Will Google finally cave in under US regulatory pressure?

In August, a US federal court ruled that Google holds a monopoly in internet search and defends it against competitors through unfair means.

"This is truly a historic ruling," says Ulrich Müller, who founded the German nonprofit Rebalance Now, a Cologne-based organization that advocates for limiting the power of large corporations.

The ruling, he told DW, would show that "the extensive antitrust tools in the US are now being used more forcefully, even against domestic tech companies."

According to a court filing on October 7, the US Department of Justice (DoJ) is considering asking a federal judge to break up the Big Tech company. But it is just one of many possible options under review as the case now enters the so-called remedies phase, meaning there are several options to curb the company's market dominance.

Google breakup one option of many

Government lawyers outlined a series of potential remedies it may pursue. These include restrictions on how Google's artificial intelligence mines other websites to deliver search results and blocking Google from paying companies like Apple billions of dollars annually to ensure that Google is the default search engine presented to consumers on gadgets like iPhones.

Another possibility is forcing Google to open its search engine data to competitors. However, "structural changes" have also been proposed, which would involve breaking up Google's parent company, Alphabet.

The document released is only a preliminary version of the recommendations, which the Justice Department is expected to present in November.

Florian Bien from the University of Würzburg tells DW the envisioned structural changes could mean "very strict bans, such as the prohibition of coupling the Android operating system with Google Search and the Chrome browser," which would "almost feel like a breakup of the company."

Above all, a breakup is a very serious infringement on a company's rights, which is why courts would provide strong legal protections. "As a result, such proceedings can drag on for a long time, sometimes so long that technological developments outpace the courts," Bein says

It could also happen that the market may resolve the issues differently, which is why Bien believes there's little enthusiasm within the US government to engage in such a battle. "It simply ties up an incredible amount of resources in the Justice Department and elsewhere."

Are US antitrust authorities finally waking up?

In a keynote speech in January 2022, US Assistant Attorney General Jonathan Kanter of the DoJ's Antitrust Division said that in the past two decades, "we have seen an evolution in industry on par with, and perhaps greater than, the industrial revolution."

This has brought about "serious competition challenges," he added because concentration has increased in "more than 75% of US industries." And as more markets are dominated by large companies, he said, it has become harder for entrepreneurs and small businesses to get off the ground. "That is why we and our law enforcement partners are committed to using every tool available to promote competition," he added.

The United States has a 100-year-old tradition of antitrust law, beginning as early as 1911 when the oil monopoly Standard Oil was broken up. According to Ulrich Müller, in the 1960s and early 1970s, there was significant scrutiny of potential monopolists, which began to weaken in the 1980s through the advent of the so-called neoliberal economic theory promoted by the Chicago School of Economics. The theory argued that high market concentration was acceptable if companies were efficient, resulting in fewer structural measures being taken.

Still, in 1982, the telecommunications giant AT&T was broken up. Two decades later, Microsoft faced a similar threat after a 2001 court ruling ordered the software giant to be broken up for being a monopolist whose Windows operating system was tightly linked with its own browser, Internet Explorer, pushing out competitors like Netscape. Microsoft appealed and avoided the breakup but was forced to open parts of its system to competitors.

EU also wary of Google

In the European Union, Google's market dominance and that of other internet giants are also in focus for antitrust authorities.

In 2017, the European Commission already fined Google billions for favoring its price comparison service, while in 2018 the company was hit with a fine of over €4 billion ($4.35 billion) for illegal practices related to its mobile operating system, Android. However, the European Court of Justice still has to finally decide on this matter.

In 2019, the European Commission imposed another billion-euro fine on Google for abusing its dominant position in online advertising.

The EU's so-called Digital Markets Act, which came into force in March of this year, also aims to limit the market power of so-called "gatekeepers" of the internet. For Google, this means that services like Google Maps can no longer be given preferential treatment in search results.

Müller, however, believes the EU's antitrust cases against Google have had little impact. "Although billions in fines were imposed, Google's monopoly profits are so large that they can easily afford to pay them," he said.

Google pushing back

In the latest Google vs. United States case, the internet behemoth is accused of paying smartphone manufacturers like Apple and Samsung billions to have the Google search engine pre-installed as the default on their devices. Google also offers the popular Android operating system for mobile devices.

Google also has a monopoly on advertising related to online searches, holding between 80% and 90% of the search engine market share in both the US and Europe. YouTube and Google Maps, both part of the Google empire, are also central to online advertising.

"In 2023, we generated over 75% of our revenue from online advertising," according to the annual report by Google parent company Alphabet. Total revenue last year was nearly $306 billion (€281 billion).

Google's business is also boosted by its control of the so-called Adtech sector, which handles the infrastructure for online advertising. The company sells ad space on its own websites and apps and acts as an intermediary between advertisers who want to place ads online and publishers (i.e., third-party websites and apps) that can offer ad space.

The European Commission has expressed concerns, stating that "the only way to address competition concerns is through the mandatory divestiture of some of Google's services."

Google has already announced plans to appeal the ruling and argues it has won over users through quality and faces significant competition from Amazon and other websites.

Müller says there are now more than 100 competition cases worldwide against Google or its parent company, Alphabet, and they are likely to fight these cases to the end. The US case against Google's dominance in the online advertising market could, however, create momentum for Google to reach a settlement and accept certain measures, Müller suggested.

Under the framework presented in October, the Justice Department will submit a more detailed proposal to the court by November 20. Google, a subsidiary of Alphabet, has until December 20 to present its own remedies. A final decision is not expected until the end of 2025.

This article was originally written in German.