Yelp Takes Cue from D.C. Court’s Antitrust Ruling Against Google

On the heels of a judgment from the U.S. District Court for the District of Columbia earlier this month that found that “Google is a monopolist,” Yelp, Inc. has brought a lawsuit against Google in the Northern District of California under Section 2 of the Sherman Act, 15 U.S.C. § 2, and California’s Unfair Competition Law. The suit alleges that Google is “engaging in various anticompetitive practices designed to monopolize the markets for local search services and local search advertising.”

The complaint charges that Google has abandoned “its stated mission to deliver the best information available to its consumers” in favor of “forcing its own low-quality local search content on them.” Far from its roots when it launched in 1998 as “an unbiased and impartial matchmaker sitting between consumers and all the web had to offer,” Google’s mission has morphed into one meant to “enhance its own bottom line and stifle competition,” said Yelp. It adds that Google has engaged in anti-competitive practices, “including stealing information from Yelp’s website and passing it off as Google’s own; preferencing Google’s own local search results over Yelp’s; implementing a “OneBox” feature to prioritize Google’s own inferior local search services at the top of the search results page; and even going so far as to tweak its algorithm and steer customers away from Yelp.”

The suit is seeking injunctive relief, monetary damages, restitution, pre-and post-judgment interest, attorney fees, costs, and expenses, and a declaratory judgment that Google’s conduct violates the antitrust laws.

In one example of the way Google’s practices have evolved to crowd Yelp out of the market, the complaint included a graphic of search results for “plumber San Francisco” showing first sponsored results, then Google’s OneBox results, which display Google’s own vertical search results above organic search results, and finally, the organic search results  at the bottom. “Google has thus capitalized on the primacy of the top of the search page by crowding it with Google products such as OneBox, while pushing organic search results out of view,” explained the complaint. “This is even more pronounced on mobile displays, like iPhones and Androids, where the smaller screen size means that a user must scroll through several screens before even reaching organic search results.”

The complaint referred to the recent ruling by Judge Amit Mehta to bolster its position that “general search services in the United States is a relevant antitrust market.” Judge Mehta’s opinion found that general search engine (GSE) services satisfied the Brown Shoe factors for qualifying as a relevant product market and then held that the plaintiffs “easily demonstrated” that Google has dominant market share and that (1) high capital costs, (2) Google’s control of key distribution channels, (3) brand recognition, and (4) scale all showed significant barriers to entry. With respect to monopoly power in advertising markets, however, the court found that “search advertising” is a relevant market but that Google does not have a monopoly in it. Google has said it plans to appeal the decision.

The Yelp complaint also argues that “local search advertising” in the United States is a relevant antitrust market, that Judge Mehta’s opinion supports such a reading, and that Google has market power in the local search advertising market in the United States. Approximately 95% of Yelp’s revenue comes from local search advertising, according to the complaint. It added:

“Google’s success in siphoning users away from Yelp in the local search market deprives Yelp of user traffic. This loss of traffic has had a three-fold negative effect on Yelp’s business. First, it has directly caused Yelp to lose advertising revenues…. Second, it has increased Yelp’s own costs to compete, by forcing Yelp to purchase advertising from Google just to be able to reach users, given Google’s preferential treatment of its own local vertical at the top of the SERP in combination with sponsored links. Third, it has impaired Yelp’s ability to improve its content every day, and thus has harmed Yelp’s ability to compete.”

The complaint is seeking relief on seven counts, including monopolization of the local search services market; attempted monopolization of the local search services market; attempted monopolization of the local search advertising market; unlawful tying of local search services to general search services; illegal monopoly leveraging in the local search services market; illegal monopoly leveraging in the local search advertising market; and violation of California Unfair Competition Law.

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