Google's Antitrust Battle: Regulatory Challenges and AI Competition

Google is a 'monopolist'. Will anyone be able to stop it?

It took the US Department of Justice four years of painstaking preparation to win its sweeping antitrust case against Google's online search dominance. What it will ultimately mean, however, depends on what happens next. The same judge who this week declared Google a "monopolist", Amit Mehta, will now determine what remedies to impose: anything from restricting its ability to strike the agreements at the heart of the case to forcibly breaking up the company. Those remedies could transform a business that has vaulted Google's parent Alphabet, led by chief executive Sundar Pichai, into the ranks of the world's most valuable companies. But equally it could prove too little, too late to stop the dominance of Google, whose name has become shorthand for online search. "Without question, it's an important first step in the direction of imposing greater controls on Google . . . But there are many, many rivers to cross," said William Kovacic, a former Republican chair of the Federal Trade Commission. The DoJ's last major antitrust win against Big Tech highlights the sometimes glacial and political nature of antitrust enforcement. That verdict, which in 2000 ordered Microsoft to be broken up for illegally squashing competition, was ultimately overturned on appeal. Microsoft later settled with the new, more business-friendly administration of George W Bush. The DoJ has yet to confirm the remedies it will seek against Google. The most ambitious would involve a break-up of Google or spin off of its Chrome web browser or Android mobile operating system. Those kinds of structural remedies are rarely pursued and granted, but experts said that Jonathan Kanter -- the head of the DoJ's antitrust division, who has a reputation for vigorous enforcement -- might consider proposing them. "If you're trying to create competition and the conduct has raised barriers to entry, then the remedy should lower those barriers to entry," said a person familiar with the DoJ's approach. More straightforward penalties include a ban or reduction in Google's ability to make payments to smartphone makers Apple and Samsung, or browser developer Mozilla, to enshrine itself as the default search option. Kanter would probably "at least [seek] something more than just an injunction" that would bar the company from re-engaging in the offending behaviour, said Herbert Hovenkamp, professor at University of Pennsylvania's law school. "The problem Kanter faces . . . is that a simple injunction may not do all that very much." "Google has good lawyers and won't take this lying down," said Ben Reitzes, a tech analyst at Melius Research. "Our message to investors: don't draw definitive conclusions yet; we have a hunch it isn't as bad as it looks." According to Mehta's decision, nearly 90 per cent of US search queries flowed through Google in 2020, and 95 per cent for mobile. It has no serious rivals -- the next closest, Microsoft's Bing, accounted for just 6 per cent. The advertising business Google has built around its search business generates enormous revenue: $175bn last year, more than half its $307bn total. It has spent lavishly to protect its cash cow: Google's total payments to the likes of Apple and Mozilla to make it their default search engine reached more than $26bn in 2021 alone, Mehta said. The European Commission has sought to curb Google's market power for years, but despite imposing multibillion-dollar penalties, the search giant has brushed these off to retain its dominance in the region. Following the commission's 2018 ruling that Google abused its dominant position in smartphones, Android manufacturers must offer European users a choice of search engine when they first use their device. The EU's new Digital Markets Act, whose obligations on so-called "gatekeepers" came into force in March this year, imposed new mobile "choice screens" and rules against Google "self preferencing" its own services in search results. But Brussels' interventions have made no discernible dent in Google's monopoly. According to online activity tracker Statcounter, Google still accounted for more than 90 per cent of search traffic in Europe as of July. "Not all that many people would switch away from Google search if they were given the choice," Hovenkamp said. "It's clear both Europe and the US share the concern about Google's abuse of its dominant position," said Bill Baer, who led the DoJ antitrust division during the Obama administration. "But what the [EU] Digital Markets Act shows so far is that it's really hard to reintroduce competition once it's been shut up . . . The US, working with the district court, will now be in a position to try and come up with some creative remedies, which break up Google's unlawful dominance." A person familiar with Google's thinking said the reason it continues to pay for default search agreements -- despite most users picking Google over rivals regardless when given the choice in Europe -- was down to how to the smartphone and browser makers choose to run their platforms. "Apple and Mozilla get to design the product and decide how [Google] bids and competes," the person said. "Google is playing their game to compete for their shelf space." US federal agencies were slow to act as Google built its empire. The FTC previously spent two years investigating Google for allegedly prioritising its own content on its search results page, but dropped the case in 2013 because of lack of evidence. Since then, Google's share of US search queries has only grown, offering dim prospects for Big Tech and start-up competitors who might invest in rival products. By the time that remedies are set and the appeals process exhausted, the case's "central argument may not be pragmatically relevant, like Microsoft two decades ago", said a former Google manager who now works for a rival search company. "The real impact on Google is slowing down execs right now by having to manage these issues -- which does create material openings for other start-ups." However, an antitrust lawyer familiar with the matter disagreed, arguing that Mehta could set "interim measures while appeals are pending" and had "discretion on which course to take". The lawyer added that Microsoft's ruling had remained relevant. "It