Google (GOOG, GOOGL) is about to find out what the Justice Department believes should be done to dismantle the tech giant’s dominance of the online search market.
Prosecutors are expected to submit a document as early as Tuesday in federal court outlining potential remedies after successfully arguing in a landmark trial that Google acted as an illegal monopoly.
It will be up to District of Columbia District Court Judge Amit Mehta, who sided with DOJ’s monopoly argument, to decide what should happen now in a separate “remedies” phase of the trial that will likely start in 2025.
Potential remedies range from an outright breakup of Google, to making its search engine data available to competitors, to ending agreements that secure its search engine as a default on mobile devices and internet browsers.
“I think it’s going to be more complicated coming up with injunctive relief than it was finding the liability,” antitrust attorney Carl Hittinger said.
Google has promised to appeal. And Judge Mehta could hold off on any orders to alter Google’s behavior while it challenges his ruling in D.C.’s Circuit Court of Appeals.
The judge would lose the right to impose remedies if Google is found not to have broken the law on appeal.
And even if Google fails and is ordered to change its behavior, Judge Mehta could later adjust his orders to better ensure competition is restored.
A breakup
Certainly, a breakup of Google’s empire — the most rare of antitrust remedies — has the most potential to reorder the tech universe.
That could include divestitures of its Android operating system, Chrome browser, or AdWords platform — all of which steer users into Google search.
Any one of the three solutions would rip away a multibillion-dollar revenue stream from the tech giant, plus cut off data that fuels its broader search and advertising ecosystem.
Legal experts disagree about whether this will actually happen. Hittinger said it’s unlikely because Judge Mehta must select a remedy that best serves the public interest.
“You can’t just yank the rug out from under the American public that’s been using Google’s service, now ingrained in our culture, without a substitute,” Hittinger said. “Unless other competitors have a platform which is the same or better than Google, what’s the public supposed to use in the meantime?”
A divestment of Android away from Google could have consequences for devices aside from those installed on devices used for internet search.
Peloton, for example, uses the open-sourced system to power its exercise equipment. Airplane manufacturers use it to power video screens, and supermarkets use it to run their consumer kiosks.
Developers also rely on Google to maintain Android’s ability to work across platforms.
Hittinger expects Judge Mehta to fashion a remedy similar to the one imposed against Xerox (XRX) in 1975 to end its dominance of the office copier market.
The company was no longer allowed to configure its copiers so that ink cartridge suppliers and other third-party components could not run on its machines.
But Bill Baer, former attorney general for the Justice Department’s antitrust division, said he could foresee Judge Mehta requiring Google to divest Android or Chrome.
“The judge, in order to make this remedy meaningful, is going to have to do something that allows competition to flourish,” Baer said.
“Because they’re a monopolist, they charge the advertisers, who in turn charge us, a whole lot more than if the market were competitive.”
Exclusive contracts
One likely scenario, antitrust lawyers said, is for the judge to put an end to agreements that secure Google’s search engine as a default on internet browsers and internet-connected devices that use Google’s Android operating system.
Google pays as much as $26 billion per year to maintain its position on mobile devices like Apple (AAPL) and Samsung smartphones.
Proskauer antitrust lawyer Colin Kass said he suspects Judge Mehta to be particularly receptive to remedies that undo those contracts because their anticompetitive effects were at the heart of the ruling.
“This was a relatively narrow complaint and an even narrower ruling,” Kass said.
Representatives from Apple and other companies that benefit from the contracts testified that they chose Google for the quality of its search engine. Competing evidence from the DOJ showed Microsoft’s Bing search engine attracted more users on its Edge browser when Google was not the default option.
An end to these revenue-sharing contracts would have considerable consequences for Google and Apple.
The contracts — which require Apple to install Google Search as the default across its Safari browser, Spotlight Search, and Siri — bring in an estimated $20 plus billion for Apple each year.
Targeted search platforms like Yelp (YELP) and Amazon (AMZN) could also benefit from fewer search users being automatically directed to Google.
Tim McGinn, an antitrust litigation attorney with Gunster, said device manufacturers and browser services could choose Google as a default even if a court blocks Google from default placement agreements.
Plus, he said, it’s possible that the court could still allow Google to secure default placements for search but under new non-exclusive contracts that don’t raise antitrust concerns.
If Google can’t get default placement any longer, it could also be required to give consumers a choice of search provider.
McGinn predicted the DOJ would ask that mobile devices, browsers, and wireless carriers give consumers a choice between search providers.
“It’s possible we’ll eventually see more phones and browsers preprogrammed to use another search engine,” McGinn said.
Last year, the European Union’s antitrust regulator, the European Commission, required Google to give a choice screen based on its determination that the lack of choice violated its antitrust law.
Sharing data with rivals
The DOJ could also ask the judge to force Google to share with rival browsers and search providers its “click and query” data that it uses to refine its search algorithms.
Specifically, the data includes Google’s intellectual property that tracks and learns from information that its search engine users type into its search field and links they choose by clicking on query results.
Rival US search providers include Microsoft (MSFT) Bing, Yahoo Search (owned by Yahoo Finance’s parent company), and DuckDuckGo. International search providers include Russia’s Yandex and China’s Baidu.
A spokesperson for DuckDuckGo told Yahoo Finance before the trial that the company hoped the case would result in Google having to share its click and query data.
The data could help more privacy-oriented browsers like DuckDuckGo and search engines compete against Google.
The representative said it can be more difficult for DuckDuckGo to attract advertisers because, unlike Google, it does not assemble user search profiles or search histories and then use that data to target users with advertisements.
Another remedy that some legal experts expect to be on the DOJ’s list is for Google to temporarily open up its internet index data to rival browser providers, such as Microsoft’s Edge, Apple’s Safari, Mozilla’s Firefox, Brave, and Opera.
AI
Even if Google were forced to divest search-related entities or unravel contracts for default placement, these moves may not have a dramatic effect on the company, according to Jefferies senior analyst Brent Thill.
Its bigger threats, Thill said, are from new AI-assisted search engines and recent gains made by rival Meta in attracting advertisers.
“I don’t think spinning off a browser or an Android operating system is going to have a dramatic impact on the company,” Thill said.
Judge Mehta, however, may have to consider how remedies to restore competition in the traditional search engine market may impact competition in the emerging market for AI-assisted search.
One concern, legal experts said, is that Google’s search dominance could unfairly entrench its position in the market for next-generation search.
At the same time, these fresh threats may work to Google’s advantage in the remedies trial, allowing it to argue that its overall search dominance is already under threat.
“If a violation is found, Google will say the market is already solving itself,” said former US Federal Trade Commission Chairman and George Washington University antitrust law professor William Kovacic.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on X @alexiskweed.
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