Google has an illegal monopoly on search, US judge rules

A U.S. judge ruled Monday that Google violated antitrust law by investing billions of dollars to create an illegal monopoly and become the world’s default search engine, the first major victory for federal authorities in the fight against Big Tech’s market dominance.

The ruling clears the way for a second trial to determine possible remedies, including a possible split from Google parent company Alphabet, which would change the landscape of the online advertising world, which Google has dominated for years.

It is also a green light for aggressive US anti-monopoly agencies to pursue Big Tech, a sector that has been under fire from across the political spectrum for years.

“The court concludes that Google is a monopolist and has conducted itself as such to maintain its monopoly,” wrote U.S. District Judge Amit Mehta, Washington, D.C. Google controls about 90 percent of the online search market and 95 percent of the smartphone market.

The “remedy” phase could be lengthy, followed by potential appeals to the U.S. Court of Appeals, District of Columbia Circuit, and the U.S. Supreme Court. The legal wrangling could drag on into next year, or even 2026.

Shares of Alphabet fell 4.5 percent on Monday amid a broad decline in tech stocks as the broader stock market tumbled on recession fears. Google advertising accounted for 77 percent of Alphabet’s total revenue in 2023.

Alphabet said it plans to appeal Mehta’s ruling. “This decision recognizes that Google offers the best search engine, but concludes that we should not be able to make it available,” Google said in a statement.

U.S. Attorney General Merrick Garland called the ruling “a historic victory for the American people,” adding that “no company — no matter how large or influential — is above the law.”

White House press secretary Karine Jean-Pierre said the “pro-competition ruling is a victory for the American people,” adding that “Americans deserve an internet that is free, fair and open to competition.”

Mehta noted that Google spent $26.3 billion (approximately Rs 2,20,748 crore) in 2021 alone to ensure its search engine becomes the default on smartphones and browsers and to maintain its dominant market share.

“The standard is extremely valuable real estate,” Mehta wrote. “Even if a new entrant were able to bid on the standard from a quality standpoint when an agreement expires, such a company would only be able to compete if it were willing to pay partners more than billions of dollars in revenue sharing and compensate them for any revenue shortfalls resulting from the change.”

He added: “Google of course recognizes that losing the default settings would have a dramatic impact on its bottom line. For example, Google has predicted that losing the Safari default would result in a significant drop in searches and billions of dollars in lost revenue.”

The ruling is the first major decision in a series of lawsuits over alleged monopolies in Big Tech brought by the Trump administration that ran from September to November of last year.

“A forced divestment of the search business would cut Alphabet off from its biggest source of revenue. But even losing its ability to negotiate exclusive standards agreements could be damaging to Google,” said Evelyn Mitchell-Wolf, a senior analyst at Emarketer, who said a lengthy legal process would delay the immediate effects on consumers.

Over the past four years, federal antitrust authorities have also sued Meta Platforms, Amazon.com and Apple, alleging that the companies were unlawfully maintaining monopolies.

These cases all started under the administration of former President Donald Trump.

Sen. Amy Klobuchar, a Democrat who chairs the Senate Judiciary Committee’s antimonopoly committee, said the fact that the case spanned multiple administrations shows there is strong bipartisan support for enforcing antimonopoly policies.

“It’s a huge victory for the American people that antitrust enforcement is alive and well when it comes to competition,” she said. “Google is a savage monopolist.”

When it was filed in 2020, the Google Search case marked the first time in a generation that the U.S. government had accused a major company of operating an illegal monopoly. Microsoft settled with the Justice Department in 2004 over allegations that it had forced its Internet Explorer web browser on Windows users.

© Thomson Reuters 2024

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