actually had an impact because it changed" the company's practices, they said. Arguments made in that case also underpinned the Google lawsuit. The DoJ compared Google's exclusive deals to contracts Microsoft signed with PC makers to promote its Internet Explorer browser and crush rival Netscape. Others point out that the Google case is backward-looking, considering the threat that the emergence of generative artificial intelligence and chatbots could present to traditional search engines. OpenAI is developing a prototype search tool called SearchGPT to compete with Google, funded by a $13bn partnership with Microsoft and billions more in venture capital cash. The start-up has also struck a deal with Apple to integrate ChatGPT into its Siri assistant to answer questions, a development that could eat into searches typed into the Google-powered Safari browser. Other fast-growing AI search start-ups include Perplexity and You.com, though their threat to Google remains nascent. "The way SearchGPT plays out will materially impact the final resolution of this case [and] how the industry manages the potential rise of a new disruptive offering," the former Google manager added. "It can be argued that nothing was really disruptive to Google in the last 20 years." Whatever remedies are chosen, Mehta's conclusions underline how the bipartisan US political backdrop to antitrust enforcement has moved against Big Tech. For years, US antitrust policy tolerated corporate growth as long as consumers were not harmed by higher prices. Donald Trump, however, bucked the more hands-off antitrust approach of his Republican predecessors. The Google search probe began during his presidency before being passed to the Biden administration, which brought on a progressive pair of antitrust enforcers in Kanter and FTC chair Lina Khan. Kanter's DoJ will square off again at trial against Google next month, in a separate case over digital advertising, and has another case pending against Apple. The FTC is pursuing cases against Meta and Amazon. Mehta's decision is a "shot in the arm" for these efforts "because it shows that the government can prevail", Kovacic said. There is no guarantee that a second Trump administration, should he win in November, would look more favourably on Big Tech -- and tackling these companies' power has proven a popular position for both parties. That has left tech companies scrambling to defend cases that threaten their empires. One person familiar with Google's thinking described the current US approach to antitrust as "Calvinball" -- a reference to the Calvin and Hobbes comic strip in which the rules are made up by a six-year-old while the game is played, changing constantly. In the current AI frenzy, Big Tech is rewriting the dealmaking playbook too. Google, Microsoft and Amazon have recently made so-called "acqui-hires" of staff from promising AI start-ups, which critics say are structured to skirt antitrust rules. According to Baer, Mehta's ruling "reinforces the US antitrust principle that while you can be big because you came up with a better idea, were a first mover . . . you can't then take steps that preclude the possibility of anyone else challenging you and succeeding in that marketplace". "What Judge Mehta did was say: 'Here are the limits and boy, you went way beyond them'," he said.

Opinion | What will the Google antitrust ruling mean for search -- and all of us?

Molly Roberts: A natural monopoly is hard to fight Google has a favorite line when it comes to antitrust cases against the company: "Competition is just a click away." But U.S. District Judge Amit P. Mehta didn't buy it this time. He ruled this week that by paying for default placement on platforms such as Apple's iPhone, Google unlawfully extended its monopoly in search -- no matter that consumers can still choose from the small players offering alternatives for trawling the web, if they want to. The question Google has always asked is why people would want to choose another search site. Google, after all, is the best. But that's exactly the point: Google is the best because the more people use it, the more data it has to improve its results. The more it improves its results, the more people use it. This virtuous cycle makes Google's dominance in search essentially a natural monopoly. That gives it all the advantage it ought to need to earn default placement on iPhones or anywhere else on the merits. So why allow it to buy even more of a leg up, at a price no one else (thanks to its monopoly) can afford? This makes for a reasonable policy argument. Whether it makes for a solid legal argument is less certain. The courts have generally decided that prosecutors must show some harm to consumers to win an antitrust case, but exactly how consumers are harmed here is unclear. It's also difficult to prove that Google has ceased to innovate because its default status wards off any competitive threat. Besides, telling Google it can't pay Apple punishes Apple, too. We'll see what happens as this issue wends its slow way through the courts -- but it might turn out that this isn't an issue for the courts at all. Truly transforming modern-day antitrust might be a job for Congress. Catherine Rampell: A narrow ruling means many possible remedies Some news coverage has implied that this Google decision will be the start of breaking up Big Tech. But even if this ruling ultimately survives whatever appeals will come, a breakup is unlikely to be on the table for Alphabet, Google's parent company. Any "remedies" -- actions the court orders to set things right -- will probably be much more modest than the dreams of the "Big Is Bad" folks. That's because the court's decision in this case was pretty narrow. Judge Amit P. Mehta didn't dispute that Google had offered a superior product and won competition on the merits; most of his ruling was about how Google had then illegally maintained its monopoly in "general search engines," by paying Apple and Samsung to be the default search engine on their phones and other products. (The judge rejected many of the more expansive claims made by states and the U.S. Justice Department.) Follow Molly Roberts Follow If that dominance were stripped away, the hope is that Bing -- or DuckDuckGo, Ecosia or other search engines -- would use the boon of seeing more of our search queries to build better, more