On Monday, August 5, 2024, Federal Judge Amit Mehta ruled that Google is a monopoly and has acted to maintain its monopoly, violating Section 2 of the Sherman Act, a landmark antitrust law enacted in 1890 to curb concentrations of power that restrain trade and reduce economic competition.
The case against Google has gone on since 2020, when the Department of Justice sued Google over monopolistic actions. The DOJ and several states called for Google to break up its ad tech business, which allegedly monopolized the US ad market.
The court's investigation revealed that Google indeed wields monopoly power in the markets for general search services and general search text ads. Its exclusive distribution agreements have been found to have anticompetitive effects, allowing Google to charge supra-competitive prices for general search text ads and amass monopoly profits.
However, the court ruled in favor of Google because of its lack of monopoly power in the search advertising market and the absence of liability for its actions involving its advertising platform. This ruling will likely impact Google's future operations and business strategies. Additionally, the court declined to sanction Google for failing to preserve its employees' chat messages under Federal Rule of Civil Procedure 37(e).
The court used Google’s relationship with Apple and Android, stating that Google paid both companies billions of dollars to be the default browser app on smartphones and web browsers. Bloomberg reported that this placement has allowed Google to build up the most-used search engine in the world and fueled more than $300 billion in annual revenue (generated mainly by search ads). Reuters reports that Google controls about 90% of the online search market and 95% of smartphones.
The judge’s ruling states:
“For years, Google has secured default placements through distribution contracts. It has entered into such agreements with browser developers, mobile device manufacturers, and wireless carriers. These partners agree to install Google as the search engine that is delivered to the user right out of the box at key search access points.”
Additionally, he wrote:
“In exchange for revenue share, Google not only receives default placement at the key search access points, but its partners also agree not to preload any other general search engine on the device. Thus, most devices in the United States come preloaded exclusively with Google. These distribution deals have forced Google’s rivals to find other ways to reach users.”
What happens now?
This ruling paves the way for another phase to determine what changes or penalties will be implemented to restore a competitive landscape. The next hearing is scheduled for September 6, 2024. However, Google's appeal could delay the implementation by up to five years.
If the court wishes to implement significant changes, Google’s empire could be dismantled enough to make way for other search engines. The court may also prevent Google from paying to ensure its search engine is the default on smartphones and web browsers.