2024-10-07 News

Google May Self-Divest Before DOJ's Antitrust Action

Google Faces the Crisis of Breakup, Regulatory Bodies' "Excessive Intervention"?

After the US Department of Justice indicated yesterday that it is considering breaking up Google, Google argued that regulatory bodies' "excessive intervention" is detrimental to the development of artificial intelligence technology in the United States. The Department of Justice has demanded that it divest itself of the Chrome browser or the Android operating system, or other "structural" remedies, which would tip the balance at a critical moment where "competition is thriving."

Google hopes that any remedies can focus on its contracts with companies such as Apple and Mozilla (the manufacturer of the Firefox browser). Even so, Google believes that as long as these transactions do not require exclusivity, it should still be allowed to pay distribution fees to these partners.

On Wednesday, October 9th, a proposal submitted by the US Department of Justice showed that they are considering requiring Google to sell part of its business to mitigate the damage caused by monopolizing the online search market. The Department of Justice also stated that they are considering how to prevent Google from using its search dominance to gain an unfair advantage in the competition of artificial intelligence products.

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Such a complex and high-stakes case will take a long time to process. It is expected that in April 2025, Judge Amit Mehta will make a ruling on the remedies.

Google may appeal this case to the US Supreme Court, but critic Jason Kint said that it is uncertain whether the Supreme Court will accept this case. Implementing any remedies could take two to three years, and Google may try to settle or take proactive actions to control the outcome.

If the court ultimately issues an order to break up Google, it will be a heavy blow to Google, becoming an unprecedented event in the history of modern American corporations—a ruling that bears a striking resemblance to the antitrust case against Microsoft 20 years ago, but at that time, Microsoft escaped the fate of being broken up. This would also be the largest forced breakup of an American company since AT&T was split up in 1984.

Faced with Google's multiple crises, Wall Street's reaction is calm. Google's parent company, Alphabet, saw its stock price fall by only 1.59% yesterday on Wednesday, with a market value remaining around two trillion dollars, still the fourth-largest publicly traded company in the world.

Google: Regulatory Bodies' "Excessive Intervention"Google's argument focuses on regulatory agencies "overreaching," contending that forcing it to divest assets or share data with competitors would "far exceed the specific legal issues of this case."

Google acknowledges that it has paid fees for pre-installing Google's search engine on mobile phones and browsers, but Google argues that these deals are benign. Google likens this to deals grain companies strike with grocery stores for premium shelf space, stating that "competition is just a click away."

Google claims that requiring it to divest the Chrome browser or the Android operating system, or other "structural" remedies, would tip the scales at a "critical moment for thriving competition."

"In rapidly evolving industries, excessive government intervention could have unintended negative consequences for American innovation and consumers. For the United States' technological and economic leadership, it is hard to imagine any technology more important than artificial intelligence."

The Department of Justice disagrees, believing that Google's ability to leverage its monopoly power to advance artificial intelligence could further entrench Google's monopolistic position.

Google hopes that any remedies would focus on contracts with companies like Apple and Mozilla (the manufacturer of the Firefox browser). Even so, Google argues that it should still be allowed to pay distribution fees to these partners as long as these deals do not require exclusivity.

Northeastern University professor John Kwoka disagrees, stating that Google is "a complex company with many ways to achieve what it wants, thus necessitating broad remedies that match, including divestitures when necessary."

Kwoka points out that there are many historical cases of companies circumventing regulatory remedies, which is also a risk raised by the Department of Justice. Kwoka suggests that the Department of Justice may argue that structural remedies are "necessary and other methods are ineffective."

"A critical moment for thriving competition"The Financial Times suggests that with the emergence of new search advertising competitors such as Amazon and TikTok, as well as the widespread disruption to Google's core business by artificial intelligence startups like OpenAI and Perplexity, Google can argue that it currently faces the most intense competition since Microsoft Bing was launched fifteen years ago.

For instance, Google mentioned on Tuesday that its share of search advertising spending in the United States will fall below 50% for the first time next year, primarily due to the rapid growth of Amazon's marketing business. However, the Department of Justice successfully argued that Google's monopoly in a narrower market of general search engines makes the growth of Amazon's business irrelevant in the eyes of the court. According to StatCounter, Google still handles over 90% of online search queries.