Google and Apple now threatened by the US antitrust laws helped build their technology empires

Google Apple Antitrust Cycle

SAN FRANCISCO (AP) — The U.S. Justice Department’s double-barreled antitrust attack on Google’s dominant search and Apple’s trendsetting iPhone is reviving memories of the epic battle that hobbled Microsoft before it roared back to yet again become the world’s most valuable company.

The parallels to the Justice Department’s landmark antitrust case in 1998 could provide a window into the potential breakthroughs that could be unleashed if regulators succeed in their attempts to crack down on Google and Apple.

Federal lawyers have even gone as far as to assert Google and Apple may never have created so many popular products or become as powerful as they are now if Microsoft hadn’t been reined in a quarter century ago.

In closing arguments of a Washington, D.C., trial that began last September, regulators Thursday will apply the finishing touches to a case alleging Google has turned its search engine into an illegal monopoly that stifles competition and innovation. The Apple case, which was only filed a month ago, is still years away from its resolution.

Google Apple Antitrust Cycle

Although regulators have lodged separate complaints against Google and Apple, the two cases are shadowed by Microsoft’s legal saga that began when both those were mere specks on the technology landscape.

When they went after Google in October 2020, regulators compared the lucrative deals that the company cut with Apple to lock its search engine into the iPhone and Safari web browser to the same tactics Microsoft deployed in its personal computer software to block competition.

And in the antitrust lawsuits that they filed against Apple last month, the Justice Department pointed back to complaints that company co-founder Steve Jobs had raised in 1998 against Microsoft’s “dirty tactics” while urging regulators to take steps to force the PC software maker “to play fair.”

Google Apple Antitrust Cycle

And that is what the Justice Department did in an antitrust case against Microsoft that caused massive distractions that opened the door for Google’s search engine to become the internet’s main gateway. It also culminated in a series of concessions that paved the way for Apple to extend the reach of its iTunes music store that increased the popularity of the iPod that spawned the iPhone.

The Microsoft case “created new opportunities for innovation in areas that would become critical to the success of Apple’s consumer devices and the company itself,” the Justice Department crowed in the lawsuit that casts the iPhone as an illegal monopoly.

After years of mostly fruitless attempts to compete against Google’s search engine and the iPhone under the leadership of Steve Ballmer, Microsoft began to regain its stride when Satya Nadella became CEO in 2014.

Earlier this year, Microsoft’s market value hit $3 trillion for the first time, surpassing Apple as the world’s most valuable company while taking the early lead in artificial intelligence technology that’s expected to reshape the world.

It’s an odd juxtaposition that has thrust regulators into battling two companies they helped create when they caged a colossus now angling to seize the mantle in technology’s next frontier.

But it’s also a tableau that antitrust experts cite as evidence that the system is working to unlock more robust competition that hatches innovations. And then those breakthroughs sometimes serve as the building blocks for new monopolies that must eventually be challenged by regulators, even as fallen empires like Microsoft can still find ways to reinvent themselves.

“It’s not about an agenda about trying to pursue and destroy companies, it’s about trying to restore competition in a market,” said Rebecca Haw Allensworth, a Vanderbilt University law professor who focuses on antitrust law issues. “What has happened with the Microsoft case is a success story that can also provide a blueprint for Apple and Google when people ask why is America trying to destroy its most successful companies? Microsoft has done great after it had a major antitrust claim against it.”

The Justice Department’s landmark case against Microsoft was not the first time an antitrust lawsuit turned into a springboard for other companies to emerge as dominant forces that eventually need to be corralled, too.

For instance, separate antitrust lawsuits filed against IBM in 1969 and AT&T in 1974 helped pave the way for Microsoft and Apple to launch the personal computer revolution that subsequently spawned the internet boom that was followed by the smartphone explosion.

Those are the kinds of innovations that have fueled economic growth and society-shifting products that might not have happened had antitrust regulators stayed on the sidelines while IBM and AT&T continued to exploit their respective monopolies, Yale University economics professor Fiona Scott Morton said.

“When you innovate successfully, you can grow like crazy but then it’s 20 years later and it’s hard to keep growing like you were,” said Scott Morton, who once was chief economist in the Justice Department’s antitrust division. “So instead of just relying on innovation, you realize, ‘Hey we have a lot of market power, we could use that to raise profits.’

“It’s just very natural that’s what happens repeatedly and regulators have to say, ‘No, that part isn’t allowed, you have to compete on the merits.’ And oftentimes when you succeed in forcing more competition, somebody else ends up winning the next race.”

After the closing arguments in the Justice Department’s antitrust case against Google wrap up this week, U.S. District Judge Amit Mehta is expected to issue his ruling in the late summer or early autumn. Meanwhile, the case against Apple will continue to progress in New Jersey federal court while antitrust regulators examine whether Microsoft is once again crossing the line to gain an unfair advantage in the still-nascent field of AI.