Google antitrust probe expands as bipartisan state AGs beef up staff and resources

Key Points
  • A broad bipartisan coalition of state attorneys general is dedicating new resources to widen its antitrust probe of Google beyond the tech giant's advertising business to include its Android and search businesses.
  • The state officials are also cooperating closely with the Justice Department, which is conducting a federal antitrust probe of the search giant, people familiar with the situation said.
  • The states have also been in talks to bring in Google foe, former Mississippi Attorney General Jim Hood, as an advisor on the investigation, the people added.
The silhouettes of attendees are seen at the Google booth during the 2018 Consumer Electronics Show in Las Vegas.
David Paul Morris | Bloomberg | Getty Images

A broad bipartisan coalition of state attorneys general is dedicating new resources as it widens its antitrust probe of Google beyond the tech giant's advertising business to focus on its Android and search businesses.

In recent months, the states have divvied up resources and entered talks to bring in new consultants, people familiar with the situation told CNBC. The people spoke on condition of anonymity because the terms of the investigation are confidential.

The state officials are also cooperating closely with the Justice Department, which is conducting a federal antitrust probe of the search giant, the people said.

Texas Attorney General Ken Paxton, the Republican who is leading the states' probe, accused Google earlier this week of delaying the case as the company tries to block investigators from bringing in certain outside consultants.

Political winds appear to be in the investigators' favor, however, particularly in an election year during which big technology companies will be under scrutiny for how they convey political news and opinions to the masses. Silicon Valley is also under increasing attack from the highest levels of both parties, including from President Donald Trump and leading Democrats such as presidential contender Sen. Elizabeth Warren of Massachusetts.

Paxton announced the investigation in September. Participating attorneys general represent the District of Columbia, Puerto Rico and every state except California and Alabama.

During a news conference at the time, Paxton emphasized Google's dominance in the ad market and use of consumer data. He also said the probe could expand. Google has been accused by rivals of using its technology and power to squeeze out the competition and favor its own products.

The states later decided to formally broaden their search to Google's Android and advertising businesses, CNBC reported last fall. The states have since appointed authorities in Utah and Iowa to lead the Android probe, said people familiar with the matter. They are still putting together formal leadership for the search portion of the investigation.

Iowa Attorney General Tom Miller, a Democrat, is powerful and influential among his peers. He is in his 10th four-year term and has served as president of the National Association of Attorneys General. He is deeply experienced in antitrust fights, including states' battle with Microsoft in the 1990s. That investigation resulted in lawsuits from both the states and Justice Department, which Microsoft ultimately settled after a federal judge originally ruled for a breakup.

Alphabet earnings showed significant growth despite revenue miss, expert says

The Utah attorney general, Republican Sean Reyes, also has taken on companies blamed for the opioid crisis, including a lawsuit against Purdue Pharma. Reyes later dropped the suit in favor of administrative action through Utah's Division of Consumer Protection.

The states have also been in talks to bring in Google foe, former Mississippi Attorney General Jim Hood, as an advisor, the people said. It could not be determined how much or whether Hood would be paid.

As attorney general, Democrat Hood sued Google twice — over its use of unlawful content and over its treatment of data on children. Google in 2014 responded with its own suit, and accused Hood of working with the Motion Picture Association of America in his actions against the company. Google's accusations were supported by emails leaked in the hacking of Sony by North Korea. Hood eventually called a "time out" from his fight with the internet giant.

Hood's track record suggests the current probe could expand into consumer protection. Some Google critics have argued consumer protection could be part of an antitrust argument. If consumers had more choices, they say, they could argue for more protections.

A Google spokesperson referred CNBC to a 2019 blog post about the DOJ and AG investigations, noting the company has "always worked constructively with regulators" and will "continue to do so."

"Google's services help people, create more choice, and support thousands of jobs and small businesses across the United States," Kent Walker, senior vice president of global affairs, wrote in the post.

Representatives for Miller and Reyes declined to comment. Hood and representatives for Texas did not respond to a request for comment.

