Yelp sues Google alleging monopoly abuse in local search market

Yelp, the popular local business review platform, today filed an antitrust lawsuit against Google in federal court in San Francisco. The lawsuit alleges that Google has illegally abused its monopoly in general search to dominate the local search and local search advertising markets. Yelp claims that Google's anticompetitive practices have degraded the quality of search results, demoted rivals, and ultimately harmed consumers and competition.

The legal action comes at a time of increased scrutiny over Google's market power. Just three weeks ago, a federal judge in Washington, D.C. concluded that Google has unlawfully maintained a monopoly in the general search market for years. This ruling adds weight to Yelp's allegations and highlights the ongoing debate about the role of big tech companies in shaping online experiences.

According to Yelp's co-founder and CEO Jeremy Stoppelman, Google has abandoned its stated mission to deliver the best information to users. Instead, Stoppelman argues, the search giant has engaged in practices that keep consumers within its own ecosystem, stifling competition and innovation in the process.

At the heart of Yelp's complaint is Google's dominant position in the search market. With approximately 90% market share in general search, Google acts as a critical gatekeeper for online information. This dominance extends to local search, where a significant portion of queries have local intent. On desktop, nearly one-third of the roughly 9 billion daily Google searches are locally focused. For mobile searches, that proportion rises to nearly half.

Yelp contends that Google manipulates its search results to promote its own local search offerings above those of rivals, regardless of the comparative quality of its properties. This self-preferencing, Yelp argues, exempts Google from the qualitative ranking system it uses for other sites. The result is that an increasing number of searches result in "zero clicks," meaning users never leave Google's search results page.

The lawsuit highlights several specific practices that Yelp deems anticompetitive. One such practice is Google's handling of user reviews. An FTC economist found that 32% of Google's so-called "reviews" consist only of star ratings with no accompanying text. Yelp argues that Google buries these less helpful ratings below its text reviews for a given business, yet still includes them in its overall "review" count. This practice, Yelp claims, artificially inflates Google's credibility with consumers seeking trustworthy ratings.

In contrast, Yelp requires review text for all submissions and boasts that its reviews are consistently longer than those found on Google in the U.S., often by 500% or more. This disparity in quality, Yelp argues, demonstrates that Google's dominance in local search is not based on merit but on its ability to leverage its search monopoly.

The lawsuit also addresses Google's past behavior in the local search market. In 2009, Google began scraping reviews from Yelp and other local search services, presenting this content as its own. This practice only ceased after a 2011 FTC investigation condemned the conduct. Yelp argues that since then, Google has struggled to close the quality gap in local search content, resorting to anticompetitive practices to maintain its market position.

Yelp's legal action is not occurring in isolation. It follows a series of antitrust challenges against Google both in the United States and abroad. In September, the Department of Justice and a bipartisan group of state Attorneys General are scheduled to take Google to trial over claims of monopolization in advertising technology markets. In Europe, the European Commission fined Google $2.6 billion in 2017 for illegal self-preferencing of its shopping recommendations. More recently, in March, the Commission announced an investigation into Google's self-preferencing in search results under the newly enacted Digital Markets Act.

The implications of Google's alleged anticompetitive behavior extend beyond just Yelp and other local search competitors. Yelp argues that consumers lose out by being confined to Google's "walled garden" of inferior quality results. Multiple studies have shown that people consistently prefer search results that incorporate third-party content. By keeping users from leaving Google, other vertical search services are prevented from reaching customers, achieving scale, and building helpful content.

This softening of the competitive landscape, Yelp contends, reduces the incentive for Google to invest in quality content that would improve the consumer experience. Instead, it creates greater incentives to show less relevant but more easily monetizable results.

The impact on advertisers is also significant. Yelp argues that Google's conduct suppresses competition in the local search advertising market, forcing more local advertisers to turn to Google. As a result, Google can extract higher fees from advertisers with little consequence. The lawsuit notes that Google has increased its year-over-year search advertising revenue by 20% or more each year for the better part of the last decade while still growing its market share.

Yelp's proposed solution is for Google to match consumers with the best possible local search information at the top of the search results page, ranking Google's content alongside other third-party content providers using Google's organic search algorithm. This approach, Yelp argues, would create an environment where companies can fairly compete and consumers receive the most high-quality, relevant information.

The lawsuit seeks to recover damages and prevent Google from engaging in anticompetitive practices. Yelp hopes that this legal action will lead to a level playing field in which it and other local search providers can effectively compete, ultimately providing consumers with the best local search experience.

Details of Yelp’s lawsuit against Google

Yelp’s lawsuit against Google focuses on Google’s alleged misuse of its market power to promote its local search services at the expense of competitors. Yelp claims that Google, which controls approximately 90% of the general search market, manipulates its search results to place its own local search products above those of rivals, such as Yelp, regardless of quality. This practice is said to violate antitrust laws and harm both consumers and businesses.

