By: Michael Hakes, CFA, MBA
At The Murray Wealth Group, we continuously track developments in the tech sector. Today, we would like to examine the ongoing antitrust case against Google by the Department of Justice (DOJ), as understanding the case’s trajectory, potential remedies, and upcoming milestones are crucial for assessing its broader market implications. This lawsuit, which has been closely watched since its inception, seeks to address alleged anti-competitive practices by the tech giant. The judge is expected to issue a ruling (or possibly a call for further comments) sometime in August.
The DOJ’s antitrust lawsuit against Google has primarily targeted its dominance in the search and search advertising markets, alleging that the company has maintained a monopoly through a web of exclusionary contracts and agreements, stifling competition and harming consumers. A key element of the DOJ’s argument revolved around Google’s arrangements with mobile device manufacturers and web browsers that make Google their default search engine, effectively creating artificial barriers to entry. The trial delved into these agreements, with both the DOJ and Google presenting extensive arguments and evidence regarding the nature of competition in the digital search landscape.
Following the trial, the focus has shifted to the “remedy phase,” where the court will now determine how best to rectify the anti-competitive behavior identified. The DOJ proposed an extensive set of remedies, including the divestiture of Google’s Chrome browser and Android operating system. In contrast, Google suggested a solution that would have it discontinue only the specific practices the court determined were illegal, mainly ending special deals where Google was the only search engine allowed on a device or in a browser and eliminating payments made to companies such as Apple to ensure Google remained the default search option. Essentially, Google said, “We’ll stop the bad behaviors, but we won’t break up our company or share our core data.”
The presiding judge appears to be seeking a middle ground between these two extremes, considering a range of options in the areas of contracts, divestiture, and data sharing. While the judge has asked “provocative questions” about divestiture, suggesting it could be a simpler solution, he has suggested that a forced sale of popular products like Chrome would be considered a “hard case legally and factually”. The judge is cautious about the practicality of finding an acceptable buyer and ensuring continued support for Chromium, the open-source web browser platform underpinning Chrome. As an alternative to divestiture, mandatory search engine choice screens are also being considered.
One of the most significant areas of exploration for the judge is data sharing, specifically concerning Google’s search index and the syndication of search results. This refers to the idea of Google being required to share its search results with other search engines or services. If syndication was to be mandated, Google would have to provide its search results (or a portion of them) to other companies. This would allow a smaller search engine, or a new competitor, to potentially display search results that originated from Google searches rather than having to build its own search index from scratch. The judge is particularly interested in whether Google should be required to disclose data in the U.S. the way it does in Europe. However, there is little historical precedent for mandatory data sharing as an antitrust remedy, with the Microsoft case (2001) being the closest example. The DOJ argues that data sharing is essential to “pry open the market and deprive Google of its data advantage”. The judge seems receptive to this argument but remains cautious due to the lack of precedent.
Impact on Key Players and Market Definition
The potential remedies could have substantial implications for various stakeholders. The judge is weighing the impact on Apple, which could lose an estimated $20 billion in revenue from Google’s search revenue share payments. However, the judge is likewise concerned about harming competition and consumers, so the limiting of these payments is being considered if intervention is necessary to open up the search market. The judge appears to be particularly concerned about the impact on smaller competitors like Mozilla and Brave.
There’s a discussion about broadening the definition to include AI companies like OpenAI and Perplexity, ensuring that the remedy is forward-looking and addresses new products and markets.
Next Milestones
The judge is expected to issue a decision in August, though it’s uncertain if it will be a final order or if further comments will be solicited. Any decision will undoubtedly trigger an appeal process, which could take 12 to 18 months, with the possibility of it being expedited to six months. While the Supreme Court could potentially take the case if the Court of Appeals decision is significant, it’s considered unlikely.
The Google antitrust case remains a complex and evolving situation, and we will continue to monitor these developments closely.