Aside from the fact that it is in their terms and doing so would violate said terms, I don't see the issue with google prioritizing their own properties over others.

Search is a feee service offered by a private company. Users of search don't pay for it so I dont see how monopoly or antitrust legal issues arise. As long as they are honest about what they're doing, and don't manipate ad results (which is a service that does have paying customers) the non ad results could be generated however google sees fit. Since it's free google should be able to set whatever terms it wants - if you don't like it don't use it. No?