DOJ weighs forcing Google breakup in Antitrust showdown

On October 8, 2024, the United States Department of Justice (DOJ) unveiled a framework of potential remedies in response to a federal court ruling that found Google had illegally maintained monopolies in general search services and general search text advertising.

The DOJ's proposals, outlined in a court filing, suggest wide-ranging measures that could fundamentally alter Google's business practices and potentially lead to a breakup of parts of the tech giant. This development marks a significant escalation in the ongoing debate over how to regulate large technology companies and ensure fair competition in the digital marketplace.

Background of the Case

The case against Google began on October 20, 2020, when the DOJ, along with eleven state attorneys general, filed a civil antitrust lawsuit against the company in the U.S. District Court for the District of Columbia. The lawsuit alleged that Google had unlawfully maintained monopolies in search and search advertising through anticompetitive and exclusionary practices.

After nearly four years of litigation, including a lengthy trial, U.S. District Judge Amit P. Mehta issued a ruling on August 5, 2024. In his decision, Judge Mehta found that Google had indeed violated Section 2 of the Sherman Act by illegally maintaining monopolies in U.S. general search services and U.S. general search text advertising. The court determined that Google's conduct had resulted in "interlocking and pernicious harms" in markets that are "indispensable to the lives of all Americans."

The Landmark Ruling

Judge Mehta's 276-page memorandum opinion provided a detailed analysis of Google's business practices and their impact on competition. Key findings from the ruling include:

1. Scale and Network Effects: The court recognized that scale is essential for building, improving, and sustaining a general search engine. Google's illegal conduct generated a significant scale gap in both the search and advertising markets, enriching Google while depriving rivals of the scale necessary to compete effectively.
2. Distribution Agreements: Most devices in the United States come preloaded exclusively with Google Search, forcing rivals to find alternative ways to reach users. The court found that Google's longstanding control of popular distribution channels left competitors with little to no incentive to compete for users.
3. Revenue Sharing: Google's monopoly-funded revenue sharing payments disincentivized its partners from diverting queries to Google's rivals, further entrenching its dominant position.
4. Chrome and Android: The court noted that Google's control of the Chrome browser and Android operating system significantly narrowed available distribution channels for competitors, discouraging the emergence of new competition.
5. Advertising Market: Google's conduct enabled it to charge supracompetitive prices for text ads while degrading the quality of those ads and related services.

Federal Judge rules Google monopolized Search Market

A U.S. judge found Google violated antitrust laws through its dominance of online search and related advertising markets.

PPC LandLuís Rijo

The DOJ's Proposed Remedies

Following the court's ruling, the DOJ was tasked with developing a framework for potential remedies to address Google's antitrust violations. On October 8, 2024, the department filed its recommendations with the court. The proposed remedies aim to "unfetter these markets from Google's exclusionary conduct, remove barriers to competition, deny Google the fruits of its statutory violations, and prevent Google from monopolizing these markets and related markets in the future."

The DOJ emphasized the need for a "comprehensive" and "unitary framework" to restore competition and prevent future monopolization. The proposed remedies cover four main categories:

Search Distribution and Revenue Sharing

The DOJ is considering remedies that would limit or end Google's use of contracts, monopoly profits, and other tools to control or influence longstanding and emerging distribution channels and search-related products. Specific proposals include:

• Limiting or prohibiting default agreements, preinstallation agreements, and other revenue-sharing arrangements related to search and search-related products.
• Potentially implementing a choice screen to allow users to select their preferred search engine.
• Preventing Google from using products such as Chrome, Play, and Android to advantage Google search and search-related products over rivals or new entrants.
• Addressing practices related to user behavior and habits in search engine selection.
• Requiring Google to provide support for educational awareness campaigns to enhance users' ability to choose their preferred general search engine.

