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It has not been the best of summers for Google. In July, shares in Alphabet — the search engine’s parent company — dropped after its second-quarter earnings results underwhelmed investors. On Thursday, the Financial Times reported a secret deal that it had made with Meta to target advertisements to teenagers, which skirted its own rules for how minors should be treated online. But, the biggest hit to its business is likely to come from a ruling by a US federal judge, Amit Mehta, who on Monday found that the tech giant had violated antitrust law.
The four-year, 286-page case, brought by the US Department of Justice, called Google a “monopolist”. It found that the firm spent billions of dollars a year on exclusivity deals with wireless carriers, browser developers and device manufacturers. Tech rival Apple, the iPhone maker, was a significant beneficiary. Google paid the company $20bn in 2022 alone, as part of a years-long agreement to make its search engine the default on Apple’s Safari browser.
The findings shed light on malpractice in the search industry. Google has long maintained that because its search services are free, and market-leading in quality, its dominance of the sector is not harmful to consumers. While this case concedes some of Google’s arguments, it helps establish that Big Tech firms with monopoly power can harm consumers in broader ways.
Indeed, Google’s billion-dollar deals have helped it to entrench its position as the top search engine. That limits choice, stifles innovation and prevents other companies for gaining scale. Currently, the company controls 90 per cent of the search market, rising to 95 per cent for mobile devices. This traffic underpins its ad-based business model, and drives the data flow to improve its services.
Antitrust cases against Big Tech firms often take years and are shrouded in complexity. That makes this case all the more significant. It could set a precedent by emboldening other judges with pending tech lawsuits and by deterring companies from making exclusivity deals. It may also lead to private civil litigation against Google by companies who feel they have been harmed.
All said, Alphabet’s share price has barely budged since Monday’s ruling. It will appeal the case, and the DoJ still needs to discuss remedial actions. One might be to force Google to separate its search engine from its Android phone operating system and Chrome browser. Another is to make Google’s search data available for other companies. Both options are quite radical, difficult to execute and perhaps too retrospective.
It is better to tackle Google’s ability to protect its dominance going forward. A sensible remedy would be to curb its ability to strike exclusive deals. Although that would hit Apple too — the payments it receives from Google are substantial portion of its $85bn-a-year services business — it could give the iPhone maker the kick it needs to develop its own search business. Another option would be to ensure users can choose their search engine via a “choice screen” rather than having a default. This is mandated in the EU. It could extend choices to new artificial intelligence-powered search tools too.
Ultimately, Google may find that its biggest enemy has been itself, not regulators. Exposed to competition, it perhaps would have innovated more. A recent study found its search results had been throwing up more spam, and low-quality content. The company has also lost ground in the AI race. Perplexity, an AI search app, has recently been surging in popularity. With this landmark case, the door to even faster disruption in the search industry can hopefully be opened wider.
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