Yelp, founded in 2004, is a well-known local search platform that connects users with local businesses through reviews and other information. Yelp’s lawsuit, brought under Section 2 of the Sherman Act and California’s Unfair Competition Law, seeks to protect competition and recover damages for losses incurred due to Google’s actions.

Google’s Dominance in Search Markets

According to court documents, Google maintains its market share in general search through exclusive agreements with browser makers, device manufacturers, and cellular carriers. This entrenched position allows Google to control the information flow in online searches and heavily influences adjacent markets like local search and local search advertising.

Google's control over search extends to an estimated 9 billion daily searches, with nearly one-third having local intent on desktops and almost half on mobile devices. Local searches are crucial for consumers seeking information on nearby businesses and services, making them a key battleground for competition between general search providers like Google and vertical search providers like Yelp.

Yelp alleges that Google’s strategy involves steering users toward its own services by featuring them prominently on search results pages, often at the top, in sections known as OneBoxes. OneBoxes present information from Google’s vertical services, such as Google Maps or Google Local, directly above organic search results from other providers. This prime positioning captures user attention and clicks, often preventing users from exploring other options, including Yelp’s listings.

Allegations of Anticompetitive Conduct

Yelp's lawsuit highlights several ways in which Google’s practices allegedly harm competition and consumers:

1. Self-Preferencing: Yelp claims Google unfairly promotes its own local search content over other providers, even when rivals offer higher quality or more relevant information. For example, when users search for local businesses, Google often places its OneBox at the top of the search results, which directs traffic to Google’s own services rather than to potentially better options from competitors.
2. Zero-Click Searches: Yelp alleges that Google’s self-preferencing strategy results in a significant number of zero-click searches, where users find answers directly within Google’s search results without clicking through to external websites. According to studies, these zero-click searches deny traffic to competing sites, reducing their visibility and ad revenue.
3. Manipulation of Search Algorithms: Google is accused of altering its search algorithms to favor its services. Yelp argues that Google’s OneBox is frequently positioned above the best organically determined results, even if Google's offerings are of inferior quality.
4. Barriers to Competition: Yelp’s lawsuit details how Google’s practices make it difficult for competitors to reach scale, limiting their ability to compete effectively. Yelp claims that Google’s actions have diminished its own traffic, reduced its advertising revenues, and raised operational costs.

Impact on Consumers and Advertisers

Yelp argues that Google’s monopolistic behavior diminishes the overall quality of local search services, as it reduces the competitive pressure that would otherwise drive improvements in content and service. By capturing traffic within its ecosystem, Google limits user exposure to other local search providers that may offer more comprehensive or specialized information.

For advertisers, the lack of competition in local search leads to higher fees and fewer choices for ad placements. Yelp alleges that Google’s control over the local search advertising market allows it to charge more for ad space without fear of losing business to competitors.

Legal and Regulatory Background

Yelp’s lawsuit comes amid increasing scrutiny of Google’s business practices by regulators around the world. In recent years, Google has faced antitrust probes and fines from authorities in the United States, the European Union, and other jurisdictions. For example, the European Commission fined Google $2.6 billion in 2017 for favoring its own shopping service over rivals in search results, and similar investigations into Google’s self-preferencing practices are ongoing.

Earlier this month, a federal judge in Washington, D.C., found Google guilty of unlawfully maintaining its monopoly in the general search market. The U.S. Department of Justice and various state Attorneys General have also brought antitrust cases against Google, alleging similar monopolistic behavior in digital advertising markets.

Key Points from Yelp’s Lawsuit

• Yelp filed the antitrust lawsuit against Google on August 28, 2024, in San Francisco.
• The lawsuit alleges Google abuses its monopoly in general search to dominate the local search and advertising markets.
• Yelp claims Google’s practices stifle competition, degrade search quality, and limit consumer choice.
• The lawsuit seeks damages, injunctive relief, and a declaration that Google’s conduct violates antitrust laws.
• Google controls approximately 90% of the general search market and over 90% of the local search market.
• Google’s practices, such as self-preferencing and zero-click searches, allegedly harm competitors and consumers.
• The case adds to the global scrutiny of Google’s business practices by regulators and courts.

The outcome of this lawsuit could have significant implications for the competitive landscape of online search, particularly for how dominant platforms like Google engage with rivals in niche markets such as local search services.

Who: Yelp, a major local search provider, filed an antitrust lawsuit against Google in federal court in San Francisco.

What: Yelp accuses Google of abusing its monopoly in general search to dominate the local search and local search advertising markets.

When: The lawsuit was filed on August 28, 2024.

Where: The case was brought to the United States District Court for the Northern District of California.

Why: Yelp claims Google’s practices degrade search quality, prevent competition, and limit consumer choice by prioritizing its own services over those of competitors.

How: Yelp alleges Google’s conduct has led to self-preferencing in search results and the creation of barriers that prevent other local search providers from reaching consumers.