Accumulation and Use of Data

Recognizing the critical role of data in search engine functionality, the DOJ is exploring remedies that would offset Google's data advantage and strengthen competition. These include:

• Requiring Google to make available, in whole or through an API, the indexes, data, feeds, and models used for Google search, including those used in AI-assisted search features.
• Sharing Google search results, features, and ads, including underlying ranking signals, especially on mobile devices.
• Prohibiting Google from using or retaining data that cannot be effectively shared with others due to privacy concerns.
• Reducing the cost and complexity of indexing or retaining data for rival general search engines.

Generation and Display of Search Results

To address concerns about Google's dominance in emerging search technologies, the DOJ is considering remedies such as:

• Prohibiting Google from using contracts or other practices to undermine rivals' access to web content.
• Requiring Google to allow websites crawled for Google search to opt out of training or appearing in any Google-owned artificial intelligence product or feature on Google search, such as retrieval-augmented-generation-sourced summaries.

Advertising Scale and Monetization

To correct harms to advertisers and spur investment and opportunity in the search advertising market, the DOJ proposes:

• Creating more competition and lowering barriers to entry in general search text advertising.
• Addressing Google's use of scale, including new advertising technologies such as artificial intelligence (e.g., Performance Max), in enhancing and protecting its general search text ad monopoly.
• Exploring the licensing or syndication of Google's ad feed independent of its search results.
• Allowing Google search advertisers to receive transparent and detailed information about ad auctions and monetization, consistent with user privacy.
• Giving advertisers the option to opt out of certain Google search features, such as keyword expansion and broad match.

Administration, Anti-circumvention, and Anti-retaliation Measures

Recognizing the need for effective implementation and oversight of any remedies, the DOJ is also considering additional measures, including:

• Financing and reporting to a Court-appointed technical committee to help administer the remedies and monitor compliance.
• Designating a senior Google executive to report regularly to the Court on compliance efforts.
• Requiring Google to retain relevant documents and submit to inspections as requested by the Court, technical committee, or Plaintiffs.
• Mandating employee training on compliance with the remedies.
• Prohibiting Google from owning or holding a stake in the success of its search competitors.
• Implementing anti-retaliation provisions to protect rivals and those who cooperate with the implementation, monitoring, or enforcement of the remedies.

The DOJ also suggested the possibility of structural remedies, which could potentially include breaking up parts of Google's business. However, the department noted that specific remedies would be refined following further discovery and evaluation of market realities.

Google's Response

In a blog post published on October 9, 2024, Google's Vice President of Regulatory Affairs, Lee-Anne Mulholland, strongly criticized the DOJ's proposals, calling them "radical and sweeping" with potential for "significant unintended consequences for consumers, businesses, and American competitiveness."

Mulholland argued that the case should focus on "a set of search distribution contracts" rather than pursuing "a sweeping agenda that will impact numerous industries and products." She outlined several concerns with the DOJ's proposals:

1. Privacy and Security Risks: Mulholland warned that forcing Google to share user search queries and results with competitors could create major privacy and security risks. She emphasized that search queries are often sensitive and personal, protected by Google's strict security standards. Sharing this data with companies that may not have strong security practices could expose users to potential harm from bad actors.
2. Impact on AI Innovation: The Google executive expressed concern that hampering Google's AI tools could hold back American innovation at a critical moment in the industry's development. Mulholland argued that AI is crucial for America's technological and economic leadership, and government intervention at this stage could skew investment, distort incentives, and hobble emerging business models.
3. Breaking Chrome and Android: Mulholland stated that splitting off Chrome or Android would fundamentally break these products and many other things. She highlighted Google's significant investments in these platforms, emphasizing their role in providing secure, fast, and free services to billions of users. The blog post warned that breaking them off could change their business models, raise device costs, and undermine their competition with Apple's products.
4. Advertising Market Disruption: Google argued that changes to its online advertising system could make ads less valuable for publishers and merchants, and less useful for consumers. Mulholland emphasized how Google's ads system has leveled the playing field for small businesses and publishers, allowing them to reach customers without minimum spend requirements or upfront commitments.
5. Consumer Friction: The company contended that restrictions on how Google promotes its search engine could create difficulties for users seeking information and harm businesses relying on Google's distribution. Mulholland suggested that overbroad restrictions on distribution contracts could reduce revenue for companies like Mozilla and Android smartphone makers, potentially leading to higher costs for consumers.
6. Security Concerns: Google raised alarms about potential security implications, noting that features like Chrome's Safe Browsing, Android's security features, and Play Protect benefit from information and signals across various Google products. Severing these connections could jeopardize security and make patching vulnerabilities more challenging.

