Sean Reyes 02

Utah Attorney General Sean Reyes recently announced the state was part of a sweeping anti-trust legal action against Google for their practices in the digital advertising sphere. 

Reyes sits down with Managing Editor Bryan Schott to explain the investigation into Google and what happens next.

 

 

Highlights of our conversation with Reyes (lightly edited for clarity and grammar):

 

Utah, along with 49 other states and territories announced legal action against Google this week. For people who don’t understand what you’re trying to do, can you provide a basic explanation?

It’s about leveling the playing field in the technology space. It’s about giving consumers the greatest amount of choice and to keep costs in the tech ecosystem as low as possible for consumers. I think what many citizens don’t realize, because the search part of Google is free, so you can do as many searches as you want. They’re not charging you per search, but on the backend, Google has such market dominance, and they leverage that dominance to be able to dictate prices for buyers, sellers and those who are purchasing. Those costs get raised and passed on to consumers. So, consumers don’t realize the true cost of Google’s market power.

Certainly, there’s nothing inherently wrong with being the market’s dominant player. I think all businesses aspire to be number one in their industry. But, you have to do it the right way, follow the rules. That’s what we’re investigating. Has Google done it fairly? Have they followed the rules or not?

Part of this problem, as I understand it, stems from Google moving in, identifying companies that could be a threat to them in the future and buying them up so they can continue their dominance.

You hit a significant part of that, and that’s why some members of Congress have talked about a using a very intrusive but powerful tool called divestiture to break up a company like Google. Some would say that sounds un-American. How could you break up a company when those acquisitions were done publicly? They were done with the approval of authorities.

We’ll look at issues like that, whether things were done improperly. Then, divestiture is a possible remedy.

One of the things we’re concerned about is not only that they were buying up and acquiring competitors, but that they dictated the market in a way that other competitors couldn’t compete or that other businesses could never even be born, so to speak. They couldn’t come into existence because of the environment.

Right now, our focus is on the digital marketing space, but it could include privacy. It could include search and many other things as well.

Google is such a huge player in the ad space right now. Their only competitor is Facebook, and they’re not even close to Google.

They’re hyper dominant. Imagine in terms of real estate. They’re the broker for the buyer, the broker for the seller, they run the auction house, and they also own the prime real estate. When you control all of that, almost anything you do will favor yourself and your interests over the marketplace.

If we move outside of the ad space and look at search, they’re even more dominant in search. It’s not illegal to be the number one player, but if you use that dominance to disadvantage everybody else by forcing people who want to search to do certain things, that’s a problem. And that’s what we don’t know yet. We’re at the beginning stages of sending out investigations. We have a lot of suspicions and a lot of complaints to look into. That’s why I think it’s critical that we do that, especially because Utah is such a leader in terms of innovation. In order for us to keep and maintain our cutting edge status, we have to have a level playing field.

I think it’s significant that states are leading this action instead of Congress. When you go back and look at the Facebook hearings Congress had, that was painful to watch. They didn’t understand what they were talking about. States have experts who understand the issues and the possible remedies.

I would say those hearings were even harrowing. I came from the tech sector, and I represented tech companies as outside counsel. I invested in tech companies. I helped run them. It was scary to hear those members of Congress ask questions of Mark Zuckerberg.

You hit on something really important. The states should be the laboratories of experimentation. We are more responsive than the federal government. That being said, I’m glad the federal government is also taking steps. In 2016, Utah asked the FTC to look into these issues because we didn’t have sufficient resources in one state to do an investigation of this magnitude, and they ignored us. It was only after the EU hit Google on these very same concerns and tagged them for $1.5  billion that people started saying there’s something here. Now the FTC has an independent investigation from ours. DOJ has an independent investigation from ours. I think all of that attention will make a difference this time.

This highlights that the tech sector is moving so much faster than government can in terms of regulating what they should and should not be allowed to do. Things move so quickly in that sector and governments, by design, move more slowly.

You hit two excellent points. One, if the antitrust laws work the way they should, then that’s less regulation that we need. Some people have said, innovation has all of these problems. The focus of this is not anti-tech. If we can level the playing field, it opens up all these opportunities for new innovation to come forward.

When laws are passed today targeting the tech sector, they are almost anachronisms by the time they’re passed. Government was not built to be as fast as the pace of innovation. By the time you get a group of people together and experts on both sides of the aisle to agree on something, the tech’s already surpassed it.

It seems like individual states are much more effective in reining in some of these abuses.

I would agree, and we can do it in a bipartisan way. It’s important that it’s not just Democrats. It’s blue states and red states.  It’s everyone together. These are not Democrat or Republican issues.

It’s important to understand that we’re not anti-tech. Google has helped to create a lot of opportunity in this space. But Google has a responsibility. When you have that kind of market dominance, you have to be hypervigilant because every step you take potentially disrupts the whole ecosystem. I’m afraid in certain circumstances, and Google purposefully used their dominance to disadvantage others.

If that’s the case, then we’ll use every tool at our disposal to remedy that.

At the press conference announcing this, you were one of the leads announcing it. How did this come to be, and how did you come to be one of the leaders?

We’ve been pushing this to get other states on board, which has been difficult. We did some investigations of Google early on.

I don’t know what the precipitating event was, but suddenly everybody decided enough’s enough because it’s not just search. It’s not just tracking our every move with embedded technologies in your Android phone. It’s not just controlling payment platforms. It’s also the ad market. And a group of us came together and said, let’s talk about this as a bipartisan issue.

Over the last few months, it started to get legs. We had some meetings with the Department of Justice, just to see what they were looking at. The said they had some of the same concerns. We sad we could potentially share information.

Originally, we had 20 states, and once I think other states started to see this is serious, they joined on. It’s unprecedented to have this many states outside of the tobacco or opioid arena.

So, what’s the timeline going forward?

I hope Google will cooperate and produce documents like we’ve asked for. It’s a preliminary investigation. If they cooperate, that will tell us where we go from there. That’s just for ad revenue and questions we have about digital advertising. They make $120 billion or so annually just in the digital ad space. That’s larger than the GDP of some smaller countries.

The investigation will be pretty comprehensive, and as a result, it might take us a year or two to get through all of that.

 

 

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