In a bold move, the US Department of Justice is contemplating a rare bid to break up Alphabet Inc.’s Google following a landmark court ruling that declared the company had monopolized the online search market, according to a report by Bloomberg.
This potential action marks the first significant push by Washington to dismantle a major corporation for illegal monopolization since the attempts to break up Microsoft Corp. two decades ago.
Alphabet shares fell as much as 2.5% to $160.11 in after-hours trading before erasing some losses.
A separate trial scheduled for September 4 will determine the penalties or remedies that Google will face.
Loss of antitrust case against the US precursor to the discussions
Earlier this month, Google lost a landmark antitrust case against the DoJ after federal judge Amit Mehta ruled that the tech giant had built an “illegal monopoly” over the online search and advertising industry.
It specifically found that Google broke antitrust laws by striking exclusive agreements with device makers like Apple and Samsung, in which Google would pay billions of dollars ($26 billion in 2021 alone) to ensure that its product was the default search engine on their phones and tablets.
Judge Amit Mehta’s August 5 ruling has intensified the Justice Department’s discussions, highlighting Google’s illegal dominance in online search and search text ads.
Google has said it will appeal that decision, but Mehta has ordered both sides to begin plans for the second phase of the case, which will involve the government’s proposals for restoring competition, including a possible breakup request.
Divestiture plans on the table
Potential divestitures being considered include the Android operating system and Google’s web browser, Chrome, Bloomberg said.
Judge Mehta found that Google requires device makers to sign agreements to access its apps, such as Gmail and the Google Play Store, which in turn mandates the installation of Google’s search widget and Chrome browser in a non-deletable manner.
This effectively stifles competition from other search engines.
Officials are also looking at trying to force a possible sale of AdWords, the platform the company uses to sell text advertising, to mitigate its dominance in the sphere, sources told the news agency.
AdWords contributed to over $100 billion in revenue in 2020.
Less severe plans include sharing data with competitors
Less severe measures include mandating Google to share more data with its competitors, Bloomberg said.
Judge Mehta’s ruling highlighted that Google’s contracts secure the majority of user data, 16 times more than its closest competitor, which stifles rivals from improving their search algorithms.
Requiring Google to make its data available to rivals like Microsoft’s Bing or DuckDuckGo could enhance competition and innovation in the search market.
A similar approach was taken in the 1956 antitrust case against AT&T, which required the company to provide royalty-free licenses to its patents, and the 2001 case against Microsoft, which mandated making some APIs available to third parties for free.
Concerns with Google’s AI play
Concerns over Google’s dominance extend to the development of artificial intelligence (AI) technology.
The Justice Department has raised alarms that Google’s control over online search provides an unfair advantage in AI development.
Websites have historically allowed Google’s web crawler to index their content to appear in search results. However, this data is also utilized to train Google’s AI models.
Recently, Google introduced a tool allowing websites to block data scraping specifically for AI, yet this opt-out doesn’t apply to all data used for AI development.
Google’s AI Overviews, narrative responses to search queries, draw from search results and present summarized information.
These overviews, which are integrated into the search feature, cannot be opted out of by website publishers, posing further concerns about Google’s leverage over web content.
The way forward and implications
If the Justice Department decides to pursue a breakup, the plan will need approval from Judge Mehta, who will then direct Google to comply.
The Justice Department’s attorneys have been consulting with companies affected by Google’s practices to assess the full scope of the monopolistic impact and potential remedies.
Regardless of the specific course of action, the government’s focus remains on restoring competitive balance in the tech industry.
This may involve banning exclusive contracts that stifle competition and ensuring that Google does not unfairly dominate emerging markets like AI.
The outcome of this historic antitrust case against Google could set a significant precedent, influencing how digital markets are regulated and ensuring that competition and innovation thrive in the rapidly evolving tech industry.
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