Mulholland emphasized that the DOJ's blueprint "goes well beyond the legal scope of the Court's decision about Search distribution contracts" and warned against government overreach in a fast-moving industry. She concluded by stating that Google looks forward to making its arguments in court.

Implications for the tech industry and digital economy

The outcome of this case could have far-reaching implications for the tech industry and the broader digital economy:

1. Search Engine Market: If implemented, the proposed remedies could significantly alter the competitive landscape in search, potentially opening up opportunities for existing rivals and new entrants to gain market share.
2. Digital Advertising: Changes to Google's advertising practices could reshape the online advertising ecosystem, affecting publishers, advertisers, and ad tech companies.
3. Mobile Ecosystem: Remedies targeting Android and the Google Play Store could impact the mobile app economy and potentially shift the balance of power between Google and Apple in the smartphone market.
4. AI and Emerging Technologies: The case raises important questions about how antitrust law should apply to rapidly evolving technologies like AI, potentially setting precedents for future enforcement actions.
5. Data Sharing and Privacy: Any requirements for data sharing between competitors could have significant implications for user privacy and data protection practices across the industry.
6. Innovation and Investment: The resolution of this case could influence investment patterns in the tech sector, potentially affecting the development of new technologies and services.

Global context and international implications

The DOJ's case against Google is part of a broader global trend of increased scrutiny of large technology companies. Similar investigations and legal actions are underway in the European Union, United Kingdom, Australia, and other jurisdictions. The outcome of the U.S. case could influence regulatory approaches in other countries and shape the global landscape for digital competition.

Moreover, the remedies proposed by the DOJ could have international ramifications, given Google's global operations. Any significant changes to Google's business model or practices in the U.S. market would likely have ripple effects worldwide, potentially impacting users, businesses, and competitors in multiple countries.

The road ahead

The remedies phase of the trial is expected to extend well into 2025. Judge Mehta has set a target date of August 2025 for ruling on remedies, after which any appeals process could further delay implementation. Google has already indicated its intention to appeal the court's liability ruling, which could potentially extend the legal battle for several more years.

As the case progresses, the DOJ will continue to refine its proposed remedies based on further discovery and market analysis. The department has emphasized the need for flexibility in crafting remedies that can adapt to rapidly changing market conditions and technological developments.

Key Dates

• Original antitrust lawsuit filed: October 20, 2020
• Court ruling on Google's antitrust violations: August 5, 2024
• DOJ filing outlining potential remedies: October 8, 2024
• Google's response blog post: October 9, 2024
• Target date for judge's ruling on remedies: August 2025
• Google's Q2 2024 "Search & Other" revenue: $48.5 billion (57% of total revenue)
• Google's current search market share: Approximately 90%

The DOJ's proposed remedies in the Google antitrust case represent a watershed moment in the regulation of digital platforms. The outcome of this case could reshape the landscape of online search and advertising, with potentially far-reaching consequences for consumers, businesses, and the broader tech industry.

As the legal process unfolds, stakeholders across the digital ecosystem will be closely watching to see how the court balances the need for effective antitrust enforcement with concerns about innovation, user experience, and America's technological leadership. The case raises fundamental questions about the nature of competition in the digital age and the appropriate role of government in shaping the future of the internet economy.

Whatever the final outcome, this landmark case is likely to have lasting implications for how we think about monopoly power, innovation, and fair competition in the rapidly evolving world of technology. As society becomes increasingly dependent on digital platforms and services, the principles established in this case may well shape the digital landscape for generations to come.