By Kenneth Tiven
Federal Court Judge Amit Mehta’s 268-page decision states: “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.” This ruling is but a step in a multi-year process—US et al vs Google. This concerns unfair competition in online search, which generates billions in profits annually for Alphabet, Google’s parent company. Involved are multiple over-achievers born in India and include Federal Judge Amit Mehta 52, Google’s Sundar Pichai, 52 and Microsoft ’s Satya Nadella, 57.
This four-year-old anti-trust case is intended to create a more level playing field where Big Tech’s market power is unchecked. On the legal ladder of US anti-trust regulation, demonstrating a monopoly is a first step. A second trial will determine potential fixes, possibly including a breakup of Google parent Alphabet (GOOGL.O). Expect no immediate obvious changes in the landscape of the online advertising world that Google dominates. Potential appeals, including to the US Supreme Court, could last well into the next decade.
Anti-trust regulation began seriously in the US in the early decades of the 20th century against energy, transport, and communications empires formed as technology impacted society. Efforts have been intermittent across decades, depending on political leadership at the national level. Republicans, as a rule, like unregulated competition, Democrats not so much.
At the heart of the case is understanding why Google pays billions of dollars a year for anti-competitive deals with wireless carriers, browser developers, and device manufacturers—and particularly Apple. It is really quite brilliant. It is not coercive. It is a “freebie”.
In software speak, it is the ultimate SEO— search engine optimization. Google sells online advertising, the volume of which is related to search engine data reflecting where the customers are and who they are. The larger that pool, the more advertising revenue Google earns. Keep in mind that the cost to create and maintain the software is fixed, immune to the number of people using it. In 2023, Google’s Internet advertising system generated an estimated $230 billion dollars, or 77% of its revenue. Paying $26 billion in “thank you money” costs 11% of the advertising revenue generated. That’s a brilliant business model in a capitalist system.
For Google, the free search software to computer makers with a bribe attached creates a sustaining herd of cash cows. In the Google case, as in Microsoft’s, the court found that contracts illegally excluded rivals. But Google’s were more carrot than stick, offering industry partners generous payments rather than threats. Unlike Microsoft, Google is a pure internet company with a very different business model, relying mainly on advertising rather than software licensing. Judge Mehta praised the company for its engineering skill and investment in search. “But Google,” he wrote, “has a major, largely unseen advantage over its rivals: default distribution.”
“Google It” has gone from a brand slogan to a global verbal command, reflecting its original role in the growth of the Internet. However, that reputation is at odds with American regulations, which for more than 100 years have tried, albeit inconsistently, to stop companies trying to dominate marketplaces. Judge Mehta’s 286-page decision states that Google had “violated US anti-trust law by acting as a monopolist to maintain its monopoly,” The ruling follows a weeks-long trial.
Nearly 25 years ago Microsoft lost a similar anti-trust case for forcing computer makers to sign coercive contracts forcing them to use only Microsoft products. While aspects of that decision were overturned on appeal, much of it remains to guide the anti-trust approach to an industry embedded in every aspect of society today. Anti-trust actions have ramped up, beginning in the Donald Trump administration and continuing under President Joe Biden. This is the first big win for federal authorities taking on Big Tech’s market dominance. The ruling paves the way for a second trial to determine potential fixes, possibly including a breakup of Google parent Alphabet (GOOGL.O), which would change the landscape of the online advertising world that Google has dominated for years. There are alternatives, but only a small segment of the market switches to them to avoid Google’s tracking and data collection issues.
The “remedy” phase could be lengthy, followed by potential appeals to the US Court of Appeals, District of Columbia Circuit and the US Supreme Court. The legal wrangling could play out into next year, or even 2026.
Kent Walker, Google’s president of global affairs, said the company would appeal the ruling. “This landmark decision holds Google accountable,” Jonathan Kanter, the top Justice Department anti-trust official, said. “It paves the path for innovation for generations to come and protects access to information for all Americans.”
During the trial, Microsoft’s chief executive, Satya Nadella, testified that he was concerned that his competitor’s dominance had created a “Google web” and that its relationship with Apple was “oligopolistic”. If Google continued undeterred, it was likely to become dominant in the race to develop artificial intelligence, he said. Google’s chief executive, Sundar Pichai, countered in his testimony that Google created a better service for consumers.
The ruling is a harsh verdict on the rise of giant technology companies that have used their roots in the internet to influence the way we shop, consume information and search online—and indicates a potential limit of Big Tech’s power. It is likely to influence other nations as well as more US actions against Google, Apple, Amazon and Meta, the owner of Facebook, Instagram and WhatsApp.
The last significant anti-trust ruling against a tech company targeted Microsoft more than two decades ago. “This is the most important anti-trust case of the century, and the first of a big slate of cases to come down against Big Tech,” said Rebecca Haw Allensworth, a professor at Vanderbilt University’s law school who studies anti-trust. “It’s a huge turning point.”
The ruling could have major ramifications for Google’s success, especially as the company spends heavily to compete in the race over artificial intelligence. Google faces another federal anti-trust case over advertising technology that is scheduled to go to trial next month.
All of those cases hinge on the 19th-century Sherman Anti-trust Act, which makes it illegal for a monopoly to engage in corporate conduct to thwart competition. But that law, designed for companies like Standard Oil, faces the continuing challenge of being in a different industrial environment to the new technology of its day. Both agencies have sought to test the old law by applying new legal arguments regarding tech giants.
—The writer has worked in senior positions at The Washington Post, NBC, ABC and CNN and also consults for several Indian channels