(Bloomberg) — An attempt to break up Alphabet Inc.’s Google is among the options the Justice Department is considering after a landmark court ruling found the company had a monopoly in the online search engine market, people familiar with the matter said.
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The move would be Washington’s first attempt to dismantle a company for illegal monopolization since failed attempts to break up Microsoft Corp. two decades ago. Less severe options include forcing Google to share more data with competitors and measures to prevent it from gaining an unfair advantage in AI products, said the people, who spoke on condition of anonymity to discuss private conversations.
Either way, the government is likely to seek a ban on the type of exclusive contracts that were at the heart of the case against Google. If the Justice Department moves forward with a breakup plan, the most likely units for divestment are the Android operating system and Google’s Chrome web browser, the sources said. Officials are also considering trying to force a possible sale of AdWords, the platform the company uses to sell text ads, one of the sources said.
The Justice Department’s discussions have intensified after Judge Amit Mehta’s Aug. 5 ruling that Google illegally monopolized the online search and text-search advertising markets. Google has said it will appeal that decision, but Mehta has ordered both sides to begin planning for the second phase of the case, which will include the government’s proposals to restore competition, including a possible request for a breakup.
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Alphabet shares fell 1.4% to $161.95 in premarket trading on Wednesday.
A Google spokesperson declined to comment on the potential remedy. A Justice Department spokeswoman also declined to comment.
The U.S. plan would have to be accepted by Mehta, who would order the company to stick to it. A forced breakup of Google would be the largest of a U.S. company since AT&T was broken up in the 1980s.
Justice Department lawyers who have consulted with companies affected by Google’s practices have raised concerns in their conversations that the company’s dominance in the search engine industry gives it an advantage in developing artificial intelligence technology, the sources said. As part of a remedy, the government could seek to stop the company from forcing websites to let their content be used by some of Google’s AI products in order to appear in search results.
Breaking up
Divesting the Android operating system, which runs on about 2.5 billion devices worldwide, is one of the remedies most often discussed by Justice Department lawyers, the people said. In his decision, Mehta found that Google requires device makers to sign agreements to access its apps, such as Gmail and the Google Play store.
According to him, these agreements also require that Google’s search widget and Chrome browser be installed on devices in such a way that they cannot be removed, preventing other search engines from competing.
Mehta’s decision follows a December jury verdict in California that the company monopolized the distribution of Android apps. A judge in that case has not yet ruled on damages. The Federal Trade Commission, which also enforces antitrust laws, filed a brief in that case this week and said in a statement that Google should not “reap the benefits of illegal monopolization.”
Google paid a whopping $26 billion to companies to make its search engine the default on devices and in web browsers. Of that, $20 billion went to Apple Inc.
Mehta’s ruling also found that Google monopolized the ads that appear at the top of search results pages to drive users to websites, known as search text ads. Those are sold through Google Ads, which was renamed from AdWords in 2018 and offers marketers a way to place ads on specific keywords related to their businesses. About two-thirds of Google’s total revenue comes from search ads, amounting to more than $100 billion in 2020, according to testimony from last year’s trial.
If the Justice Department does not order Google to sell AdWords, it could seek interoperability requirements so AdWords can work seamlessly on other search engines, the sources said.
Data access
Another option would require Google to divest or license its data to rivals, such as Microsoft’s Bing or DuckDuckGo. Mehta’s ruling found that Google’s contracts not only ensure that its search engine gets the most user data — 16 times as much as its nearest competitor — but that data flood also prevents rivals from improving their search results and competing effectively.
Europe’s recently adopted digital gatekeeper rules similarly required Google to make some of its data available to third-party search engines. The company has publicly said that sharing data could raise user privacy concerns, so it only makes information about searches that meet certain thresholds available.
Requiring monopolists to grant rivals some access to technology has been a remedy in previous cases. In the Justice Department’s first case, against AT&T in 1956, the company was required to grant royalty-free licenses to its patents.
In the antitrust case against Microsoft, the settlement required the Redmond, Washington-based tech giant to make some of its so-called application programming interfaces, or APIs, available to third parties for free. APIs are used to allow software programs to effectively communicate with each other and exchange data.
AI products
For years, websites have given Google’s web crawler access to ensure they appear in the company’s search results. But recently, some of that data has been used to help Google develop its AI.
Last fall, Google created a tool that lets websites block AI scraping after companies complained. But that opt-out doesn’t apply to everything. In May, Google announced that some searches would now come with “AI Overviews,” narrative answers that save people the task of clicking multiple links. The AI-powered panel appears below searches and presents summarized information pulled from Google search results across the web.
Google does not allow website publishers to opt out of appearing in AI Overviews, as it is a “feature” of search, not a separate product. Websites can block Google from using snippets, but that applies to both search and AI Overviews.
Although AI summaries appear in only a fraction of searches, the feature’s rollout has been slow, with some snippets making embarrassing suggestions, such as advising people to eat rocks or put glue on pizza.
(Updated with premarket shares in the fifth paragraph.)
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