Updated August 05, 2024 at 19:40 PM ET
WASHINGTON — A judge on Monday ruled that Google's ubiquitous search engine has been illegally exploiting its dominance to squash competition and stifle innovation in a seismic decision that could shake up the internet and hobble one of the world's best-known companies.
The highly anticipated decision issued by U.S. District Judge Amit Mehta comes nearly a year after the start of a trial pitting the U.S. Justice Department against Google in the country's biggest antitrust showdown in a quarter century.
After reviewing reams of evidence that included testimony from top executives at Google, Microsoft and Apple during last year's 10-week trial, Mehta issued his potentially market-shifting decision three months after the two sides presented their closing arguments in early May.
"After having carefully considered and weighed the witness testimony and evidence, the court reaches the following conclusion: Google is a monopolist, and it has acted as one to maintain its monopoly," Mehta wrote in his 277-page ruling. He said Google’s dominance in the search market is evidence of its monopoly.
Google “enjoys an 89.2% share of the market for general search services, which increases to 94.9% on mobile devices,” the ruling said.
It represents a major setback for Google and its parent, Alphabet Inc., which had steadfastly argued that its popularity stemmed from consumers' overwhelming desire to use a search engine so good at what it does that it has become synonymous with looking things up online. Google's search engine currently processes an estimated 8.5 billion queries per day worldwide, nearly doubling its daily volume from 12 years ago, according to a recent study released by the investment firm BOND.
Kent Walker, Google’s president of global affairs, said the company intends to appeal Mehta’s findings: “This decision recognizes that Google offers the best search engine, but concludes that we shouldn’t be allowed to make it easily available.”
For now, the decision vindicates antitrust regulators at the Justice Department, which filed its lawsuit nearly four years ago while Donald Trump was still president, and has been escalating it efforts to rein in Big Tech's power during President Joe Biden's administration.
“This victory against Google is an historic win for the American people,” said Attorney General Merrick Garland. “No company — no matter how large or influential — is above the law. The Justice Department will continue to vigorously enforce our antitrust laws.”
Justice Department argued that Google's monopoly enabled artificially high prices
The case depicted Google as a technological bully that methodically has thwarted competition to protect a search engine that has become the centerpiece of a digital advertising machine that generated nearly $240 billion in revenue last year. Justice Department lawyers argued that Google's monopoly enabled it to charge advertisers artificially high prices while also enjoying the luxury of not having to invest more time and money into improving the quality of its search engine — a lax approach that hurt consumers.
Mehta's ruling focused on the billions of dollars Google spends every year to install its search engine as the default option on new cellphones and tech gadgets. In 2021 alone, Google spent more than $26 billion to lock in those default agreements, Mehta said in his ruling.
Google ridiculed those allegations, noting that consumers have historically changed search engines when they become disillusioned with the results they were getting. For instance, Yahoo — now a minor player on the internet — was the most popular search engine during the 1990s before Google came along.
Mehta said the evidence at trial showed the importance of the default settings. He noted that Microsoft's Bing search engine has 80% share of the search market on the Microsoft Edge browser. The judge said that shows other search engines can be successful if Google is not locked in as the predetermined default option.
Still, Mehta credited the quality of Google's product as an important part of its dominance, as well, saying flatly that "Google is widely recognized as the best (general search engine) available in the United States."
The Consumer Choice Center, a lobbying group that has fought other attempts to rein in businesses, decried Mehta’s decision as a step in the wrong direction. “The United States is drifting toward the anti-tech posture of the European Union, a part of the world that makes almost nothing and penalizes successful American companies for their popularity,” said Yael Ossowski, the center’s deputy director.
What changes or penalties should be imposed?
Mehta's conclusion that Google has been running an illegal monopoly sets up another legal phase to determine what sorts of changes or penalties should be imposed to reverse the damage done and restore a more competitive landscape.
The potential outcome could result in a wide-ranging order requiring Google to dismantle some of the pillars of its internet empire or prevent it from shelling out billions annually to ensure its search engine automatically answers queries on the iPhone and other internet-connected devices. After the next phase, the judge could conclude only modest changes are required to level the playing field.
“Google’s loss in its search antitrust trial could be a huge deal — depending on the remedy,” said Emarketer senior analyst Evelyn Mitchell-Wolf. “A forced divestiture of the search business would sever Alphabet from its largest source of revenue. But even losing its capacity to strike exclusive default agreements could be detrimental for Google. Its ubiquity is its biggest strength, especially as competition heats up among AI-powered search alternatives.”
Regardless she added, a drawn-out appeals process will delay any immediate effects for both consumers and advertisers.
Lee Hepner, senior legal counsel for the American Economic Liberties Project, believes the tenor of Mehta’s ruling makes it likely the judge will decide to prohibit Google from making default search deals and may even look at separating some of its different lines of business.
The appeals process could take as long as five years, predicted George Hay, a law professor at Cornell University who was the chief economist for the Justice Department’s antitrust division for most of the 1970s. That lengthy process will enable Google to fend off the likelihood of Mehta banning default search agreements, Hay said, but it probably won’t shield the company from class-action lawsuits citing the judge’s findings that advertisers were gouged with monopolistic pricing.
Here's how Microsoft and Apple could be affected
If there is a significant shakeup, it could turn out to be a coup for Microsoft, whose own power was undermined during the late 1990s when the Justice Department targeted the software maker in an antitrust lawsuit accusing it of abusing the dominance of its Windows operating system on personal computers to lock out competition.
That Microsoft case mirrored the one brought against Google in several ways and now the result could also echo similarly. Just as Microsoft's bruising antitrust battle created distractions and obstacles that opened up more opportunities for Google after its 1998 inception, the decision against Google could be a boon for Microsoft, which already has a market value of more than $3 trillion. At one time, Alphabet was worth more than Microsoft, but now trails its rival with a market value of about $2 trillion.
If Mehta decides to limit or ban Google’s default search deals, it could squeeze Apple’s profits, too. Although parts of his decision were redacted to protect confidential business information, Mehta noted that Google paid Apple an estimated $20 billion in 2022, doubling from 2020. The judge also noted Apple has periodically considered building its own search technology, but backed off that after a 2018 analysis estimated the company would lose more than $12 billion in revenue during the first five years after a break-up with Google.
Google’s payments have helped Apple’s steadily growing services division, which generated $85 billion in revenue during the company’s last fiscal year. Apple didn’t immediately respond to a request for comment.
The Justice Department’s antitrust division has recently taken on some of the biggest companies in the world. It sued Apple in March and in May announced a sweeping lawsuit against Ticketmaster and its owner, Live Nation Entertainment. Antitrust enforcers have also opened investigations into the roles Microsoft, Nvidia and OpenAI have played in the artificial intelligence boom.
The Biden administration has won some big cases, including blocking mergers of some of the world’s biggest publishers as well as JetBlue Airways and Spirit Airlines. It’s also had some notable setbacks, including in the sugar and healthcare industries.
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