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The Justice Department’s pending antitrust case against Google, in which the search giant is accused of illegally monopolizing the market for online search and related advertising, revealed the nature and extent of a revenue sharing agreement (“RSA”) between Google and Apple. Pursuant to the RSA, Apple gets 36 percent of advertising revenue from Google searches by Apple users—a figure that reached $20 billion in 2022. The RSA has not been investigated in the EU. This essay briefly recaps the EU law on remedies and explains why choice screens, the EU’s preferred approach, are the wrong remedy focused on the wrong problem. Restoring effective competition in search and related advertising requires (1) the dissolution of the RSA, (2) the fostering of suppressed publishers and independent advertisers, and (3) the use of an access remedy for competing search-engine-results providers.

EU Law on Remedies

EU law requires remedies to “bring infringements and their effects to an end.” In Commercial Solvents, the Commission power was held to “include an order to do certain acts or provide certain advantages which have been wrongfully withheld.”

The Commission team that dealt with the Microsoft case noted that a risk with righting a prohibition of the infringement was that “[i]n many cases, especially in network industries, the infringer could continue to reap the benefits of a past violation to the detriment of consumers. This is what remedies are intended to avoid.” An effective remedy puts the competitive position back as it was before the harm occurred, which requires three elements. First, the abusive conduct must be prohibited. Second, the harmful consequences must be eliminated. For example, in Lithuanian Railways, the railway tracks that had been taken away were required to be restored, restoring the pre-conduct competitive position. Third, the remedy must prevent repetition of the same conduct or conduct having an “equivalent effect.” The two main remedies are divestiture and prohibition orders.

The RSA Is Both a Horizontal and a Vertical Arrangement

In the 2017 Google Search (Shopping) case, Google was found to have abused its dominant position in search. In the DOJ’s pending search case, Google is also accused of monopolizing the market for search. In addition to revealing the contours of the RSA, the case revealed a broader coordination between Google and Apple. For example, discovery revealed there are monthly CEO-to-CEO meetings where the “vision is that we work as if we are one company.” Thus, the RSA serves as much more than a “default” setting—it is effectively an agreement not to compete.

Under the RSA, Apple gets a substantial cut of the revenue from searches by Apple users. Apple is paid to promote Google Search, with the payment funded by income generated from the sale of ads to Apple’s wealthy user base. That user base has higher disposable income than Android users, which makes it highly attractive to those advertising and selling products. Ads to Apple users are thought to generate 50 percent of ad spend but account for only 20 percent of all mobile users.

Compared to Apple’s other revenue sources, the scale of the payments made to Apple under the RSA is significant. It generates $20 billion in almost pure profit for Apple, which accounts for 15 to 20 percent of Apple’s net income. A payment this large and under this circumstance creates several incentives for Apple to cement Google’s dominance in search:

The RSA also gives Google an incentive to support Apple’s dominance in top end or “performance smartphones,” and to limit Android smartphone features, functions and prices in competition with Apple. In its Android Decision, the EU Commission found significant price differences between Google Android and iOS devices, while Google Search is the single largest source of traffic from iPhone users for over a decade.

Indeed, the Department of Justice pleadings in USA v. Apple show how Apple has sought to monopolize the market for performance smartphones via legal restrictions on app stores and by limiting technical interoperability between Apple’s system and others. The complaint lists Apple’s restrictions on messaging apps, smartwatches, and payments systems. However, it overlooks the restrictions on app stores from using Apple users’ data and how it sets the baseline for interoperating with the Open Web. 

It is often thought that Apple is a devices business. On the contrary, the size of its RSA with Google means Apple’s business, in part, depends on income from advertising by Google using Apple’s user data. In reality, Apple is a data-harvesting business, and it has delegated the execution to Google’s ads system. Meanwhile, its own ads business is projected to rise to $13.7 billion by 2027. As such, the RSA deserves very close scrutiny in USA v. Apple, as it is an agreement between two companies operating in the same industry.

The Failures of Choice Screens

The EU Google (Search) abuse consisted in Google’s “positioning and display” of its own products over those of rivals on the results pages. Google’s underlying system is one that is optimized for promoting results by relevance to user query using a system based on Page Rank. It follows that promoting owned products over more relevant rivals requires work and effort. The Google Search Decision describes this abuse as being carried out by applying a relevance algorithm to determine ranking on the search engine results pages (“SERPs”). However, the algorithm did not apply to Google’s own products. As the figure below shows, Google’s SERP has over time filled up with own products and ads.

