovery is stalling out, thanks to Trump’s refusal to have a serious plan to deal with Covid or to pass a new economic relief plan for workers, small businesses and communities,” Mr. Biden’s campaign said in a release ahead of Thursday’s report. The rebound was widely expected, and the campaign characterized it as “a partial return from a catastrophic hit.”

Economists have warned that the recovery could face serious roadblocks ahead. Temporary measures meant to shore up households and businesses — including unemployment insurance supplements and forgivable loans — have run dry. Swaths of the service sector remain shut down as the virus continues to spread, and job losses that were temporary are increasingly turning permanent.

“With coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower,” Paul Ashworth, chief United States economist at Capital Economics, wrote in a note following the report.


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Black and Hispanic workers, especially women, lag in the U.S. economic recovery.



The surge in economic output in the third quarter set a record, but the recovery isn’t reaching everyone.

Economists have long warned that aggregate statistics like gross domestic product can obscure important differences beneath the surface. In the aftermath of the last recession, for example, G.D.P. returned to its previous level in early 2011, even as poverty rates remained high and the unemployment rate for Black Americans was above 15 percent.

Aggregate statistics could be even more misleading during the current crisis. The job losses in the initial months of the pandemic disproportionately struck low-wage service workers, many of them Black and Hispanic women. Service-sector jobs have been slow to return, while school closings are keeping many parents, especially mothers, from returning to work. Nearly half a million Hispanic women have left the labor force over the last three months.

“If we’re thinking that the economy is recovering completely and uniformly, that is simply not the case,” said Michelle Holder, an economist at John Jay College in New York. “This rebound is unevenly distributed along racial and gender lines.”

The G.D.P. report released Thursday doesn’t break down the data by race, sex or income. But other sources make the disparities clear. A pair of studies by researchers at the Urban Institute released this week found that Black and Hispanic adults were more likely to have lost jobs or income since March, and were twice as likely as white adults to experience food insecurity in September.

The financial impact of the pandemic hit many of the families that were least able to afford it, even as white-collar workers were largely spared, said Michael Karpman, an Urban Institute researcher and one of the studies’ authors.

“A lot of people who were already in a precarious position before the pandemic are now in worse shape, whereas people who were better off have generally been faring better financially,” he said.

Federal relief programs, such as expanded unemployment benefits, helped offset the damage for many families in the first months of the pandemic. But those programs have mostly ended, and talks to revive them have stalled in Washington. With virus cases surging in much of the country, Mr. Karpman warned, the economic toll could increase.

“There could be a lot more hardship coming up this winter if there’s not more relief from Congress, with the impact falling disproportionately on Black and Hispanic workers and their families,” he said.


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Ant Challenged Beijing and Prospered. Now It Toes the Line.



As Jack Ma of Alibaba helped turn China into the world’s biggest e-commerce market over the past two decades, he was also vowing to pull off a more audacious transformation.

“If the banks don’t change, we’ll change the banks,” he said in 2008, decrying how hard it was for small businesses in China to borrow from government-run lenders.

“The financial industry needs disrupters,” he told People’s Daily, the official Communist Party newspaper, a few years later. His goal, he said, was to make banks and other state-owned enterprises “feel unwell.”

The scope of Mr. Ma’s success is becoming clearer. The vehicle for his financial-technology ambitions, an Alibaba spinoff called Ant Group, is preparing for the largest initial public offering on record. Ant is set to raise $34 billion by selling its shares to the public in Hong Kong and Shanghai, according to stock exchange documents released on Monday. After the listing, Ant would be worth around $310 billion, much more than many global banks.

The company is going public not as a scrappy upstart, but as a leviathan deeply dependent on the good will of the government Mr. Ma once relished prodding.

More than 730 million people use Ant’s Alipay app every month to pay for lunch, invest their savings and shop on credit. Yet Alipay’s size and importance have made it an inevitable target for China’s regulators, which have already brought its business to heel in certain areas.

These days, Ant talks mostly about creating partnerships with big banks, not disrupting or supplanting them. Several government-owned funds and institutions are Ant shareholders and stand to profit handsomely from the public offering.

The question now is how much higher Ant can fly without provoking the Chinese authorities into clipping its wings further.

Excitable investors see Ant as a buzzy internet innovator. The risk is that it becomes more like a heavily regulated “financial digital utility,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”

“Utility stocks, as far as I remember, were not the ones to be seen as the most exciting,” Mr. Howie said.

Ant declined to comment, citing the quiet period demanded by regulators before its share sale.

The company has played give-and-take with Beijing for years. As smartphone payments became ubiquitous in China, Ant found itself managing huge piles of money in Alipay users’ virtual wallets. The central bank made it park those funds in special accounts where they would earn minimal interest.

After people piled into an easy-to-use investment fund inside Alipay, the government forced the fund to shed risk and lower returns. Regulators curbed a plan to use Alipay data as the basis for a credit-scoring system akin to Americans’ FICO scores.

