Justice department hits Google with Antitrust lawsuit.

The Justice Department accused Google on Tuesday of illegally protecting its monopoly over search and search advertising. It is the most significant legal offensive since the landmark case against Microsoft nearly two decades ago.

The crux of the complaint is that Google has allegedly used its monopoly power to tie up distribution channels for online search and related markets. The Justice Department claims that Google has “foreclosed competition for internet search” through exclusionary agreements that deny rivals the opportunity to achieve the necessary scale to challenge its dominance.

Google is owned by Alphabet Inc., which has a market value of just over $1 trillion. The federal government argues Google unfairly dominates online search and advertising to the detriment of consumers and competitors and that it has struck lucrative deals to maintain its 90% control of the world’s online search market.

For example, Google pays Apple billions of dollars a year to have its search engine as the default on iPhones and other devices. The Justice Department also says Google has contracts with smartphone makers that use Google’s Android mobile operating system to make its search engine the default there, too.

Google’s dominance in digital advertising – nearly all of Alphabet’s $34 billion in profit last year came from it – is also at issue. In a lengthy blog post following the announcement, Google Chief Legal Officer Kent Walker laid out the company’s rebuttal to the DOJ’s claims.

Google says there’s plenty of choice and competition. Users can switch to other search engines such as Microsoft’s Bing or Yahoo Search if they want. Most of Google’s services are offered for free (albeit in exchange for personal information that helps Google sell ads).

Google's argument: This is not the 1990s. People are savvy consumers who can easily switch apps and change defaults. They elect to use Google even when it’s not the default option because it’s the most helpful, not because they have to because the search results are better and the advertising more relevant, Google says.

Google also contends that there is “fierce” competition in digital advertising. “We compete for advertising dollars every day,” against Amazon, Apple, Facebook and all kinds of rivals every day, Google says. And, warns Google, should the DOJ prevail, it could become harder for people to get quality search results and phone prices could go up.

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