To remedy the abuse, the Decision compelled Google to adopt a “Choice Screen.” Yet this isn’t an obvious remedy to the impact on competitors that have been suppressed, out of sight and mind, for many years. The choice screen has a history in EU Commission decisions.

In 2009, the EU Commission identified the abuse Microsoft’s tying of its web browser to its Windows software. Other browsers were not shown to end users as alternatives. The basic lack of visibility of alternatives was the problem facing the end user and a choice screen was superficially attractive as a remedy, but it was not tested for efficacy. As Megan Grey observed in Tech Policy Press, “First, the Microsoft choice screen probably was irrelevant, given that no one noticed it was defunct for 14 months due to a software bug (Feb. 2011 through July 2012).” The Microsoft case is thus a very questionable precedent.  

In its Google Android case, the European Commission found Google acted anticompetitively by tying Google Search and Google Chrome to other services and devices and required a choice screen presenting different options for browsers. It too has been shown to be ineffective. A CMA Report (2020) also identified failures in design choices and recognized that display and brand recognition are key factors to test for choice screen effectiveness.

Giving consumers a choice ought to be one of the most effective ways to remedy a reduction of choice. But a choice screen doesn’t provide choice of presentation and display of products in SERPs.  Presentations are dependent on user interactions with pages. And Google’s knowledge of your search history, as well as your interactions with its products and pages, means it presents its pages in an attractive format. Google eventually changed the Choice Screen to reflect users top five choices by Member State. However, none of these factors related to the suppression of brands or competition, nor did it rectify the presentation and display’s effects on loss of variety and diversity in supply. Meanwhile, Google’s brand was enhanced from billions of user’s interactions with its products.

Moreover, choice screens have not prevented rival publishers, providers and content creators from being excluded from users’ view by a combination of Apple’s and Google’s actions. This has gone on for decades. Alternative channels for advertising by rival publishers are being squeezed out.

A Better Way Forward

As explained above, Apple helps Google target Apple users with ads and products in return for 36 percent of the ad revenue generated. Prohibiting that RSA would remove the parties’ incentives to reinforce each other’s market positions. Absent its share of Google search ads revenue, Apple may find reasons to build its own search engine or enhance its browser by investing in it in a way that would enable people to shop using the Open Web’s ad funded rivals. Apple may even advertise in competition with Google.  

Next, courts should impose (and monitor) a mandatory access regime. Applied here, Google could be required to operate within its monopoly lane and run its relevance engine under public interest duties in “quarantine” on non-discriminatory terms. This proposal has been advanced by former White House advisor Tim Wu:

I guess the phrase I might use is quarantine, is you want to quarantine businesses, I guess, from others. And it’s less of a traditional antitrust kind of remedy, although it, obviously, in the ‘56 consent decree, which was out of an antitrust suit against AT&T, it can be a remedy. And the basic idea of it is, it’s explicitly distributional in its ideas. It wants more players in the ecosystem, in the economy. It’s almost like an ecosystem promoting a device, which is you say, okay, you know, you are the unquestioned master of this particular area of commerce. Maybe we’re talking about Amazon and it’s online shopping and other forms of e-commerce, or Google and search.

If the remedy to search abuse were to provide access to the underlying relevance engine, rivals could present and display products in any order they liked. New SERP businesses could then show relevant results at the top of pages and help consumers find useful information.

Businesses, such as Apple, could get access to Google’s relevance engine and simply provide the most relevant results, unpolluted by Google products. They could alternatively promote their own products and advertise other people’s products differently. End-users would be able to make informed choices based on different SERPs.

In many cases, the restoration of competition in advertising requires increased familiarity with the suppressed brand. Where competing publishers’ brands have been excluded, they must be promoted. Their lack of visibility can be rectified by boosting those harmed into rankings for equivalent periods of time to the duration of their suppression. This is like the remedies used for other forms of publication tort. In successful defamation claims, the offending publisher must publish the full judgment with the same presentation as the offending article and displayed as prominently as the offending article. But the harm here is not to individuals; instead, the harm redounds to alternative publishers and online advertising systems carrying competing ads. 

In sum, the proper remedy is one that rectifies the brand damage from suppression and lack of visibility. Remedies need to address this issue and enable publishers to compete with Google as advertising outlets. Identifying a remedy that rectifies the suppression of relevance leads to the conclusion that competition between search-results-page businesses is needed. Competition can only be remedied if access is provided to the Google relevance engine. This is the only way to allow sufficient competitive pressure to reduce ad prices and provide consumer benefits going forward.

