On August 5, 2024, District of Columbia court judge Amit Mehta ruled that Google (GOOG, Financial) is operating as a monopoly, particularly in its search business. The Department of Justice (DOJ) has proposed potential remedies, which may include breaking up GOOG to separate its search business from other segments like YouTube, Cloud, Android, and Chrome.
- Antitrust cases involving tech giants such as GOOG, Microsoft (MSFT, Financial), Apple (AAPL, Financial), and Amazon (AMZN, Financial) usually result in fines. However, this case could lead to significant changes in GOOG's business model, though a complete breakup is unlikely.
- If the court mandates GOOG to separate its search business, which accounts for about 60% of its revenue, GOOG is expected to appeal, potentially prolonging the case for years. An independent Google Search may not change its practices without new regulations.
- The probable outcome is that GOOG will need to alter or discontinue its search distribution deals, including its agreement with AAPL, where it pays to be the default search engine on Apple devices.
- The DOJ is considering "structural remedies" to prevent GOOG from leveraging products like Android, Play, and Chrome to maintain its search dominance. However, it's challenging to envision a competitor significantly reducing GOOG's estimated 90% market share.
- GOOG believes the government is overreaching, and any decision not involving a breakup might be resolved quicker. The company is likely to appeal any unfavorable ruling.
The main takeaway is that GOOG's business model faces a credible threat, but its dominant position in search suggests no immediate decline. Long-term, increased competition and the rise of Gen AI could challenge GOOG's market dominance.