competitive search results. Of course, directing more traffic to Bing would also be quite good for the profitability of Bing, which is owned by Microsoft. So one possible remedy is that Google just pays a fine, and maybe even maintains its default position, but is forced to share all its search query data with its rivals -- though privacy advocates might have something to say about even more widespread sharing of consumer data. A more likely option is that Google is no longer allowed to pay Apple $20 billion per year to be Safari's default search engine. This could have some unintended consequences, hurting not just Apple's bottom line but also Mozilla's; more than 80 percent of that company's revenue comes from Google's payments to be the default search on Firefox). And, ironically, this outcome might actually help Google. One detail that came out in the trial, cited by the judge in his decision: Even though Windows users were defaulted to Microsoft's Edge browser and Bing search, 80 percent of them chose to switch to Google search anyway (either directly or by installing Google's Chrome browser). So even if Google's default setting on Apple devices soon goes away, most users still might manually switch to Google, meaning Google retains most of the valuable traffic without having to pay. A final possibility: The next time we buy a phone, we'll get the full European experience of being asked to select a browser and a search engine. And we'll all still select Google. Megan McArdle: Don't overlook the innovations of monopolists If you are reading this on a device other than pulped-up dead trees, you can thank Bell Labs. During the golden age of landline telephony, Bell's in-house skunk works was a fountain of useful inventions, from the laser to the photovoltaic cell to the transistor upon which modern microchips are based. This largesse was, of course, subsidized by Bell's monopoly over a singularly useful technology. Monopolists have a bad name, deservedly, as they often use their market power to deliver worse goods and services at a premium price. But monopoly profits aren't always siphoned off into monopolist pockets; sometimes, they subsidize socially useful goods. That's worth thinking about now that Judge Amit P. Mehta has ruled that Google has a monopoly over search. It's not yet clear what sorts of remedies Mehta might impose. The possibilities range from the relatively minor -- restricting Google's ability to pay for positioning as the default search engine on browsers and devices -- to carving the company apart. But the more drastic the surgery, the more it will cut into the revenue that is currently subsidizing pie-in-the-sky long-term technology bets, such as self-driving-taxi service Waymo, along with various services that are unlikely to ever become major revenue sources, such as Google Scholar and Google Books. Of course, that doesn't mean the antitrust ruling is necessarily wrong. It's nice to get free research and development from monopolists, but it doesn't necessarily offset the large social costs -- as well as the potential costs of monopolists using their power to squash innovative upstart competition. Personally, having tried most of the other available browsers and found them wanting, I'm skeptical that consumers would benefit by being pushed toward those instead, but there's no way to be sure until we experience the aftermath of whatever remedies await. Bina Venkataraman: This ruling is a cautionary tale for AI One day in the future, all your urgent and idle questions -- where to find a good bowl of ramen, the forgotten name of a book you read in college, the best doctor in Chicago -- might get answered by an armada of AI agents, including chatbots powered by large language models such as Claude and ChatGPT. But for now, most people connected to the internet get their answers from Google search, which captures more than 90 percent of the global market of online queries. The fiction of a Google search is that it scours the web for the best information out there, spitting out answers that best serve your needs. The reality is that though Google started out prioritizing the most networked and relevant results, these days searchers have to wade through a thicket of advertisements, search-engine-optimized content that might or might not be correct and, yes, unreliable AI content. Without competition, it's a problem that's poised to get worse. Google's revenue comes primarily from the advertisements, even though co-founders Sergey Brin and Larry Page, in a foundational research paper about their search engine, argued that "advertising income often provides an incentive to provide poor quality search results." And now, Judge Amit P. Mehta has deemed that Google wielded illegal monopoly power -- with practices such as paying Apple to be the default search engine in the iPhone's Safari browser. Such moves, which aimed to solidify the early dominance Google established from outperforming its competition, have made it nearly impossible for upstart search companies with different principles or business models to compete. Another round of court proceedings will follow Mehta's ruling to determine what Google has to change about its practices -- or its structure -- to allow for a more competitive marketplace. Regardless of the prescription, one good outcome would be for the ruling to serve as a warning to tech companies seeking to dominate markets for AI-driven answer services: Having the best product at one moment is not an excuse for crowding out competitors. This antitrust case, alongside others pending against Meta, Apple and Google, is seminal not because it will break the back of Big Tech -- it likely won't -- but because it could encourage the companies building the next era of information services to continue to innovate and give the public better choices, instead of elbowing the competition out of the game. We should all welcome a true marketplace in which we can get answers to our questions from a broad range of organizations, in competition to raise the bar for how useful the answers are, how our personal data is used, and how much truth or misinformation they cough up. For now, a number of companies are in the game to create the next era of AI technologies offering such answers. The Google ruling makes it more likely that no single one will overshadow the rest.