The authors are Chair Antitrust practice, Associate, and Paralegal, respectively, of Preiskel & Co LLP. They represent the Movement for an Open Web versus Google and Apple in EU/US and UK cases currently being brought by their respective authorities. They also represent Connexity in its claim against Google for damages and abuse of dominance in Search (Shopping).

As the DOJ’s antitrust case against Google begins, all eyes are focused on whether Google violated antitrust law by, among other things, entering into exclusionary agreements with equipment makers like Apple and Samsung or web browsers like Mozilla. Per the District Court’s Memorandum Opinion, released August 4, “These agreements make Google the default search engine on a range of products in exchange for a share of the advertising revenue generated by searches run on Google.” The DOJ alleges that Google unlawfully monopolizes the search advertising market.

Aside from matters relating to antitrust liability, an equally important question is what remedy, if any, would work to restore competition in search advertising in particular and online advertising generally?

Developments in the UK might shed some light. The UK Treasury commissioned a report to make recommendations on changes to competition law and policy, which aimed to “help unlock the opportunities of the digital economy.” The report found that Big Tech’s monopolizing of data and control over open web interoperability could undermine innovation and economic growth. Big Tech platforms now have all the data in their hands, block interoperability with other sources, and will capture more of it, through their huge customer-facing machines, and so can be expected to dominate the data needed for the AI Period, enabling them to hold back competition and economic growth.

The dominant digital platforms currently provide services to billions of end users. Each of us has either an Apple or Android device in our pocket. These devices operate as part of integrated distribution platforms: anything anyone wants to obtain from the web goes through the device, its browser (often Google’s search engine), and the platform before accessing the Open Web, if not staying on an app on an apps store within the walls of the garden.

Every interaction with every platform product generates data, refreshed billions of times a day from multiple touch points providing insight into buying intent and able to predict people’s behavior and trends.

All this data is used to generate alphanumeric codes that match data contained in databases (aka “Match Keys”), which are used to help computers interoperate and serve relevant ads to match users’ interests. These were for many years used by all from the widely distributed Double Click ID. They were shared across the web and were used as the main source of data by competing publishers and advertisers. After Google bought Double Click and grew big enough to “tip” the market, however, Google withdrew access to its Match Keys for its own benefit.

The interoperability that is a feature of the underlying internet architecture has gradually been eroded. Facebook collected its own data from user’s “Likes” and community groups and also withdrew access for independent publishers to its Match Key data, and recently Apple has restricted access to Match Key data that is useful for ads for all publishers, except Google has a special deal on search and search data. As revealed in U.S. vs Google, Apple is paid over $10 billion a year by Google so that Google can provide its search product to Apple users and gather all their search history data that it can then use for advertising. The data generated by end user interactions with websites is now captured and kept within each Big Tech walled garden.

If the Match Keys were shared with rival publishers for use in their independent supply channel and used by them for their own ad-funded businesses, interoperability would be improved and effective competition could be generated with the tech platforms. Competition probably won’t exist otherwise.  

Both Google and Apple currently impose restrictions on access to data and interoperability. Cookie files also contain Match Keys that help maintain computer sessions and “state” so that different computers can talk to each other and help remember previous visits to websites and enable e-commerce. Cookies do not themselves contain personal data and are much less valuable than the Match Keys that were developed by Double Click or ID for advertisers, but they do provide something of a substitute source of data about users’ intent to purchase for independent publishers.

Google and Apple are in the process of blocking access to Match Keys in all forms to prevent competitors from obtaining relevant data about users needs and wants. They also prevent the use of the Open Web and limit the inter-operation of their apps stores with Open Web products, such as progressive web apps.

The UK’s Treasury Report refers to interoperability 8 times and the need for open standards as a remedy 43 times; the Bill refers to interoperability and we are expecting further debate about the issue as the Bill passes through Parliament.

A Brief History of Computing and Communications

The solution to monopolization, or lack of competition, is the generation of competition and more open markets. For that to happen in digital worlds, access to data and interoperability is needed. Each previous period of monopolization involved intervention to open-up computer and communications interfaces via antitrust cases and policy that opened market and liberalized trade. We have learned that the authorities need to police standards for interoperability and open interfaces to ensure the playing field is level and innovation can take place unimpeded. 

IBM’s activity involved bundling computers and peripherals and the case was eventually solved by unbundling and unblocking interfaces needed by competitors to interoperate with other systems. Microsoft did the same, blocking third parties from interoperating via blocking access to interfaces with its operating system. Again, it was resolved by opening-up interfaces to promote interoperability and competition between products that could then be available over platforms.

