On Monday, August 5th, a US judge ruled that Google, owned by Alphabet, was illegally monopolizing online search and related advertising businesses. Additionally, US officials have not ruled out the possibility of resorting to the nuclear option: as a solution, splitting up this tech giant.
This marks the first time that the US antitrust agency has won a lawsuit like this, a process that took four years to reach this point. Alphabet, the owner of Google, has indicated that they will appeal, meaning that the legal process may continue for some time.
According to BBC analysis, people are already considering the potential consequences of the judge’s ruling, ranging from cash fines to other more complex remedial measures. However, regardless of what happens next, based on past experiences, things are unlikely to happen overnight.
The US government is particularly keen on using “structural relief” as a solution to this case. So, what exactly does structural relief entail?
Splitting up Google is certainly a nuclear option, but US officials have not ruled this out. After all, there is precedent with Microsoft.
As far back as 1999, Microsoft found itself in a situation very similar to Google’s current predicament. The company was ruled to be monopolistic and a year later, the court ordered this tech giant to be broken up.
However, by the end of 2002, Microsoft reached a settlement agreement with the US Department of Justice, which was accepted by the judge.
But some states in the US disagreed, and it wasn’t until 2004, five years after the initial ruling, that the settlement agreement was officially signed.
If Google’s search engine were to be split into a separate business, it could make executives at Alphabet uneasy. However, as long as Google remains the default search engine on devices, the average consumer may not notice much of a difference.
Reports during the court trial indicated that the search engine brought in over $160 billion in advertising revenue for Google, accounting for a significant portion of Alphabet’s annual income.
Another potential remedy focuses on Google’s practice of paying other companies to use its search engine.
The Department of Justice accused Google of entering into agreements with companies like Apple and Samsung to make its search engine the default option on web browsers and phones, unlawfully helping to maintain its monopoly position in the market. Google controls around 90% of the global online search market and 95% of the smartphone market.
According to the court ruling, in just 2021, Google paid $26.3 billion to related companies to ensure its search engine became the default on web browsers and smartphones, maintaining its dominant market share.
According to a report by BBC, an analyst noted that as the iPhone manufacturer, Apple would naturally welcome the continuous influx of funds from Google.
Dipanjan Chatterjee of Forrester Research said, “Any interruption to the revenue stream would have significant implications for Apple.”
“With this case proceeding through the legal system and the potential outcome seeming to open up exclusive rights to search engines, you can fully expect brands like Apple, which are focused on customer experience, to have a Plan B in place to ensure a smooth transition for customers.”
If Google did not spend this money, larger companies might be encouraged to develop their own search engines. Users could have the opportunity to choose the search engine they prefer.