The foundation of the Google (GOOG, GOOGL) empire took a major hit Monday after a judge ruled that the company’s search and advertising businesses violated antitrust law.
The ruling, handed down by District of Columbia Judge Amit Mehta, sided with the U.S. Justice Department and a group of states in a series of cases accusing the tech giant of abusing its dominant position in online search.
“Google is a monopolist and has behaved as such to maintain its monopoly,” Mehta wrote in his ruling.
If the findings are confirmed, contracts that have secured Google’s dominant position for years could be banned.
Google said it would appeal the decision. According to the company, Google recognizes that Google offers the best search engine, but concludes that we cannot simply make it available.
Judge Mehta ruled that Google violated antitrust law in the markets for “general search advertising” and “general search text advertising,” which are ads that appear at the top of search results pages.
He said Google had no liability in the “search advertising” market because it did not have a monopoly there.
The decision is a major victory for the Justice Department and could have major implications for some other big names in the tech world.
That’s because Apple (AAPL), Amazon (AMZN) and Meta (META) are defending themselves against a series of other anti-monopoly lawsuits brought by the federal government and the states, some of which raise similar claims.
The investigation is part of a broad effort by the Biden administration to end what it sees as anticompetitive behavior across a range of sectors, from health care to grocery stores to technology.
For Google, the judge’s decision has implications for a huge profit engine. In 2023, Google’s search advertising business generated more than $175 billion in revenue.
When we add in revenue from advertising on YouTube and the Google network, both of which Google promotes through its general search engine, advertising accounted for a whopping $237 billion of the company’s total revenue of $307 billion.
According to Statcounter, Google held 91% of the global search engine market share across all computing platforms in June 2023. On mobile, Google’s market share was even higher, at 95%.
Nearly four years ago, in October 2020, when the Justice Department and the states filed suit, Google’s annual revenue was $162 billion, about half of its most recently reported revenue for that year.
Google’s decision follows a two-month trial that took place late last year, during which testifiers included Google CEO Sundar Pichai and executives from search competitors Microsoft (MSFT) and DuckDuckGo.
The Justice Department and 35 states, plus Guam, Puerto Rico and the District of Columbia, accused Google in separate lawsuits of unfairly clinging to its market dominance in search, including search engines, search engine advertising and text ads within search engines.
The cases were tried together over nearly identical allegations that Google maintained its monopoly position by paying companies like Apple, Amazon, Mozilla and Firefox to make Google the default search engine on mobile phones, tablets and browsers.
At the time of the lawsuit, Google had a 90% share of online search. During the trial, the lawyers argued that Google earned and maintained that outsized share not through anticompetitive behavior, but by delivering a superior product.
Google’s contested conduct related to contracts the company entered into with computer equipment and mobile device manufacturers, as well as with browser services, browser developers, and mobile carriers.
The government said the contracts violated antitrust laws because they required Google to be the default search engine.
Companies that have entered into these exclusive contracts include Apple, LG, Samsung, AT&T, T-Mobile, Verizon and Mozilla. These deals are the reason that smartphones from manufacturers such as Samsung, one of the world’s largest smartphone makers, come pre-loaded with several apps from Google.
During the lawsuit, Google argued that despite having a monopoly on the search engine, its contracts do not violate antitrust laws or harm competition.
Microsoft’s Bing has just a 3.74% market share across all platforms, while Yahoo Finance subsidiary Yahoo has a 1.16% market share.
In the US, Google has 87% of the search market share across all platforms. Bing has 7.2%, Yahoo has 2.4%, and DuckDuckGo has 1.9%. On mobile, Google has 95% of the US search market share.
The global search industry is also in the midst of a massive shift as companies increasingly add generative AI responses to their services.
Google has added AI Overviews to its standard search service, giving users answers to their searches based on generative AI. The answers summarize the content of various websites in a special window with the search engine’s standard website links.
Microsoft offers the Copilot feature in its Bing search engine, which provides similar functionality to Google’s AI Overviews.
The move to generative, AI-driven search results raises additional questions about the fate of the search engine industry. For example, whether websites that are used to summarize AI results are given proper credit for their contributions.
These features have also raised concerns that users are worried that they will no longer be able to find the answers to their questions in a box that fetches content from third-party websites, which would have a major impact on their page views and revenue.
These new search options give Google the opportunity to argue during a separate “remediation” phase of the process that any competition concerns identified in the complaint no longer exist or have abated.
Google could appeal this case, requesting a stay of proceedings until the case has been heard by the appellate system.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.
Email Daniel Howley at dhowley@yahoofinance.com. Follow him at X on @DanielHowley.
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