Google’s Antitrust Defense May Benefit from SearchGPT Threat

A new risk Google faces from artificial intelligence entities could affect the final outcome of a landmark antitrust trial in which a judge must decide whether the tech giant has illegally monopolized online search.

The lawsuit, brought by the Justice Department and a group of U.S. states, centers on the government’s argument that Google (GOOG, GOOGL) illegally prevented rivals from competing. Google argues that it dominated search because its service was better.

But even as the company awaits a ruling from U.S. District Judge Amit Mehta, new threats to its dominance are emerging in the form of new ways to search the web.

Antitrust experts say the threats could increase Google’s chances of getting leniency if Judge Mehta finds the company has broken competition law.

“If there is a finding of infringement, Google will say that the market has already solved the problem itself,” said William Kovacic, a professor of antitrust law at George Washington University.

Just last week, Microsoft (MSFT)-backed OpenAI unveiled a prototype of a new search engine called SearchGPT and pitched it as a new way to search the web — posing a potential threat to Google’s long-standing dominance of the search market.

Microsoft’s Bing also offers generative AI capabilities based on OpenAI’s ChatGPT, Copilot, and Prometheus.

Google, for its part, offers generative AI capabilities in its AI Overviews, its latest search product based on the Gemini model. The company also offers its LaMDA, T5, PaLM, and GLaM models.

Other new ways to search the web are AI-based large language models (LLMs), such as OpenAI’s ChatGPT, introduced in November 2022, and Perplexity, an AI-based search engine designed using multiple LLMs that has raised significant funding from Amazon (AMZN) founder Jeff Bezos and Nvidia (NVDA) CEO Jensen Huang.

“Market development is already solving problems”

The new search options won’t necessarily help Google defend its past conduct, but they could significantly mitigate the penalty if the U.S. government and states win the antitrust lawsuit.

This is because Google would have the opportunity to argue in a separate phase of the trial that any antitrust issues identified in the complaint no longer exist or have diminished.

The argument that Google could make to the judge is as follows: “There is not much to be done here, because the development of new products, new technologies, the emergence of competitive alternatives means that the development of the market is already solving the identified problems,” Kovacic said.

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Carl Hittinger, head of BakerHostetler’s antitrust and competition practice, agreed that changes in the market that open up more choices for consumers could work to Google’s advantage.

“If consumers switch to another product, if they have the ability and capacity to do so, there is no anticompetitive harm here,” Hittinger said.

On the other hand, the judge may not consider SearchGPT and the new search platforms to be direct competitors to Google Search, since these products are not currently installed as defaults on many devices.

Hittinger said one of the key factors a judge considers when determining a remedy is what is in the public interest.

“It’s an incredible responsibility”

The government has not yet said what specific remedy it expects if it wins.

Remedies may include a court order, such as a review of the company’s future conduct, or structural remedies, such as requiring the sale of assets.

Federal law also allows Google to ask Judge Mehta to reopen the case before his decision to consider new factual evidence. And even if an order is granted, new and relevant evidence can be presented to the court to request that it be amended.

If Google is found liable, it is expected to appeal the case. This could involve asking Google to delay the remediation phase until the case works its way through the appeals system.

Kovacic predicted the governments would succeed on at least some of their claims and added that regardless of the outcome, Judge Mehta’s decision would have consequences.

“You can imagine how difficult this case is for the court,” Kovacic said. “The hand of fate of the entire exploration sector — it’s an incredible responsibility.”

Google’s antitrust trial is the most high-profile since another landmark case in the 1990s ultimately forced Microsoft (MSFT) to reach a settlement that made its operating system available to competitors in the early 2000s.

“The landscape is changing”

The question remains what impact the antitrust trial and new competitors in the search engine market will have on Google and its parent company Alphabet.

There’s certainly a lot at stake. In 2023, Google’s search advertising business generated more than $175 billion in revenue.

Including advertising revenue from YouTube and the Google network, advertising revenue accounted for a staggering $237 billion of the company’s $307 billion in total revenue.

However, new market threats to Google’s search empire still have a long way to go before they can topple the leader.

So far, LLM and competing search platforms haven’t radically changed the way most Internet users search the web. Bing has gained about 1% of the search market share since Copilot launched, but Google still holds more than 90% of that share.

Hittinger, who represented AT&T in another landmark antitrust case that ended with the breakup of the telecom giant in the 1980s, said changes in technology tend to affect difficult antitrust cases.

“While you’re making a decision on an issue, the world is changing and the landscape is changing,” he said.

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