Google Faces Breakup Moment: Can It Escape Like Microsoft 20 Years Ago?
The U.S. Department of Justice has informed a federal judge that they are contemplating advising tech giant Google (GOOGL.US) to forcibly divest certain business segments to mitigate the monopolistic harm caused by its dominance in the online search market. Should Google actually be split up, it would also mark a historic antitrust breakup. In addition to the breakup, the Department of Justice has also suggested that Google provide greater transparency of exclusive data, allowing competitors and new entrants access to and use of search engine data, and reduce Google's advantage in leveraging its platforms (such as Chrome, Play, Android) to promote its own search business.
In a court filing submitted on Tuesday, U.S. antitrust enforcers indicated that Judge Amit Mehta could also order Google, a subsidiary of Alphabet Inc., to provide access to the exclusive underlying data it uses to build search results and artificial intelligence products. This means that U.S. antitrust officials are considering remedies that would require Google to share its proprietary search engine data and related access rights.
The Department of Justice stated in the filing that the agency is considering both behavioral and structural remedies to prevent Google from using flagship products like Chrome, Play, and Android to gain an advantage over competitors or new entrants in Google's search engine and related new products and features—this includes emerging search access points and new functionalities, such as artificial intelligence.
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This 32-page court document provides a framework for the judge to consider various potential options as the Google antitrust case enters the "remedy phase." The agency said it would provide a more comprehensive set of remedies next month. Following the filing, Nasdaq 100 index futures fell about 0.3%, with Google, a subsidiary of Alphabet, being one of the largest components of the index, alongside Microsoft and Apple.
This marks the most significant move to control the illegal monopolistic behavior of a major U.S. tech company since Washington's failed attempt to break up Microsoft (MSFT.US) 20 years ago. It indicates that Google may face a long legal battle similar to what Microsoft experienced at the time, with the possibility of a breakup remaining and Google needing to go through a lengthy legal process to avoid it.
Antitrust enforcers claim that Google has secured profits related to scale and data by entering into illegal distribution agreements with other tech companies, making its search engine the default option on smartphones and web browsers. Google's Android business includes the operating system used on smartphones and other consumer electronic devices and applications.
The Department of Justice also stated that it might require Google to allow websites to have more power to opt out of its artificial intelligence products. The agency said it is considering proposals related to Google's dominance in search text advertising, such as requiring the company to provide more disclosure to advertisers and control the placement of advertisements.
Google has consolidated its monopolistic position in the online search engine market by leveraging its scale and data advantages through illegal distribution agreements with other tech companies. Therefore, the U.S. Department of Justice believes that to eliminate Google's unfair competitive advantage in the market, some remedial measures may be necessary, including the breakup of some of its businesses suspected of monopolization. In addition to the breakup, the Department of Justice has also considered other antitrust remedies, such as restricting Google's use of its products (like Chrome, Play, and Android) to promote its search and search-related products, as well as providing more advertising control authority and exclusive data information transparency.
The agency may also require restrictions on Google's investments in search competitors or potential competitors.
Regarding Google's latest developments, a spokesperson for the giant criticized the Department of Justice's filing as too "aggressive," stating that it "would have unintended serious consequences for consumers, businesses, and America's competitiveness."Google's Vice President of Regulatory Affairs, Lee Anne Mulholland, wrote in a blog post: "We believe that today's antitrust blueprint goes far beyond the legal scope of the courts' decisions on search distribution contracts."
Multiple antitrust cases against Google are forming a strong antitrust pressure. Mehta ruled this summer that Google's online search and search text advertising markets violated antitrust laws. He plans to hold a trial on proposed remedies next spring and issue a formal decision by August 2025. Google has indicated that it plans to appeal Mehta's antitrust decision, but must wait until he finalizes the nature of the remedies before doing so.
"We believe that despite the ongoing antitrust whirlpool, Google is currently unlikely to be formally split up," said Daniel Ives, Managing Director and Senior Equity Analyst at Wedbush Securities. "We believe Google will fight this in court for years."
Several U.S. state governments have long sued Google for monopolistic behavior in the online search field and have indicated that they may ask the tech giant to pay for a public education campaign on how to switch search engines.
On Monday, another U.S. federal judge ordered Google to open its app store over the next three years to resolve another antitrust case brought by Epic Games Inc., which involves Google's dominance in the distribution of Android smartphone apps. The company also plans to appeal the decision.
Last month, the U.S. Department of Justice and Google faced off in a third antitrust lawsuit, which focused on Google's dominance in the technology used to buy and sell online search engine advertising spaces. Closing arguments in the lawsuit are scheduled for the end of November. Antitrust enforcers said that if the court finds that Google has monopolized the online search engine advertising market, they plan to force Google to sell part of its advertising technology business.