On August 5, 2024, U.S. District Court for the District of Columbia Judge Amit P. Mehta ruled that Google violated Section 2 of the Sherman Act by maintaining a monopoly in general search services. Google achieved and maintained its monopoly via a series of exclusive deals spanning two decades with Apple Computer and other device manufacturers.[2]  In this article, we apply market design economics to develop a “but-for” standard for the causal link between Google’s anticompetitive bidding for search engine contracts and harm to rivals and consumers.

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As a matter of law, various scholars have argued that Judge Mehta’s ruling is “seriously lacking” because Judge Mehta incorrectly applied the special case "reasonably appears capable of” standard of causation instead of the default “but-for” standard of causation.[3] 

We start by conceptualizing negotiations between Google and Apple as a combinational position auction, featuring a bid menu of de facto exclusive versus shared choice screen positions. We embed this market design within the canonical antitrust three-party model of vertical contracting. We make clear that this model is applicable only in cases where each of the three parties - seller, entrant, and buyer — have some market power in their relevant markets.

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We argue that Google’s repeated no-bids on shared screen contracts were equivalent to anticompetitive gross overestimates of liquidated damage clauses in exclusive contract offers. By locating anticompetitive conduct early on during the competition for contract, rather than later in the effects of a contract on future competition, our market design framework offers a “but-for” causal link. 

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Bargaining in our model is not over price and quantity, but a share of excess profits or rent in exchange for platform positions with reduced competition. Our model assumes that bidders and the market designer consider the complex ad revenue effects of shared screen positions. As a result, we view our market design model as bringing forward Raising Rivals’ Costs (RRC) considerations during the competition for  contract. 

Our market design model locates anticompetitive conduct in Google’s repeated no-bids for shared choice screen contracts. Specifically, we argue that Google’s repeated no-bids in 2007, 2009, and 2012 were equivalent to grossly overestimated and anticompetitive liquidated damage clauses in exclusive contract offers.