Google Losing US Anti-Monopoly Case Set To Disrupt And Reshape Internet Search And Mobile Landscape

The trial spanned several months, with the bulk of the proceedings in 2023. Testimonies and representations were heard across the board from industry representatives, including Google CEO and other C-suite executives.

On Monday, Federal Judge in the District Court of Columbia Amit P. Mehta ruled that Google’s dominance in the internet search engine market is due to illegal monopolistic practices. He observed in the ruling that Google’s actions have stifled competition and innovation.

Moreover, the tech giant’s default search agreements with device manufacturers and browsers are a key factor behind its market dominance, and many of those agreements are illegal by US standards.

Mehta acknowledged that though Google’s search engine is widely recognised as the best, the company’s overwhelming market share is decisively supported by these illegal agreements.

Google of course is planning to appeal against the ruling in the Supreme Court. However, if the company fails to get a judgment in its favour, the Internet search industry landscape (now completely dominated by it) would irreversibly change for Google, its parent company Alphabet, and its partners that have shares in its humongous advertising revenues.

Even if Google’s appeal gets a favourable judgment in future, the process can take years. The District Judge is expected to rule next on potential remedies to Google’s monopoly practices, which will likely consume at least a few months.

In a fast-paced globalised tech world, the market for search engines would change drastically by that time.

What Do Antitrust Laws Mean In USA?

Antitrust laws in the USA are essentially regulations to promote fair competition by preventing monopolies, anti-competitive practices, and any other activities harming consumers or other competing business entities.

The key American monopoly-restricting laws include the Sherman Antitrust Act of 1890 which prohibits monopolies and actions that restrain trade, and the Clayton Antitrust Act of 1914 which is for redressal of specific unfair practices.

Federal Trade Commission (FTC) was established by the FTC Act in 1914 to investigate and prevent unfair competition. The FTC and the Antitrust Division of the Department of Justice (DoJ) enforce these laws, by investigating companies and taking action if there is any violation.

What Were DoJ’s Charges Against Google?

The DoJ argued that Google’s agreements with wireless carriers, browser developers, and device manufacturers are anti-competition. Google pays all these entities upfront to make its search engine the default option.

Google reportedly paid more than US$ 26 billion to companies like Apple to make Chrome the default option on devices like iPhones and browsers like Safari and Mozilla. The company also pays Samsung an undisclosed amount to be the default search engine on all mobile phones.

Mehta’s judgment states that Samsung gets 80 per cent of its on-device search revenue from queries through Google searches on home screens and pre-installed Chrome browser.

Google’s search-based advertising is a major source of revenue for the company. It generated US$ 175 billion in 2022, in comparison to US$ 12 billion made by Microsoft’s Bing.

Google has an 89.2 per cent market share in general search services, on mobile devices the market share goes up to 94.9 per cent.

The DoJ’s case represented Google as a tech bully which has blunted competition to protect a search engine that is the main engine of advertising revenue. Google’s total ad revenue was nearly US$ 240 billion in 2023.

The DoJ lawyers argued in the court that Google’s monopoly enabled the company to charge advertisers artificially high prices. Moreover, little or no competition also translates into the luxury of having more time and money to improve the quality of its search engine further, which gradually deepens the monopoly power.

What Was Google’s Defence?

Google denied all these allegations. Their main point of argument was that users have historically changed search engines whenever they were dissatisfied with the search results of any query in a particular browser.

The company cited the example of Yahoo, which was the most popular search engine in the 1990s when there was no Google search. Consumers were increasingly disillusioned with Yahoo search results. When they got an alternative in Google, they shifted en masse to Google.

Mehta, however, was not convinced and ruled that Google had been running an illegal monopoly. This conclusion logically will be followed up by another legal phase to determine modalities of changes and penalties imposed to redress the damage done and restore a more competitive landscape.

The potential outcome of such an order is likely to result in wide-ranging measures requiring Google to dismantle important pillars of its Internet search empire and to prevent it from paying iPhone and other Internet-connected device manufacturers to make its search engine the default one.

What Are Possible Implications?

In 1998, Microsoft lost an antitrust case filed against it where the DoJ filed charges to determine if the company’s bundling of additional programmes into its operating system constituted monopolistic actions.

Now when its rival is facing the same music, this is an opportunity for Microsoft to boost the market share of Bing search engine. The company repeatedly tried and failed to convince Apple to make Bing its default search engine, as court documents and testimony noted.

Google, on the other hand, is set to lose its market share in search as it is almost certain that the number of search queries on its engine is going to fall under any consequential scenario. If the loss is extremely severe, it may have to sell off its browser and Android mobile software businesses. However, a moderate loss would provide an opportunity for the company to regroup and bounce back.

Google predicted in 2020 that if it was not the default search engine on Apple’s Safari and iPhone operating system (OS) devices, it may lose between 60 per cent and 80 per cent of search queries on iPhones and iPads, translating into a net revenue loss of US$ 32.7 billion.

Apple and Samsung have been big beneficiaries of Google’s annual payout in revenue. These companies are also bound to lose money. Therefore, these companies have strong economic incentives to develop their own search engines, instead of using Bing or giving the decision of choice to the users.

However, building the technical infrastructure to match Google may cost Apple as much as US$ 20 billion, a one-time cost to be followed by maintenance expenses.

The arrival of OpenAI’s ChatGPT in 2022 prompted many experts to conclude about the imminent demise of traditional internet search engines. Eyes of the top brasses in AI companies, other than Microsoft and Google, may have lit up after this landmark verdict. But Mehta has a note of caution for them.

He noted in his judgment that AI (artificial intelligence) has not been able to replace traditional ingredients that define general search. So, this may be very early and premature for other AI companies to celebrate.

Takeaways For India From The Google Lawsuit

Indian policymakers, in recent times, seem to be more bothered about regulating content spread in big tech-hosted platforms. However, they may learn more about digital tech regulation by taking a leaf or two from their counterparts in the USA, who have shown immense depth and willingness to engage in this Google antitrust case.

Outside the USA, the big tech companies often resort to mis-selling which they cannot indulge in on American soil due to stringent anti-monopoly laws and rules which flow from them. India is no exception. Bundling of products, for example, is still used across marketing and as a selling strategy for many high-tech products forcing Indians to buy add-ons that they do not require. For instance, along with a computer operating system, software that is not essential is bundled or apps with a mobile phone or OTT channels with internet data.

As these big tech companies are headquartered in the USA, there is not much regulatory requirements existing in India to disclose financial and accounting information. So, there is always scope for monopoly formation in any segment of the digital markets. A dynamic approach to regulating a fast-evolving Indian digital tech landscape is the way forward.

That will be the apt and broader takeaway for Indian digital policymakers from the Google antitrust case.