Google’s antitrust loss is a hollow victory for regulators

By Dave Lee

In a “blockbuster” ruling published Monday, US Judge Amit Mehta stated it clearly enough: “Google is a monopolist, and it has acted as one to maintain its monopoly.”

As most media outlets have reported, it is the most significant victory for the antitrust hawks since Microsoft Corp lost its famous case in the 1990s. That one was about access to web browsers. The Google case was about access to search engines. What they both share in common is a question around the competitive benefit of being the default option presented to users. The court ruled that Google’s payment of billions of dollars for the privilege was illegal.

Next comes a series of hearings to determine what should be done about it. This is where it gets tricky — and dispiriting. Unfortunately, if the goal is to curb Google’s dominance, the options floated so far are uninspiring at best.

One would be to force Google to cancel its revenue-sharing agreements, saving the search giant tens of billions of dollars a year. Another would be to require device makers to offer a “choice menu,” one that asks consumers whether they would like to use Google’s vastly superior search engine or one with fewer features and data, like DuckDuckGo or Bing. When choice menus were implemented in response to concerns from the European Commission, Google’s search market share dropped by less than 1per cent, according to Search Engine Land.

One theatrical but unlikely option would be to order a breakup, though I can’t see where the dividing line would be drawn. In the Microsoft case, a judge wanted the company split into two parts: one business that built operating systems and another that made software that ran on them. In theory, this would mean the software company would be on a level playing field with other software companies. (We’ll never know — the demand was overturned on appeal.)

I have yet to hear any compelling logic about how Google’s search operation could be split up in a way that would bring more competition to online search. (Google’s ad business, on the other hand, is another matter and the subject of a different antitrust case still in progress.)

It’s easy to see why investors in Google’s parent company, Alphabet Inc., didn’t seem fazed when the news broke. Alphabet’s stock was down but in line with the broad selloff in tech stocks. Investors likely see the loss for what it is: a late skirmish in a war for search supremacy that Google won years ago.

The court’s decision was the correct one, but it came way too late to make a real difference. Google has signaled its intent to appeal, dragging this four-year saga out even further, possibly into 2026 and a final showdown in front of the Supreme Court. Analysts expect the conservative bench will look more favorably on Google than the lower court has.

Already, the process has been arduous. “Millions of pages exchanged hands,” Judge Mehta wrote of the proceedings. “Google produced petabytes of data, and the parties deposed dozens of witnesses, including high-ranking executives at some of the world’s largest technology companies.” There were more than 3,500 exhibits, the judge wrote, adding: “The lawyering has been first rate throughout.” Oh, I bet it has.

That the Justice Department regulators were finally successful will provide at least some encouragement to the teams working on the many other cases against tech companies, both in the US and intentionally. And, for all the talk of the need to modernize antitrust laws to apply to the internet age, it’s reassuring that the more-than-a-century-old Sherman Act stood up to the task. Google’s payments, and the monopolistic behavior it enabled, broke the fundamental principles of how US companies should conduct themselves — a yardstick that has turned out as applicable to search traffic as it did to Standard Oil.

But the time it has taken to get this victory makes it a Pyrrhic one. “Six full years to get an answer,” mused former Federal Trade Commission Chair William Kovacic. “That’s not quite the speed of light.” He pointed to Europe for inspiration: Its new Digital Markets Act and Digital Services Act have the teeth to move quickly and come down hard.

Will no longer being the default hurt Google’s market share? Possibly — by a percentage point here and there. But it won’t stop it from being the dominant market leader with the same exploitative levers it has today. Whatever window may have been open for a Google competitor to arise was sealed shut firmly long ago.

Talk of ChatGPT or other artificial intelligence tools stealing market share is highly optimistic at best. Microsoft added AI to its Bing search engine and it didn’t make the faintest bit of difference. As Microsoft Chief Executive Officer Satya Nadella testified during the trial, Google’s existing scale makes its search engine untouchable, a compounding competitive advantage that is under no threat from Mehta’s ruling.