OpenAI is a bigger threat to Google than U.S. regulators

Google is facing a bigger threat from Sam Altman's OpenAI even as it awaits a decision on how antitrust regulators in Washington plan to level the playing field in the internet search business. A U.S. ruling on Monday, which found that Google built an illegal search monopoly, is being considered a big win for regulators. But an increasing number of people using AI tools including OpenAI's popular ChatGPT chatbot is already eroding Google's dominance, sources, investors and analysts said. "I think for Google right now, AI (is) a much bigger deal than the ruling. AI is fundamentally changing how the search product also works," said Arvind Jain, a former Google engineer who worked on products including Search for a decade. Jain, who now runs an enterprise search firm called Glean, said AI's impact was immediate compared with any impact from these rulings that get appealed and take a long time to affect a market. (For top technology news of the day, subscribe to our tech newsletter Today's Cache) Google has long been synonymous with search, commanding around 90% of the global market share and bringing in about $175 billion in annual revenue through the business. Even Apple , which prefers to build all the software and much of the hardware that goes into its devices, has allowed Google to be its default search engine for a handsome fee. But the days of preferential treatment for a fee are over even before slew of antitrust court cases resolve. In its AI foray, Apple announced a partnership with OpenAI to bring ChatGPT to its upcoming devices. It emphasized the deal's non-exclusive basis and talked up the likelihood of bringing on Google as another partner. A ruling against Google will speed up Apple's move towards AI-powered search services, if it is forced to end its Search deal with Google, analysts have said. Microsoft-backed OpenAI said last month it was also breaking into the search game with a slow launch of SearchGPT, an AI-powered search engine with real-time access to information from the internet. SearchGPT One former senior Google executive predicted, "AI is going to move faster than the speed that DOJ can move against Google. The whole monopoly will be over, in other words, the speed at which AI will take over search." Both the former Google executives as well as many Wall Street analysts agree that Google has the raw material needed to take a lead in AI - a large language model to train its AI and a search engine. But the company's efforts seem scattered in the face of OpenAI's onslaught, which is attracting younger users. Generative AI's popularity caught Google by surprise. Despite being the source of foundational research behind the technology, it did not release a consumer product until well after ChatGPT became the fastest-growing consumer app in early 2023. "The biggest threat to Google may be Google itself - key to adoption of any AI is trust, and its original missteps with Search Overviews showed that Google's engineers were focused more on rapid releases than getting it right as it tries to keep up with the pace of OpenAI and others," said Rebecca Wettemann, CEO and principal analyst at research firm Valoir. Wettemann referred to Google's AI Overviews, a new feature that employs AI to answer search queries that appear ahead of links. It drew fire from publishers watching referral traffic from Google decline and was criticized for delivering errors including telling users to eat glue and saying Barack Obama was a Muslim. Google scaled back the feature earlier this year. Gil Luria, an analyst at D.A. Davidson, believes the regulatory scrutiny as well as the AI threat are related. "Part of the reason (the DOJ) are coming after Google's business practices is that the market is in fact in flux right now and they want to make sure Google does not extend its current market dominance." While the antitrust ruling may not have a big impact on Google yet, it should open the search market up for more players, said Richard Socher, CEO and founder of AI search engine startup You.com and former chief scientist at Salesforce. He added, though, that ending Google's dominance in search will be "very hard." "No one has really made a big dent into Google search dominance yet ... we'll have to see if this will be yet another domino piece that will fall into place to actually give consumers some more choices, real choices." Read Comments