Google loses massive antitrust case over its search dominance

Updated August 5, 2024 at 7:40 PM EST

WASHINGTON — A judge ruled Monday that the ubiquitous search engine Google illegally uses its dominant position to stifle competition and limit innovation, a landmark decision that could shake the Internet and cripple one of the world’s most iconic companies.

The long-awaited decision by U.S. District Judge Amit Mehta comes nearly a year after the start of the trial pitting the U.S. Justice Department against Google, the largest antitrust battle in the country’s history in a quarter-century.

After reviewing extensive evidence, including testimony from top Google, Microsoft and Apple executives during a 10-week trial last year, Mehta issued the potentially game-changing decision, three months after both sides delivered their closing arguments in early May.

“After carefully considering and weighing the witness statements and evidence, the court concludes that Google is a monopolist and is acting like a monopolist to maintain its monopoly,” Mehta wrote in his 277-page ruling. He said Google’s dominance in the search market is evidence of its monopoly.

“Google has an 89.2% market share in general search services, and on mobile devices that share increases to 94.9%,” the ruling reads.

This represents a major setback for Google and its parent company, Alphabet Inc., which has steadfastly argued that its popularity stems from an overwhelming desire among consumers to use a search engine so good at what it does that it has become synonymous with finding things online. Google’s search engine now processes an estimated 8.5 billion searches per day worldwide, nearly doubling its daily volume from 12 years ago, according to a recent study by investment firm BOND.

Kent Walker, Google’s global president, said the company plans to appeal Mehta’s findings: “This decision recognizes that Google offers the best search engine but says we shouldn’t be able to easily share it.”

For now, the decision vindicates Justice Department antitrust regulators, who filed the lawsuit nearly four years ago when Donald Trump was still president and have stepped up efforts to curb the influence of big tech companies under President Joe Biden.

“This victory over Google is a historic victory for the American people,” said Attorney General Merrick Garland. “No company — no matter how large or influential — is above the law. The Department of Justice will continue to vigorously enforce our antitrust laws.”

The Justice Department argued that Google’s monopoly allowed it to artificially inflate prices.

The case portrayed Google as a tech tyrant that systematically thwarted competition to protect its search engine, which had become the centerpiece of a digital advertising machine that generated nearly $240 billion in revenue last year. Justice Department lawyers argued that Google’s monopoly allowed it to charge advertisers artificially high prices while having the luxury of not having to invest more time and money into improving the quality of its search engine — a permissive approach that hurt consumers.

Mehta’s ruling focused on the billions of dollars Google spends each year to install its search engine as a default option on new mobile phones and tech gadgets. In 2021 alone, Google spent more than $26 billion to enter into these default agreements, Mehta said in his ruling.

Google has laughed off the accusations, noting that consumers have historically switched search engines when they’re disappointed with the results they get. For example, Yahoo—now a secondary player on the Internet—was the most popular search engine in the 1990s, before Google came along.

Mehta said the evidence at trial showed the importance of default settings. He noted that Microsoft’s Bing search engine has an 80% share of the search market in Microsoft’s Edge browser. The judge said that shows that other search engines can succeed if Google is not blocked as a predetermined default.

Still, Mehta credited the quality of Google’s product as an important element of its dominance, saying bluntly that “Google is widely recognized as the best (general search engine) available in the United States.”

The Consumer Choice Center, a lobbying group that has fought other attempts to restrict business, denounced Mehta’s decision as a step in the wrong direction. “The United States is drifting toward the anti-tech stance of the European Union, a part of the world that produces almost nothing and punishes successful American companies for their popularity,” said Yael Ossowski, deputy director of the center.

What changes or penalties should be introduced?

Mehta’s conclusion that Google is operating an illegal monopoly sets off the next phase of the legal process, which will determine what changes or penalties need to be made to repair the harm and restore a more competitive position.

The potential outcome could be a sweeping injunction requiring Google to dismantle some pillars of its internet empire or prevent it from spending billions a year to ensure its search engine automatically answers queries on iPhones and other internet-connected devices. After the next phase, a judge could find that only modest changes are needed to level the playing field.

“Google losing its search antitrust case could be a huge deal—depending on the remedy,” said Emarketer senior analyst Evelyn Mitchell-Wolf. “A forced divestiture of its search business would cut Alphabet off from its largest revenue source. But even losing the ability to enter into exclusive default agreements could be damaging to Google. Its ubiquity is its greatest strength, especially as competition from AI-based alternative search engines intensifies.”

Regardless, she added, the lengthy appeals process will delay any immediate effects for both consumers and advertisers.

Lee Hepner, senior counsel at the American Economic Liberties Project, said the tone of Mehta’s ruling indicates the likelihood that the judge will bar Google from entering into agreements over its default search engine, or even consider separating some of the company’s different business lines.

The appeals process could take as long as five years, predicted George Hay, a Cornell University law professor who was chief economist at the Justice Department’s antitrust division for most of the 1970s. That lengthy process will allow Google to fend off the possibility that Mehta will ban default search contracts, Hay said, but it likely won’t protect the company from class-action lawsuits citing the judge’s findings that advertisers were being cheated by monopoly pricing.

Here’s How Microsoft and Apple Could Be Affected

If a major shake-up occurs, it could prove to be a success for Microsoft, whose power was shaken in the late 1990s when the Justice Department filed an antitrust lawsuit against the software maker, accusing it of abusing the dominant position of its Windows operating system on personal computers to eliminate competition.

The Microsoft case mirrored the Google one in several ways, and now the outcome could be similar. Just as Microsoft’s bitter antitrust battle created distractions and obstacles that opened up more opportunities for Google after its founding in 1998, the Google decision could be a boon for Microsoft, which already has a market value of more than $3 trillion. Alphabet was once worth more than Microsoft, but now it lags behind its rival, with a market value of about $2 trillion.

If Mehta decides to restrict or ban Google’s default search offerings, it could also cut into Apple’s profits. While parts of his decision were redacted to protect confidential business information, Mehta noted that Google paid Apple an estimated $20 billion in 2022, double the amount it paid in 2020. The judge also noted that Apple had periodically considered building its own search technology but backed off after a 2018 analysis estimated the company would lose more than $12 billion in revenue in the first five years after breaking away from Google.

Google Payments has helped fuel Apple’s growing services division, which generated $85 billion in revenue in the company’s last fiscal year. Apple did not immediately respond to a request for comment.

The Justice Department’s antitrust division has recently taken on some of the world’s largest companies, suing Apple in March and announcing a massive lawsuit against Ticketmaster and its owner, Live Nation Entertainment, in May. Law enforcement has also launched investigations into the roles Microsoft, Nvidia and OpenAI have played in the AI boom.

The Biden administration has won some big cases, including blocking mergers between some of the world’s largest spenders and JetBlue Airways and Spirit Airlines. It has also had some notable setbacks, including in the sugar and health care industries.