The antitrust decision involving Google shares similarities with the monopoly case that Microsoft faced.
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Google Antitrust Ruling: A Modern Parallel to Microsoft’s Historic Case
In a recent ruling, U.S. Judge Amit Mehta declared that Google has maintained a monopoly in internet search, drawing parallels to the historic antitrust case against Microsoft. Back in 1999, a federal judge found that Microsoft had unlawfully leveraged its Windows operating system to suppress competition from browsers like Netscape Navigator. This led to a 2001 settlement requiring Microsoft to cease practices that disadvantaged competitors.
The 2020 Lawsuit Against Google
The government’s 2020 lawsuit against Google accused the company of preserving its search market dominance through significant barriers to entry and a self-reinforcing feedback loop. Judge Mehta concluded that Google breached Section 2 of the Sherman Act, which prohibits monopolistic practices. He noted that Google’s distribution agreements have limited the search query volumes of its competitors, similar to how Microsoft’s agreements kept Navigator from becoming a viable threat.
The Power of the Default
A key factor in both cases is the “power of the default.” For Google, this involves its costly agreements to be the default search engine on Apple and Samsung devices. Although users can switch to other search engines, they seldom do.
Upcoming Penalties and Business Implications
A separate trial set for September 4 will determine the penalties for Google, which could include changes to its business practices that might impact its profitability. Experts suggest that Google may be required to eliminate certain exclusive agreements and make it easier for users to access alternative search engines. While financial penalties are possible, the more significant risk lies in potential changes to Google’s default status on smartphones, which could affect its core search business.
Financial Stakes and Google’s Defense
In the second quarter, “Google Search & Other” generated $48.5 billion, accounting for 57% of Alphabet’s total revenue. Google is expected to argue in its appeal that advancements in artificial intelligence have increased competition, a factor not present when the lawsuit was initially filed. However, Google has downplayed this narrative since the rise of AI competitors like OpenAI’s ChatGPT.
Neil Chilson, former chief technologist at the Federal Trade Commission, believes that AI-driven competition could bolster Google’s case. He noted that while the court’s rigid market definitions found Google guilty of maintaining a monopoly, emerging AI services and search vertical providers like Amazon could disrupt Google’s general search advertising model.
Market Reaction and Future Implications
Following the ruling, Google’s stock saw minimal movement, closing slightly lower amid a broader market downturn. The company did not comment on the decision. Investors and analysts await the trial’s outcome to understand the full implications, though experts doubt that Google will be forced to break up its business.
Bill Baer, a former antitrust division head at both the FTC and DOJ, emphasized that the Microsoft case sets a strong precedent against Google. However, the specific remedies the DOJ will seek and what the judge will accept remain uncertain.