U.S. Considers Rare Antitrust Move: Breaking Up Google

Jibran Munaf
Jibran Munaf August 14, 2024

Image | Reuters

The U.S. Justice Department is contemplating a rare bid to break up Alphabet’s Google following a landmark court ruling that found the company monopolized the online search market. This would be Washington’s first attempt to dismantle a company for illegal monopolization since the unsuccessful efforts to break up Microsoft two decades ago.

Less severe options include forcing Google to share more data with competitors and measures to prevent it from gaining an unfair advantage in artificial intelligence products. Regardless, the U.S. government is likely to seek a ban on the exclusive contracts central to its case against Google.

If the Justice Department proceeds with a breakup plan, the most likely units for divestment are the Android operating system and Google’s web browser, Chrome. Officials are also considering forcing a possible sale of AdWords, the platform Google uses to sell text advertising.

The discussions have intensified after Judge Amit Mehta’s August 5 ruling that Google illegally monopolized the markets for online search and search text ads. Google plans to appeal the decision, but Mehta has ordered both sides to prepare for the second phase of the case, which will involve the government’s proposals for restoring competition, including a possible breakup.

Alphabet shares fell as much as 2.5% to $160.11 in after-hours trading before regaining some losses.

Justice Department attorneys have raised concerns that Google’s search dominance gives it advantages in developing AI technology. As part of a remedy, the government might seek to stop Google from forcing websites to allow their content to be used for some of Google’s AI products to appear in search results.

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Divesting the Android operating system, used on about 2.5 billion devices worldwide, is one of the remedies most frequently discussed by Justice Department attorneys. Mehta found that Google requires device makers to sign agreements to gain access to its apps such as Gmail and the Google Play Store. These agreements also require that Google’s search widget and Chrome browser be installed on devices in such a way they can’t be deleted, effectively preventing other search engines from competing.

Mehta’s decision follows a verdict by a California jury in December that found the company monopolized Android app distribution. The Federal Trade Commission, which also enforces antitrust laws, filed a brief in that case, stating that Google shouldn’t be allowed “to reap the rewards of illegal monopolization.”

Google paid as much as $26 billion to companies to make its search engine the default on devices and in web browsers, with $20 billion of that going to Apple. Mehta’s ruling also found that Google monopolized the advertisements that appear at the top of a search results page to draw users to websites, known as search text ads. These are sold via Google Ads, which offers marketers a way to run ads against certain search keywords related to their business. About two-thirds of Google’s total revenue comes from search ads, amounting to more than $100 billion in 2020.

If the Justice Department doesn’t call for Google to sell off AdWords, it could ask for interoperability requirements that would make it work seamlessly on other search engines. Another option would require Google to divest or license its data to rivals, such as Microsoft’s Bing or DuckDuckGo. Mehta’s ruling found that Google’s contracts ensure that its search engine gets the most user data, which keeps its rivals from improving their search results and competing effectively.

Europe’s recently enacted digital gatekeeper rules imposed a similar requirement that Google make available some of its data to third-party search engines. Google has said that sharing data can pose user privacy concerns, so it only makes available information on searches that meet certain thresholds.

Requiring monopolists to allow rivals to have some access to technology has been a remedy in previous cases. In the Justice Department’s first case against AT&T in 1956, the company was required to provide royalty-free licenses to its patents. In the antitrust case against Microsoft, the settlement required the tech giant to make some of its application programming interfaces (APIs) available to third parties for free.

For years, websites have allowed Google’s web crawler access to ensure they appear in the company’s search results. More recently, some of that data has been used to help Google develop its AI. Last fall, Google created a tool to allow websites to block scraping for AI, after companies complained. But that opt-out doesn’t apply to everything.

In May, Google announced that some searches will now come with “AI Overviews,” narrative responses that spare people the task of clicking through various links. The AI-powered panel presents summarized information drawn from Google search results from across the web. Google doesn’t allow website publishers to opt out of appearing in AI Overviews, since those are a “feature” of search, not a separate product. Websites can block Google from using snippets, but that applies to both search and the AI Overviews.

While AI Overviews only appear on a fraction of searches, the feature’s rollout has been rocky after some excerpts offered embarrassing suggestions, such as advising people to eat rocks or put glue on pizza.

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