US mulls rare antitrust move: splitting up Google

(Bloomberg) — A rare attempt to break up Alphabet Inc.’s Google business is among the options the Justice Department is considering after a landmark court ruling that found the company had a monopoly on the Internet search engine market, people familiar with the proceedings said.

The move would be Washington’s first step in cracking down on a company for illegal monopoly activity since failed attempts to break up Microsoft Corp. two decades ago. Less serious options include forcing Google to share more data with competitors and measures to prevent it from gaining an unfair advantage in AI products, said the people, who asked not to be identified discussing private conversations.

Regardless, the government is likely to seek to ban the kind of exclusive deals that were at the center of its case against Google. If the Justice Department pursues a spin-off plan, the most likely entities to be divested are the Android operating system and Google’s Chrome web browser, the people said. Officials are also considering trying to force a possible sale of AdWords, the platform the company uses to sell text ads, one of the people said.

The discussions at the Justice Department intensified following Judge Amit Mehta’s Aug. 5 ruling that Google illegally monopolized the online search and text search advertising markets. Google said it would appeal the decision, but Mehta ordered both sides to begin planning for the second phase of the case, which will include the government’s proposals to restore competition, including a possible split request.

A Google spokesman declined to comment on a possible remedy. A Justice Department spokeswoman also declined to comment.

The U.S. plan would need to be approved by Mehta, who would order the company to comply. A forced breakup of Google would be the biggest breakup of a U.S. company since AT&T was dismantled in the 1980s.

Justice Department lawyers who have consulted 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 AI technology, the people said. As a remedy, the government could seek to stop the company from forcing websites to allow their content to be used in some of Google’s AI products in order to appear in search results.

Getting rid of the Android operating system, which powers about 2.5 billion devices worldwide, is one of the most talked-about remedies by Justice Department lawyers, the people said. In his decision, Mehta said Google requires device makers to sign agreements to access its apps, such as Gmail and the Google Play Store.

As he discovered, these agreements also require that the Google search widget and Chrome browser be installed on devices in a way that makes them impossible to remove, effectively preventing other search engines from competing with them.

Mehta’s decision follows a California jury verdict in December that found the company had monopolized the distribution of Android apps. The judge in that case has not yet ruled on relief. The Federal Trade Commission, which also enforces antitrust laws, filed a brief in the case this week and said in a statement that Google should not be allowed to “reap the benefits of an illegal monopoly.”

Google paid companies as much as $26 billion to make its search engine the default search engine on devices and web browsers, $20 billion of which went to Apple Inc.

Mehta’s ruling also found that Google had a monopoly on ads that appear at the top of search results pages to drive users to sites, known as search text ads. They are sold through Google Ads, which was rebranded from AdWords in 2018 and offers marketers a way to show ads for specific keywords on search engines related to their business. About two-thirds of Google’s total revenue comes from search ads, accounting for more than $100 billion in 2020, according to testimony at last year’s trial.

If the Justice Department does not ask Google to sell AdWords, it could seek interoperability requirements that would allow AdWords to work seamlessly with other search engines, the people said.

Another option would require Google to divest itself of or license its data to rivals like Microsoft’s Bing or DuckDuckGo. Mehta’s ruling found that Google’s agreements not only ensure that its search engine gets the most user data — 16 times more than its closest competitor — but that data stream also prevents rivals from improving their search results and competing effectively.

Europe’s recent digital gatekeeper law imposed a similar requirement for Google to share some of its data with third-party search engines. The company has publicly stated that sharing data could raise privacy concerns for users, so it only shares information in searches that meet certain thresholds.

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

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

For years, websites have allowed Google’s crawler to index web pages 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 artificial intelligence.

Last fall, Google created a tool that lets websites block AI scraping after companies complained. But that opt-out doesn’t apply to everyone. In May, Google announced that some searches would now feature “AI Overviews,” narrative responses that save people from clicking on different links. The AI-powered panel appears below queries, presenting summarized information pulled from Google search results from across the web.

Google doesn’t allow site publishers to opt out of AI Overviews because they’re a “feature” of search, not a separate product. Sites can block Google from using snippets, but that applies to both search and AI Overviews.

Although AI Overviews only appears in a fraction of searches, its rollout has been rocky, with some snippets containing compromising suggestions, such as advice to eat rocks or put glue on pizza.

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