The Google search antitrust case is a triumph for behavioral economics

On August 4th, 2024, United States (US) judge Amit Mehta ruled that Google is a monopolist and has violated federal antitrust law. The court’s reliance on evidence of how consumer behavior is shaped by online defaults marks a pivotal moment at the intersection of antitrust and behavioral economics.

Judge Mehta’s ruling hinged on a series of agreements Google struck with various technology companies to make its search engine default across the web. Perhaps the most widely cited piece of evidence revealed during the trial was that the company paid Apple over $20 billion in 2022 to be the default search engine on its Safari browser.

As a result of this agreement, when a consumer opens up Safari on an iPhone, iPad, or laptop, her searches will flow through Google, unless she goes out of her way to navigate to another search engine or to select one to replace Google as the default. Google enjoys a default search position on all Android devices due to similar agreements with other phone companies.

The US Department of Justice (DOJ) sued Google alleging that these exclusive default agreements, as they are known, allowed Google to illegally obtain a monopoly over online search. In the court’s decision, it largely affirmed the DOJ’s contention, representing a significant leap forward in antitrust that has its origins in behavioral economics.

In contrast, Google’s defense of its exclusive default agreements relies on old arguments about defaults being easy to change. All the way back in 2009, Google famously argued that on the web, “competition is a click away.”

The company’s more recent defense of its conduct similarly emphasized how switching search engines is easy and that Google Search’s quality is the main reason why it is usually made default. In the past, this logic was supported by influential economists associated with  neoclassical antitrust, and US competition authorities were persuaded to refrain from bringing an enforcement action against Google on this basis.

In US v. Google, the court and DOJ broke with this neoclassical analysis. The case is remarkable for how it uses insights from behavioral economics to analyze the effects of Google’s exclusive default agreements on competition. The very first witness that the DOJ called in the case was a behavioral economist.

Throughout the trial, the DOJ argued that, due to the placement of Google as default on so many devices, these agreements prevent competing search engines from the most effective means of distributing their products to consumers, in effect depriving them of the scale needed to match Google’s quality.

Defaults can strongly affect which search engines consumers use. As described by Judge Mehta in his decision, consumers form habits using a particular search engine because the process of search is largely automatic, happening frequently and instantly.

Moreover, most consumers are unaware that Google is the default or that it can be changed, and those who do often find selecting an alternative search engine frustrating and difficult. Judge Mehta’s opinion highlights many pieces of evidence documenting the power of defaults and Google’s awareness of it:

• Google research found that users typically stick with the services they have become habituated to using. In one 2020 study of where users opened links from their email, the leading rationale from study participants for which service they used was “Habit/Regular Usage”.
• Google also identified that most users are unaware they are acting out of habit. In a 2015 study, almost half of users (12 out of 26) failed to notice when their search engine on iPhone was surreptitiously changed from Google to Bing. This study concluded that “People expressed interest (but not urgency) to switch back to Google.”
• Google studies further showed that many users do not realize a default search engine has been set or that it can be changed: one 2018 study highlighted “substantial user confusion” about which browsers and search engines are set as default, and another 2020 study reported that more than half of iPhone users in the US were “unsure” which search engine was default on Safari.
• Google’s research team emphasized that even small design changes can introduce frictions that impede users from switching. In one internal document, the research team stated that “[s]eemingly small friction points in user experiences can have a dramatically disproportionate effect on whether people drop or stick.” And in another piece of research, the team disclosed ”[O]f the tiny fraction of end users who try to change the default, many will become frustrated and simply leave the default as originally set[.]“
• Finally, internal research confirmed the existence of these frictions in how Google’s services are designed. One study of iPhone users observed that they “were able to switch back with relatively little effort” from Bing to Google, whereas Android users have to complete a 10-step process to replace Google’s search widget with that of Bing.

Overall, this evidence highlights the typical process consumers undergo when they start searching on Safari and Chrome: they use Google because it is the default, grow habituated to it, and largely never consider the alternatives. Competing search engines like Bing and DuckDuckGo rarely enter the picture.

These findings are similar to the conclusions reached by antitrust authorities abroad. In the last decade, the European Union, Russia, and Turkey have all brought enforcement actions against Google for requiring its apps (including Google Search and Chrome) be made default on Android phones. Likewise, in 2020, the United Kingdom’s Competition and Markets Authority concluded a comprehensive study of digital markets which found the presence of exclusive defaults can have anti-competitive effects in online search.

In the US, the reliance of Judge Mehta’s opinion on arguments about default effects is an important milestone. Traditional economic analysis as invoked in antitrust law assumes that consumers are capable of making decisions that optimize their utility according to their preferences.

However, over the last two decades, behavioral economists have found that consumers often do not behave in this way. Their findings suggest that consumer behavior can be imperfect due to the innate limits we face as human beings. For instance, making decisions is often complicated and taxing, and the amount of willpower we have to do so is finite.

As a result, consumers often rely on shortcuts and rules of thumb to make decisions, which can sometimes bias their behavior in ways that lead to mistakes. One circumstance where this often happens is the usage of defaults. Research has shown that, when consumers are presented with a default, many prefer to stick with it over making an active choice.

This happens because, across many markets, defaults can affect how a product is perceived. Sometimes, consumers see default status as an implicit endorsement. That status can also frame a product as being part of the status quo, which consumers may be averse to losing. Or consumers may simply stick with a default merely because it is the path of least resistance.

While theory suggests that defaults can powerfully shape how consumers make decisions, the DOJ still had to demonstrate that, in the context of online search, default effects are strong enough to deny Google’s competitors the scale they need to match its quality.

The DOJ relied on several key pieces of evidence to persuade the court that default effects are indeed present and strong in online search:

• Expert economists calculated that around 70% of all search queries in the US occur on devices and applications where Google’s search engine is default.
• While Google’s overall share of search queries on Windows is 80%, it receives only 20% on Microsoft’s Edge browser, where Bing is default. Bing possesses the remaining 80%.
• In 2014, Mozilla switched the default search engine on its Firefox browser from Google to Yahoo. Afterwards, Google’s share of search queries dropped by 20% from between 80-90% to 60-70%, and Yahoo’s share of searches rose from 10% to 30%.

These pieces of evidence are compelling in their own right. While default status is far from the only factor influencing consumer choice, the sheer scope of Google’s defaults across the web is staggering, as is the decline in its share of queries when competing search engines were made the default.

However, this evidence would likely have been much less persuasive absent the insights of behavioral economics. This shift in how economists understand consumer behavior has finally begun to reach the mainstream of antitrust in the United States. The case reveals how consumer habits and the power of defaults can fortify monopoly positions in ways that traditional economic models fail to capture. As antitrust authorities continue to scrutinize the practices of large technology companies, the precedent set by this case will loom large.