US Considers Rare Antitrust Move: Breaking Up Google

(Bloomberg) — An attempt to break up Alphabet Inc.’s Google is one option the U.S. Justice Department is considering after a landmark court ruling found the company has a monopoly on online search, people familiar with the deliberations said.

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The move would be the first by Washington to break up a company over its illegal monopoly since a failed effort to break up Microsoft Corp. two decades ago. Less drastic options include forcing Google to share more data with rivals and measures to prevent it from gaining an unfair advantage in artificial intelligence products, said the people, who asked not to be identified discussing private conversations.

Regardless, the government is likely to seek to block the kind of exclusivity deals that were at the heart of its case against Google. If the Justice Department moves forward with the breakup plan, the units most likely to be shed are Google’s Android operating system and Chrome web browser, the people said. Officials are also looking into trying to force a potential sale of AdWords, the platform the company uses to sell text ads, one of the people said.

The debate at the Justice Department has intensified following Judge Amit Mehta’s Aug. 5 ruling that Google illegally monopolized the online search and text-based search advertising markets. Google has said it will appeal the decision, but Mehta has ordered the two sides to begin making plans for a second phase of the case, which will include the government’s proposals to restore competition, including a possible breakup.

What’s at Stake in Google’s Antitrust Ruling: QuickTake

Alphabet shares fell 1.4% to $161.95 in premarket trading on Wednesday.

A Google spokesperson declined to comment on the potential resolution, and a Justice Department spokeswoman also declined to comment.

The US plan would need the approval of Mehta, who would direct the company to comply. A forced breakup of Google would be the biggest breakup of a US company since AT&T in the 1980s.

Justice Department lawyers consulting with companies affected by Google’s practices have raised concerns in their discussions that the company’s dominance in search gives it an advantage in developing artificial intelligence technology, the people said. As part of the remedy, the government may seek to bar the company from forcing websites to allow some of Google’s artificial intelligence products to use their content in search results.

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Separated

Getting rid of Android, which is used by some 2.5 billion devices worldwide, is one solution that Justice Department lawyers have repeatedly discussed, according to the sources. In his ruling, Mehta found that Google requires device makers to sign agreements to access its apps, such as Gmail and the Google Play Store.

These agreements also require Google’s search engine and Chrome browser to be installed on devices in a way that cannot be removed, effectively preventing other search engines from competing, he found.

Mehta’s ruling follows a California jury verdict in December that found the company had a monopoly on the distribution of Android apps. The judge in that case has yet to decide whether to grant the company relief from punishment. The Federal Trade Commission, which also enforces antitrust laws, filed a brief in the case this week, saying in a statement that Google should not be allowed to “reap the rewards of an illegal monopoly.”

Google has paid up to $26 billion to companies to make its search engine the default on devices and in web browsers, with $20 billion of that going to Apple.

Mehta’s ruling also found that Google monopolized the ads that appear at the top of search results pages to attract users to websites, known as search text ads. These ads are sold through Google Ads, which was renamed from AdWords in 2018 and offers marketers a way to run ads against specific search terms that relate to their businesses. About two-thirds of Google’s total revenue comes from search advertising, which totaled more than $100 billion in 2020, according to testimony from last year’s trial.

If the Justice Department doesn’t require Google to sell AdWords, it may require interoperability requirements that would make it work seamlessly on other search engines, the people said.

Access to data

Another option would require Google to give up or license its data to competitors, such as Microsoft’s Bing or DuckDuckGo. Mehta’s ruling found that Google’s contracts not only guarantee that its search engine gets the most user data — 16 times more than its nearest competitor — but that the data flood also prevents its competitors from improving their search results and competing effectively.

Europe’s recently passed digital gateway rules impose a similar requirement that Google make some of its data available to third-party search engines. The company has publicly stated that sharing the data could pose user privacy concerns, so it only makes information available for searches that meet certain thresholds.

Requiring monopolies to allow competitors some access to technology has been a remedy in previous cases. In the first case brought by the Justice Department against AT&T in 1956, the company was required to provide royalty-free licenses to its patents.

In an antitrust case against Microsoft, the settlement required the Redmond, Wash., tech giant to make some of its so-called application programming interfaces (APIs) freely available to third parties. APIs are used to ensure that computer programs can communicate and exchange data with each other efficiently.

AI Products

For years, websites have allowed Google’s web crawler to access the company’s search results to make sure they appear in the company’s search results. But recently, some of that data has been used to help Google develop its own artificial intelligence.

Last fall, Google created a tool that lets websites block searches powered by AI, after companies complained. But that option doesn’t apply to everything. In May, Google announced that some searches will now come with “AI overviews,” narrative responses that save people the hassle of clicking through multiple links. The AI-powered panel appears below queries, offering concise information pulled from Google search results from around the web.

Google does not allow website publishers to opt out of appearing in AI Overview, as it is a “feature” of Search, not a separate product. Websites can prevent Google from using clips, but this applies to both Search and AI Overview.

Although AI Overviews only appears in a small portion of searches, the feature’s rollout has been rocky after some snippets made awkward suggestions, such as advising people to eat rocks or put glue on pizza.

(Updates with pre-market shares in paragraph 5.)

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