China’s Supreme Court this summer capped interest rates for consumer loans, though it was unclear how the ceiling would apply to Ant. The central bank is preparing a new virtual currency that could compete against Alipay and another digital wallet, the messaging app WeChat, as an everyday payment tool.

Ant has learned ways of keeping the authorities on its side. Mr. Ma once boasted at the World Economic Forum in Davos, Switzerland, about never taking money from the Chinese government. Today, funds associated with China’s social security system, its sovereign wealth fund, a state-owned life insurance company and the national postal carrier hold stakes in Ant. The I.P.O. is likely to increase the value of their holdings considerably.

“That’s how the state gets its payoff,” Mr. Howie said. With Ant, he said, “the line between state-owned enterprise and private enterprise is highly, highly blurred.”

China, in less than two generations, went from having a state-planned financial system to being at the global vanguard of internet finance, with trillions of dollars in transactions being made on mobile devices each year. Alipay had a lot to do with it.

Alibaba created the service in the early 2000s to hold payments for online purchases in escrow. Its broader usefulness quickly became clear in a country that mostly missed out on the credit card era. Features were added and users piled in. It became impossible for regulators and banks not to see the app as a threat.

ImageAnt Group’s headquarters in Hangzhou, China.
Credit…Alex Plavevski/EPA, via Shutterstock

A big test came when Ant began making an offer to Alipay users: Park your money in a section of the app called Yu’ebao, which means “leftover treasure,” and we will pay you more than the low rates fixed by the government at banks.

People could invest as much or as little as they wanted, making them feel like they were putting their pocket change to use. Yu’ebao was a hit, becoming one of the world’s largest money market funds.

The banks were terrified. One commentator for a state broadcaster called the fund a “vampire” and a “parasite.”

Still, “all the main regulators remained unanimous in saying that this was a positive thing for the Chinese financial system,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.

“If you can’t actually reform the banks,” Mr. Chorzempa said, “you can inject more competition.”

But then came worries about shadowy, unregulated corners of finance and the dangers they posed to the wider economy. Today, Chinese regulators are tightening supervision of financial holding companies, Ant included. Beijing has kept close watch on the financial instruments that small lenders create out of their consumer loans and sell to investors. Such securities help Ant fund some of its lending. But they also amplify the blowup if too many of those loans aren’t repaid.

“Those kinds of derivative products are something the government is really concerned about,” said Tian X. Hou, founder of the research firm TH Data Capital. Given Ant’s size, she said, “the government should be concerned.”

The broader worry for China is about growing levels of household debt. Beijing wants to cultivate a consumer economy, but excessive borrowing could eventually weigh on people’s spending power. The names of two of Alipay’s popular credit functions, Huabei and Jiebei, are jaunty invitations to spend and borrow.

Huang Ling, 22, started using Huabei when she was in high school. At the time, she didn’t qualify for a credit card. With Huabei’s help, she bought a drone, a scooter, a laptop and more.

The credit line made her feel rich. It also made her realize that if she actually wanted to be rich, she had to get busy.

“Living beyond my means forced me to work harder,” Ms. Huang said.

First, she opened a clothing shop in her hometown, Nanchang, in southeastern China. Then she started an advertising company in the inland metropolis of Chongqing. When the business needed cash, she borrowed from Jiebei.

Online shopping became a way to soothe daily anxieties, and Ms. Huang sometimes racked up thousands of dollars in Huabei bills, which only made her even more anxious. When the pandemic slammed her business, she started falling behind on her payments. That cast her into a deep depression.

Finally, early this month, with her parents’ help, she paid off her debts and closed her Huabei and Jiebei accounts. She felt “elated,” she said.

China’s recent troubles with freewheeling online loan platforms have put the government under pressure to protect ordinary borrowers.

Ant is helped by the fact that its business lines up with many of the Chinese leadership’s priorities: encouraging entrepreneurship and financial inclusion, and expanding the middle class. This year, the company helped the eastern city of Hangzhou, where it is based, set up an early version of the government’s app-based system for dictating coronavirus quarantines.

Such coziness is bound to raise hackles overseas. In Washington, Chinese tech companies that are seen as close to the government are radioactive.

In January 2017, Eric Jing, then Ant’s chief executive, said the company aimed to be serving two billion users worldwide within a decade. Shortly after, Ant announced that it was acquiring the money transfer company MoneyGram to increase its U.S. footprint. By the following January, the deal was dead, thwarted by data security concerns.

More recently, top officials in the Trump administration have discussed whether to place Ant Group on the so-called entity list, which prohibits foreign companies from purchasing American products. Officials from the State Department have suggested that an interagency committee, which also includes officials from the departments of defense, commerce and energy, review Ant for the potential entity listing, according to three people familiar with the matter.

Ant does not talk much anymore about expanding in the United States.

Ana Swanson contributed reporting.


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