AnalysisThe domino effect of Google's antitrust ruling
Analysis
The domino effect of Google's antitrust ruling
What this decision means for Apple, Amazon, and the future of big tech.
In one sense, the U.S. federal court's decision on Google does not change anything immediately. The court has not yet determined the next steps, and it may take months to decide whether Google should be broken up or whether the focus should be on curbing its anti-competitive practices. Meanwhile, Google continues to operate as usual. However, the ruling is a pivotal moment in the Biden administration's ongoing fight against monopolistic practices by major tech companies like Meta, Apple, and Amazon. While it may take years for any substantial change to occur, this ruling could be the catalyst for future action.
The Federal District Court in Washington, D.C., ruled that Google is an illegal monopoly in the search field and has acted to preserve its dominance through anti-competitive practices. This decision came from a lawsuit filed by the U.S. Department of Justice in 2020, alleging that Google took anti-competitive actions to maintain its dominance in search, primarily through agreements with companies like Apple and Mozilla. Google paid billions of dollars to ensure that its search engine would be the default in their browsers.
Judge Amit P. Mehta emphasized the value of default settings, stating that many users stick with the default search engine, allowing Google to generate massive amounts of data and, consequently, more revenue. In 2014, Google's ad revenue was $47 billion, which tripled to $146 billion by 2020. For comparison, Bing's ad revenue was less than $12 billion in 2022.
A hearing is set for September, where dates will be established for a separate trial to determine the measures Google will need to take to curb its anti-competitive practices. The most extreme measure would be to force Google to sell its search business, a move that would likely face strong opposition and may not survive appeals in higher courts. The U.S. judicial system has not ordered the dissolution of a large company since 1982. Judge Mehta's decision, which focuses on Google's exclusive agreements, suggests that breaking up the company is unlikely. Instead, the judge is more likely to order specific remedies, such as canceling existing agreements and banning similar agreements where Google’s search engine receives exclusivity as the default option.
This decision will primarily impact Google, which will lose a significant foothold on major platforms like the iPhone. However, it will also affect other companies, particularly Apple and Mozilla, which benefit from the significant payments Google makes to them. Apple's deal with Google provides it with approximately $20 billion a year in nearly pure profit. It is not surprising that Apple’s stock dropped 5% after the court's decision. Mozilla, which received $510 million from Google in 2021 and 2022, relies on this for 86% of its revenue. Canceling the agreement with Google could be a fatal blow to the independent browser, ultimately strengthening Google by boosting its Chrome browser’s dominance and eliminating a competitor.
Disruption is desired in the search market
For the court's decision to be truly effective, it cannot be limited to search alone. The search market is on the cusp of significant disruption due to the rise of generative artificial intelligence (GenAI) models, which could potentially replace traditional search. The decision on how to handle Google must address this shift and prevent similar anti-competitive agreements in the GenAI field. Otherwise, it will merely curb anti-competitive behavior in a market that may soon become obsolete.
This legal process is expected to be lengthy. After the district court makes its decision on the measures to be taken, appeals will likely be filed with a federal appeals court—Google has already announced its intention to appeal the monopoly ruling. These appeals could come from both sides and might even reach the Supreme Court, or the case could be sent back to the Federal District Court for another hearing before returning to the Court of Appeals. It could take years for a definitive resolution (unless a settlement is reached), during which time Google will continue its current practices.
The shift in antitrust perspective
Therefore, while the ruling does not change anything immediately, it signifies a potential shift in how antitrust cases are viewed in the U.S. legal system. Since the 1970s, U.S. courts have assessed antitrust cases primarily through the lens of consumer welfare—whether monopolistic behavior harms consumers, particularly in terms of price or service quality. Under this narrow interpretation, the court might have dismissed the lawsuit. Google's search engine is free, and the judge himself noted that it is "the best search engine in the industry." However, the court embraced a broader view that antitrust laws also aim to prevent the abuse of market power. According to the ruling, Google's agreements have anti-competitive effects, and Google failed to present valid pro-competitive justifications.
This ruling, which aligns with the Biden administration's approach to antitrust, has far-reaching implications for other ongoing cases. The U.S. government currently has four other antitrust lawsuits against Meta, Apple, Amazon, and Google. For example, the Federal Trade Commission (FTC) filed a lawsuit against Meta in December 2020, accusing it of creating an illegal monopoly in social media through its acquisitions of WhatsApp and Instagram. Another lawsuit filed by the FTC against Amazon in September last year alleges that the company maintains a monopoly by undermining independent sellers on its marketplace in favor of its own services, sometimes leading to "artificially high prices." There are also allegations that Apple's restrictions on developers harm competition and consumer prices.
The Justice Department filed a lawsuit against Google in January 2023, claiming that the company established a monopoly in digital advertising through anti-competitive mergers and threats against advertisers. This case is set to enter the discussion phase in September.
These lawsuits, at least in part, are based on arguments beyond just consumer welfare—they address monopolistic practices that harm market competition even if they do not directly harm consumers. This week's ruling bolsters these cases and the theories behind them, potentially signaling a shift in the U.S. judicial system's approach to antitrust: recognizing that anti-competitive behavior by monopolies harms the market and competition, and ultimately, everyone.