When Tim Berners Lee created the World Wide Web in the early 1990s, it took place nearly ten years after the U.S. courts imposed a break-up of AT&T and after the liberalization of telecommunications data transmission markets in the United States and the European Union. That liberalization was enabled by open interfaces and published standards. To ensure that new entrants could provide services to business customers, a type of data portability was mandated, enabling numbers held in incumbent telecoms’ databases to be transferred for use by new telecoms suppliers. The combination of interconnection and data portability neutralized the barrier to entry created by the network effect arising from the monopoly control over number data.

The opening of telecoms and data markets in the early 1990s ushered in an explosion of innovation. To this day, if computers operate to the Hyper Text Transfer Protocol then they can talk to other computers. In the early 1990s, a level playing field was created for decentralized competition among millions of businesses.

These major waves of digital innovation perhaps all have a common cause. Because computing and communications both have high fixed costs and low variable or incremental costs, and messaging and other systems benefit from network effects, markets may “tip” to a single provider. Competition in computing and communications then depends on interoperability remedies. Open, publicly available interfaces in published standards allow computers and communications systems to interoperate; and open decentralized market structures mean that data can’t easily be monopolized. 

It’s All About the Match Keys

The dominant digital platforms currently capture data and prevent interoperability for commercial gain. The market is concentrated with each platform building their own walled gardens and restricting data sharing and communication across. Try cross-posting among different platforms as an example of a current interoperability restriction. Think about why messaging is restricted within each messaging app, rather than being possible across different systems as happens with email. Each platform restricts interoperability preventing third-party businesses from offering their products to users captured in their walled gardens.

For competition to operate in online advertising markets, a similar remedy to data portability in the telecom space is needed. Only, with respect to advertising, the data that needs to be accessed is Match Key data, not telephone numbers.    

The history of anticompetitive abuse and remedies is a checkered one. Microsoft was prohibited from discriminating against rivals and had to put up a choice screen in the EU Microsoft case. It didn’t work out well. Google was similarly prohibited by the EU in Google search (Shopping) from (1) discriminating against rivals in its search engine results pages, (2) entering exclusive agreements with handset suppliers that discriminated against rivals, and (3) showing only Google products straight out of the box in the EU Android case. The remedies did not look at the monopolization of data and its use in advertising. Little has changed and competitors claim that the remedies are ineffective.

Many in the advertising publishing and ad tech markets recall that the market worked pretty well before Google acquired Double Click. Google uses multiple data sources as the basis for its Match Keys and an access and interoperability remedy might be more effective, proportionate and less disruptive.     

Perhaps if the DOJ’s case examines why Google collects search data from its search engine, its use of search histories, browser histories and data from all interactions with all products for its Match Key for advertising, the court will better appreciate the importance of data for competitors and how to remedy that position for advertising-funded online publishing. 

Following Europe’s Lead

The EU position is developing. Under the EU’s Digital Markets Act (DMA), which now supplements EU antitrust law as applied in the Google Search and Android Decisions, it is recognized that people want to be able to provide products and services across different platforms or cross-post or communicate with people connected to each social network or messaging app. In response, the EU has imposed obligations on Big Tech platforms in Articles 5(4) and 6(7) that provide for interoperability and require gatekeepers to allow open access to the web.

Similarly, Section 20.3 (e) of the UK’s Digital Markets, Competition and Consumers Bill (DMCC) refers to interoperability and may be the subject of forthcoming debate as the bill passes further through Parliament. Unlike U.S. jurisprudence with its recent fixation on consumer welfare, the objective of the Competition and Markets Authority is imposed by the law. The obligation to “promote competition for the benefit of consumers” is contained in EA 2013 s 25(3). This can be expressly related to intervention opening up access to the source of the current data monopolies: the Match Keys could be shared, meaning all publishers could get access to IDs for advertising (i.e., operating systems generated IDs such as Apple’s IDFA or Google’s Google ID or MAID).

In all jurisdictions it will be important for remedies to stimulate innovation, and to ensure that competition is promoted between all products that can be sold online, rather than between integrated distribution systems. Moreover, data portability needs to apply with reference to use of open and interoperable Match Keys that can be used for advertising, and that way address the data monopolization risk. As with the DMA, the DMCC should contain an obligation for gatekeepers to ensure fair reasonable and nondiscriminatory access, and treat advertisers in a similar way to that through which interoperability and data potability addressed monopoly benefits in previous computer, telecoms, and messaging cases.        

Tim Cowen is the Chair of the Antitrust Practice at the London-based law firm of Preiskel & Co LLP.

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