Close collaboration with DOJ

The Justice Department and the state attorneys general are working with each other on all three prongs of the antitrust investigation, the people said. The two agencies are regularly communicating and sharing information.

On Tuesday, Paxton, Reyes and several other attorneys general met with top officials at the Justice Department to discuss dividing and sharing resources for the respective investigations. That meeting did not end with an official decision to coordinate their investigations, though they may still yet choose to do so.

Also Tuesday, Makan Delrahim, the DOJ's top antitrust official, announced he was recusing himself from the investigation due to previous lobbying work pertaining to Google's $3.1 billion acquisition of DoubleClick in 2007. The deal helped strengthen Google's foothold in advertising technology. Delrahim's announcement, months after the investigation launched, suggested to some industry insiders that the DOJ's investigation is zeroing in on DoubleClick and Google's advertising technology business.

While the Justice Department's investigation into ad technology may be more advanced than its inquiry into search and Android, it continues to look at all three businesses, the people said. The department has said it hopes to wrap up its investigation by the end of the year.

A spokesperson for the Justice Department declined to comment on an ongoing investigation.

A bipartisan target

Lawmakers and critics have previously claimed that Google uses its search, Android and advertising technology businesses to favor its own products.

After a nearly two-year investigation into those business practices, the Federal Trade Commission in 2013 decided unanimously not to bring suit against the internet giant. In a settlement, Google agreed to changes including providing online advertisers more flexibility on its platforms.

Still, the FTC's vote stoked controversy when documents inadvertently given to The Wall Street Journal in 2015 suggested the investigation had found evidence that Google skewed search results to favor its own products.

Democratic presidential candidate Elizabeth Warren on Brexit, billionaires and breaking up big companies

Critics argued at the time the decision was politically driven, pointing to President Barack Obama's close ties to then-Google CEO, Eric Schmidt. The White House said at the time it respected the FTC's "independent decision-making."

Google critics now argue that politics are on their side. Big technology companies have become punching bags for Democrats and Republicans who have objected separately to policies around content moderation. Democrats have battled Google on allegations including not doing enough to protect consumer data or allowing false content on its YouTube platform. Several Republicans, including Trump, have argued that Google search results favor liberal content.

Google has pushed back against claims it censors conservative speech.

"Algorithms don't detect political perspectives, much less use them in any way to determine how webpages are ranked," Karan Bhatia, vice president of global government affairs and public policy at Google, wrote in an op-ed for Fox News in 2015.

'We won't back off'

Despite years of regulatory scrutiny and battles, Google continues to pursue business practices that attract the scrutiny of investigators in the U.S. and abroad.

EU regulators slapped Google with a $2.7 billion fine in 2017 for giving favored treatment to its "Google Shopping" service and a record $5 billion fine on Google over alleged Android antitrust abuses in 2018. Google is appealing the decision. EU regulators are also assessing how Google and Facebook collect and monetize data.

The fines don't appear to be slowing Google down.

For instance, shares of Google parent Alphabet closed up 1.1% when the FTC announced in September a record $170 million fine for alleged violations of children's privacy. The sum was a drop in the bucket compared with the revenue Alphabet hauls in. This week, the company reported fourth-quarter revenues of $46.08 billion.

The state AGs are pushing back against a motion Google filed in October, arguing that two of the consultants that Texas has hired to help with the investigation pose a conflict of interest due to prior work for competitors and critics of Google. Google is asking the state to stop sharing confidential business information with those consultants.

"Texas has requested, and we have provided, over 100,000 pages of information about our business even as we seek assurances that our confidential business information won't be shared with competitors or vocal complainants," Google spokeswoman Julie Tarallo McAlister told CNBC in a statement. "We have a strong track record of constructive cooperation with regulators around the world and we will continue working to show how our products support millions of businesses across America."

Texas' Paxton has dismissed the move as a stalling tactic and vowed to dig in for a protracted battle.

"They're pushing us towards a fight," he told CNBC recently. "We don't necessarily want one. But we won't back off if they're not going to cooperate."

CNBC's Ylan Mui contributed to this report.

Facebook's new app, Tesla deliveries and retail in today's On Your Radar