Tech giant Google is facing a "splitting moment"! Can it break free like Microsoft did 20 years ago?

Zhitong
2024.10.09 07:15
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The U.S. Department of Justice is considering forcing Alphabet to sell part of its business to alleviate its monopoly impact in the search market, and is recommending more data transparency and allowing competitors access to search engine data. This antitrust case could lead to a historic split of Alphabet, with a judge able to order Alphabet to share its exclusive data. The document provides a framework for various remedies, and Nasdaq 100 index futures fell by about 0.3% after the filing

According to the financial news app Zhitong Finance, the US Department of Justice has informed a federal judge that they are considering recommending the tech giant Google (GOOGL.US) to divest some of its businesses to alleviate the monopoly harm caused by its dominance in the online search market. If Google is indeed split up, it would be a historic antitrust breakup. In addition to the breakup, the US Department of Justice also suggests that Google provide more exclusive data transparency, allowing competitors and new entrants to access and use search engine data, and reduce Google's advantage in boosting its search business through its platforms such as Chrome, Play, and Android.

In a court filing submitted on Tuesday, US antitrust enforcers stated that Judge Amit Mehta could also order Google, a subsidiary of Alphabet Inc., to provide access to its exclusive underlying data used to build search results and artificial intelligence products. This means that US antitrust officials are considering requiring Google to share its exclusive search engine data and related access permissions as a remedy.

The US Department of Justice stated in the filing that the agency is considering both behavioral and structural remedies to prevent Google from leveraging its flagship products like Chrome, Play, and Android to gain an advantage in Google search engine and related new products and features - including emerging search access points and new functionalities such as artificial intelligence - over competitors or new entrants.

This 32-page court filing provides a framework for various potential options for the judge to consider as the Google antitrust case enters the "remedies phase." The agency stated that a more comprehensive remedy proposal will be provided next month. Nasdaq 100 index futures fell by about 0.3% after the filing, as Google, a component of Alphabet, is one of the largest components of the index, alongside Microsoft and Apple.

Since Washington's unsuccessful attempt to split up Microsoft (MSFT.US) 20 years ago, this is the most significant move to control illegal monopolistic behavior by a large US tech company, indicating that Google may face a long legal battle similar to Microsoft's at that time, and the possibility of a breakup will continue to exist. Antitrust enforcers stated that Google gained profits related to scale and data by making its search engine the default option on smartphones and web browsers through illegal distribution agreements with other tech companies. Google's Android business includes the operating system used on smartphones and other consumer electronic devices and applications.

The US Department of Justice also stated that it may require Google to allow websites more ability to opt out of its artificial intelligence products. The agency is considering proposals related to Google's dominant position in search text advertising, such as requiring the company to provide more disclosure information to advertisers and control the placement of ads.

By using illegal distribution agreements with other tech companies, Google has consolidated its monopoly position in the online search engine market through its scale and data advantage. Therefore, the US Department of Justice believes that in order to eliminate Google's unfair competitive advantage in the market, some remedial measures may be necessary, including splitting off part of its businesses suspected of monopolistic practices In addition to the spin-off, the US Department of Justice is also considering other antitrust remedies, such as restricting Google from using its products (such as Chrome, Play, and Android) to enhance its search and search-related products, as well as providing more advertising control and exclusive data transparency.

The agency may also require restrictions on Google's investments in search competitors or potential competitors.

Regarding the latest developments at Google, a spokesperson for the tech giant criticized the Department of Justice's filing as "overly aggressive," stating that it "would have unexpected serious consequences for consumers, businesses, and America's competitiveness."

Google's Vice President of Regulatory Affairs, Lee Anne Mohrland, wrote in a blog post, "We believe that today's antitrust blueprint goes far beyond the legal scope of the court's ruling on search distribution contracts."

Multiple antitrust cases against Google are creating strong antitrust pressure. Judge Mehta ruled this summer that Google's online search and search text ad markets violated antitrust laws. He plans to hold a trial next spring on proposed remedies and issue a formal decision by August 2025. Google has indicated plans to appeal Mehta's antitrust ruling but must wait until he determines the nature of the remedies before doing so.

"We believe that despite the ongoing antitrust whirlwind, Google is unlikely to be formally split up at this time," said Daniel Evans, Managing Director and Senior Equity Analyst at Wade Bush Securities. "We believe Google will fight this in court for years."

Several US states have long sued Google for monopolistic behavior in the online search sector, indicating that they may require the tech giant to foot the bill for a public education campaign on how to switch search engines.

On Monday, another US federal judge ordered Google to open its app store over the next three years to address another antitrust case brought by Epic Games Inc., which involves Google's dominant position in the distribution of apps on Android smartphones. The company also plans to appeal this decision.

Last month, the US Department of Justice and Google were at odds in a third antitrust lawsuit focusing on Google's dominant position in the technology used to buy and sell online search engine ad placements. Closing arguments for this lawsuit are scheduled for late November. Antitrust enforcers stated that if the court finds that Google has a monopoly in the online search engine ad placement market, they plan to compel Google to divest part of its ad placement technology business