The US Department of Justice announced on Tuesday (October 8th) that it may request judges to divest some of Google's businesses, such as Chrome browser, Android operating system, and AdWords advertising platform, because Google uses these businesses to maintain its illegal monopoly in the online search field.
This proposal is based on the previous ruling of a US federal judge in the antitrust lawsuit between the US federal government and Google, and is also the first time since the failed attempt to split 24 years ago that the US government has considered splitting a company on the grounds of illegal monopoly.
In August this year, a US federal judge ruled that Google, which accounts for 90% of the US Internet search market, constituted an illegal monopoly. The US Department of Justice stated, "To thoroughly correct these errors, it is not only necessary to end Google's control over search engines, but also to ensure that Google cannot control future information searches
According to foreign media reports, divesting any of the three businesses mentioned above could result in billions or even billions of dollars in revenue losses for Google's parent company Alphabet, completely reshaping the order of the global technology industry and providing greater development space for competitors.
Not only that, the US Department of Justice is also seeking measures to prevent Google from expanding its past dominance into emerging AI related businesses.
In response, Google stated in an official blog post that these proposals are "radical" and that these proposed measures "go far beyond the specific legal issues involved in this case." In addition, Google's global affairs chief Kent Walker stated that the company plans to appeal the US judge's ruling.
The US Department of Justice has submitted a 32 page proposal, stating that it is considering requesting Google to sell some of its businesses
A 32 page proposal submitted by the US Department of Justice on October 8th shows that the agency is considering requiring Google to sell some of its business to weaken the damage caused by its monopoly in the online search market.
This is the first time in 24 years that the US government has considered splitting a company on the grounds of illegal monopoly. In 2000, the US government attempted to spin off Microsoft, but was unsuccessful.
The latest proposal is based on the previous ruling of a US federal judge in the antitrust lawsuit between the US federal government and Google.
On August 5th of this year, the Federal District Court for the District of Columbia ruled that Google illegally monopolized the online search market and violated US antitrust laws. Judge Amit Mehta said that Google holds nearly 90% of the general search market share, and its search market share on mobile devices such as smartphones has reached nearly 95%. Its dominant position in the search market is evidence of monopoly.
In the proposal, the US Department of Justice stated that it is considering taking action and structural remedies to prevent Google from using products such as Chrome browser, Play, and Android to surpass competitors or new entrants in Google Search and its related products and features (including emerging search access points and capabilities such as AI)
The "remedial measures" currently under consideration by the authorities include: restricting Google's investment in competitors or potential competitors in the search engine market, requiring Google to allow websites to choose whether to use its AI products, requiring Google to provide more information to advertisers and control the location of advertisements.
According to foreign media reports, some legal experts suggest that the most likely outcome is that authorities may demand that Google revoke certain exclusive agreements signed with Apple.
Google pays $26.3 billion annually to other device manufacturers, including Apple, to ensure that its search engine is the default option for these smartphones and various browsers, in order to maintain its high market share.
Not only that, the US Department of Justice is also trying to prevent Google from extending its dominant position into the AI field. The agency stated that it may seek to provide competitors with indexes, data, and models used for Google search and AI assisted search functions.
After the US Department of Justice made the above proposals public, Google stated in an official blog post that the proposals were "radical" and that the proposed measures "go far beyond the specific legal issues involved in this case." Google insists that its search engine has won the trust of users with its quality, and adds that it faces fierce competition from Amazon and other websites, and users can also choose other search engines as default settings.
Regarding the AI related proposals put forward by the US Department of Justice, Google stated that this may stifle innovation in the industry. The US government's focus on this important industry carries significant risks, including hindering investment, hindering incentive measures, and hindering emerging business models, all of which are precisely when we need to encourage investment
On the day before the announcement of the proposal by the US Department of Justice, a US judge ruled in another case that Google must open its lucrative app store Play to promote competition, including providing Android apps from competitors. At the same time, Google is also facing another case from the US Department of Justice seeking to spin off its online advertising business.
Stripping any business could result in losses of at least billions of dollars
As the world's fourth largest company with a market value exceeding $2 trillion, Google's parent company Alphabet is facing increasing legal pressure from competitors and antitrust agencies.
However, Google has stated that it plans to appeal Judge Amit Mehta's decision. From a practical perspective, splitting Google still poses certain difficulties.
Erik Hovenkamp, a law professor at Cornell University, previously analyzed that "from a practical perspective, spin offs are surprisingly difficult... Judges view spin offs as an extreme remedy that may have unpredictable consequences. For example, the new company after spin offs may be eliminated by the market
But if Google is really spun off, including divesting its Android operating system, Chrome browser, or AdWords platform, it may reshape the order of the global technology industry. According to foreign media reports, divesting any of the three businesses mentioned above could result in Alphabet losing billions or even billions of dollars in revenue and cutting off the massive data that powers its broader search and advertising ecosystem.
If the Android system is spun off from Google, it may have an impact on approximately 2.5 billion devices worldwide that use the Android operating system. Moreover, global developers also rely on Google to maintain the cross platform running capability of the Android system.
For example, Peloton, the world's largest interactive fitness platform, uses the Android open-source system to power its fitness equipment. Aircraft manufacturers also use the Android system to drive video screens, while major supermarkets use the Android system to run their vending kiosks.
And divesting the AdWords platform, which is responsible for Google's advertising business, will also severely damage Google's revenue. Judge Mehta's ruling shows that Google monopolizes the ads that appear at the top of search results pages, known as "search text ads," used to attract users to visit the website. These ads are sold through Google Ads, which was renamed AdWords in 2018 to provide marketers with a way to target certain search keywords relevant to their business. Last year's testimony in court showed that about two-thirds of Google's total revenue came from search advertising, which had exceeded $100 billion by 2020.
NPR reports that Google controls about 90% of the US search engine market, while its closest competitors Bing and Yahoo only have a market share of about 3%. Google's financial report shows that in the second quarter of this year, the revenue of "Google Search and Other" business reached $48.5 billion, accounting for 57% of Alphabet's total revenue. Last year alone, Google generated up to $175 billion in revenue from search engines and related businesses.
In previous cases, requiring monopolists to allow competitors to acquire certain technologies was a remedial measure.
In 1956, the Department of Justice sued AT& In T's first case, the company was required to provide a royalty free license for its patents. In 2000, a federal judge ruled against Microsoft in an antitrust case, and Microsoft also faced the danger of "splitting up". The company ultimately paid a settlement fee of up to $1.8 billion and was prohibited from participating in exclusive transactions that could harm competitors, and was also required to open up some of its source code.