Google Is A Monopoly & Will Be Broken Up Or Face Serious Constraints

Judge Amit Mehta, a US federal judge ruled on Monday that Google is a monopoly. “Google is a monopolist, and it has acted as one to maintain its monopoly,” Judge Mehta wrote in his 286-page filing (PDF). “It has violated Section 2 of the Sherman Act,” he added.

This case has been going on for quiet a while now.

The decision reads:

“Specifically, the court holds that (1) there are relevant product markets for general search services and general search text ads; (2) Google has monopoly power in those markets; (3) Google’s distribution agreements are exclusive and have anticompetitive effects; and (4) Google has not offered valid procompetitive justifications for those agreements. Importantly, the court also finds that Google has exercised its monopoly power by charging supracompetitive prices for general search text ads. That conduct has allowed Google to earn monopoly profits.

Other determinations favor Google. The court holds that (1) there is a product market for search advertising but that Google lacks monopoly power in that market; (2) there is no product market for general search advertising; and (3) Google is not liable for its actions involving its advertising platform, SA360. The court also declines to sanction Google under Federal Rule of Civil Procedure 37(e) for its failure to preserve its employees’ chat messages.”

The court zoomed in on Google’s exclusive search deal with Apple on its iPhone and iPad devices and its Android mobile operating system. “Antitrust enforcers alleged that Google has illegally maintained a monopoly over online search and related advertising. The government said that Google has paid Apple, Samsung Electronics Co. and others billions over decades for prime placement on smartphones and web browsers. This default position has allowed Google to build up the most-used search engine in the world, and fueled more than $300 billion in annual revenue largely generated by search ads,” Bloomberg reported.

As CNBC wrote, “The Department of Justice and a bipartisan group of attorneys general from 38 states and territories, led by Colorado and Nebraska, filed similar but separate antitrust suits against Google in 2020.”

“Google also has a major, largely unseen advantage over its rivals: default distribution. Most users access a general search engine through a browser (like Apple’s Safari) or a search widget that comes preloaded on a mobile device,” the judge wrote in his decision. “Those search access points are preset with a “default” search engine. The default is extremely valuable real estate. Because many users simply stick to searching with the default, Google receives billions of queries every day through those access points. Google derives extraordinary volumes of user data from such searches. It then uses that information to improve search quality. Google so values such data that, absent a user-initiated change, it stores 18 months-worth of a user’s search history and activity,” he continues to write.

The rivals? “In exchange for revenue share, Google not only receives default placement at the key search access points, but its partners also agree not to preload any other general search engine on the device. Thus, most devices in the United States come preloaded exclusively with Google. These distribution deals have forced Google’s rivals to find other ways to reach users,” the judge explained.

So now what? Well, the courts need to go through the remedy phase. I asked my colleague, Greg Sterling, what he thinks will happen with the remedy and he said on X, “Breakup or draconian restraints.”

Breakup or draconian restraints

— Greg Sterling 🇺🇦 (@gsterling) August 5, 2024

We’ll see. I think the judge may be reluctant to do anything too “structural” … and of course it will be appealed

— Greg Sterling 🇺🇦 (@gsterling) August 5, 2024

I suspect so – this will have a serious impact on Google’s Search business. Exactly what will change will be unclear but I wouldn’t be surprised if Apple is forced to allow other search players easier (less costly) ways to become the default on the iPhone and iPad. I wouldn’t be surprised if Google is forced to make it much easier for users to change the default search provider on Android. But this can get even worse for Google.

Time will tell what remedy the federal court will come up with.

Here are some highlighted social shares on this from Techmeme:

Remember: US v Google case is broken into two parts. We now enter the remedy phase. This ruling could significantly reshape the competitive landscape to benefit “little tech” by reducing Google’s gatekeeping power & creating more open competition in search & digital advertising. https://t.co/iJWr5418tz

— Luther Lowe (@lutherlowe) August 5, 2024

Lots of initial reactions. I’ll drop them here.

First, sooo many references to behavioral economics ideas. Unfortunately, there is no discussion of how this interacts with the competition. pic.twitter.com/rDfK20D9r8

— Brian Albrecht (@BrianCAlbrecht) August 5, 2024

This is why I think the full competition process matters. It’s not just about one click. So much of the opinion is about market power in one click (default or not). https://t.co/1Djzvy32Fc

— Brian Albrecht (@BrianCAlbrecht) August 5, 2024

I get the market was narrowed to search, but this is funny. “Search is just like 15 years ago!”

Yeah. Because the innovation wasn’t in search. It’s LLMs. pic.twitter.com/SY9BwRjpOv

— Brian Albrecht (@BrianCAlbrecht) August 5, 2024

The weird thing to me is that their stock price was down only 4.59% and NASDAQ as a while was down 3.34% – I would think Google would be down more? Or maybe we all expected this?

Google posted this statement on X from Kent Walker, President, Global Affairs at Google:

“This decision recognizes that Google offers the best search engine, but concludes that we shouldn’t be allowed to make it easily available. We appreciate the Court’s finding that Google is ‘the industry’s highest quality search engine, which has earned Google the trust of hundreds of millions of daily users,’ that Google ‘has long been the best search engine, particularly on mobile devices,’ ‘has continued to innovate in search’ and that ‘Apple and Mozilla occasionally assess Google’s search quality relative to its rivals and find Google’s to be superior.’ Given this, and that people are increasingly looking for information in more and more ways, we plan to appeal. As this process continues, we will remain focused on making products that people find helpful and easy to use.”

Forum discussion at X.