Justice Department Considers Breaking Up Google Monopoly
Following a landmark court decision, the US Department of Justice is considering breaking up Alphabet Inc.'s Google.
In an unprecedented move, the U.S. Department of Justice is contemplating the breakup of Alphabet Inc.’s Google following a landmark court ruling that determined the company had illegally monopolized the online search market.
This potential breakup would be the first such action against a major U.S. company since the failed attempt to dismantle Microsoft Corp. two decades ago.
Options on the Table: Breakup or Data Sharing:
While a complete breakup is one option, less severe measures are also under consideration. These include forcing Google to share more data with competitors or implementing restrictions to prevent the company from leveraging its market dominance to gain an unfair advantage in artificial intelligence (AI) products. However, the government will likely pursue a ban on exclusive contracts central to its case against Google.
If the Justice Department moves forward with a breakup, it may target the divestment of key Google units such as the Android operating system and the Chrome web browser. Another possibility is the forced sale of AdWords, Google’s platform for selling text advertisements, contributing significantly to the company’s revenue.
Court Ruling Intensifies Government Action:
The discussions within the Justice Department have gained urgency following Judge Amit Mehta’s ruling on August 5th, which found that Google had illegally monopolized the markets for online search and search text ads.
Although Google plans to appeal the decision, Mehta has ordered both parties to prepare for the next phase of the case, which will involve the government’s proposals for restoring competition, potentially including a breakup request.
Impact on Google and the Broader Market:
A forced breakup of Google would be the most significant antitrust action in the U.S. since AT&T was dismantled in the 1980s. The news has already impacted Alphabet’s stock, which fell as much as 2.5% in after-hours trading before recovering some losses.
Justice Department attorneys have voiced concerns that Google’s dominance in search gives it an unfair advantage in developing AI technologies.
As part of the proposed remedies, the government might seek to prevent Google from using website content for its AI products without permission from the content creators.
Potential Remedies: Divestment and Interoperability:
Divesting the Android operating system, used on approximately 2.5 billion devices worldwide, is one of the most frequently discussed remedies. Judge Mehta’s decision highlighted that Google requires device manufacturers to sign agreements that make its non-removable apps, like Gmail and the Google Play Store, effectively stifling competition from other search engines.
In addition to Android, Mehta’s ruling also found that Google had monopolized the market for search text ads, which are sold via Google Ads (formerly AdWords). These ads are a major revenue source for Google, contributing over $100 billion in 2020 alone.
If the Justice Department does not force the sale of AdWords, it could impose interoperability requirements to ensure the platform works seamlessly with other search engines.
