(Bloomberg) — Trying to break up Alphabet Inc.’s Google is one option the Justice Department is considering after a landmark court ruling found the company has a monopoly on online search, according to people familiar with the deliberations.
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The move would be the first attempt by Washington to break up a company over its illegal monopoly since a failed effort to break up Microsoft Corp. two decades ago. Less risky options include forcing Google to share more data with rivals and taking steps 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 a ban on the kind of exclusive contracts 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 divested 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 Justice Department’s discussions intensified following Judge Amit Mehta’s August 5 ruling that Google had illegally monopolized the online search and text-based search advertising markets. Google said it would appeal that decision, but Mehta ordered both sides to begin planning for a second phase of the case, which would include the government’s proposals to restore competition, including a possible breakup request.
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Alphabet shares fell 1.4% to $161.95 in premarket trading on Wednesday.
A Google spokesman declined to comment on the potential remedy. A Justice Department spokeswoman also declined to comment.
The US plan would need to be approved by Mehta, who would guide the company to comply. The forced breakup of Google would be the largest of a US company since the breakup of 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 their content to be used in some of Google’s artificial intelligence products in order to appear in search results.
Separated
Getting rid of Android, which is used on about 2.5 billion devices worldwide, is one remedy that has been repeatedly discussed by Justice Department lawyers, according to the people. In his ruling, Mehta found that Google requires device makers to sign agreements to access its apps like Gmail and the Google Play Store.
These agreements were also found to 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.
Mehta’s decision 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 rule on the remedy. 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 rewards of an illegal monopoly.”
Google has paid up to $26 billion to companies to make its search engine the default on devices and web browsers, with $20 billion of that going to Apple.
Mehta’s ruling also found that Google has a monopoly on the ads that appear at the top of search results pages to attract users to websites, known as search text ads. They are sold through Google Ads, which was rebranded from AdWords in 2018 and gives marketers a way to show ads for certain search keywords related to their business. About two-thirds of Google’s total revenue comes from search advertising, which totaled more than $100 billion in 2020, according to a court filing last year.
If the Justice Department doesn’t require Google to sell AdWords, it could demand interoperability requirements that would make it work seamlessly on other search engines, the people said.
Access to data
Another option would require Google to divest its data or license it to competitors, such as Microsoft Bing or DuckDuckGo. Mehta’s ruling concluded that Google’s contracts not only ensure that its search engine gets the most user data — 16 times what its next closest competitor gets — but that this data influx also prevents its competitors from improving search results and competing effectively.
The recently enacted digital gatekeeping rules in Europe impose a similar requirement that Google provide some of its data to third-party search engines. The company has publicly stated that sharing data can pose user privacy concerns, so it only provides information on searches that meet certain thresholds.
Requiring monopolists 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 free licenses to its patents.
In an 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 make sure programs can communicate and exchange data effectively with each other.
AI Products
For years, websites have given Google’s web crawler access 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 to let websites block AI mining, after companies complained. But that opt-out 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 links. The AI-powered panel appears below queries, displaying summary information pulled from Google search results across the web.
Google does not allow website publishers to opt out of appearing in AI Overviews, as this is a “feature” of search, not a separate product. Websites can prevent Google from using snippets, but this applies to both search and AI Overviews.
While the AI Overviews feature only appears in a small portion of searches, the feature’s rollout was difficult after some snippets made awkward suggestions, such as advising people to eat rocks or put glue on pizza.
(Updates to pre-market shares in paragraph 5.)
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