Judge Amit Mehta in Washington stated that Google’s $26 billion in payments to make its search engine the default on smartphones and web browsers effectively blocked competitors. “Google’s distribution agreements foreclose a substantial portion of the general search services market and impair rivals’ opportunities to compete,” Mehta said in his 286-page ruling.
By controlling distribution on phones and browsers, Google could consistently raise online advertising prices without facing any competition, Mehta added. “The trial evidence firmly established that Google’s monopoly power, maintained by the exclusive distribution agreements, has enabled Google to increase text ads prices without any meaningful competitive constraint,” he wrote.
The government claimed that Google maintained its monopoly over online search and related advertising illegally. Google paid companies like Apple and Samsung billions over the years for prime placement on their devices and browsers, which helped Google become the most-used search engine globally. This also generated over $300 billion in annual revenue, mostly from search ads.
Alphabet shares dropped nearly 4.5% to $159.25 in New York. Apple Inc. fell 4.8% to $209.27, as it could lose billions in payments from Google for being the default browser on iPhones.
"This victory against Google is a historic win for the American people,” said Attorney General Merrick Garland. “No company — no matter how large or influential — is above the law. The Justice Department will continue to vigorously enforce the antitrust laws.”
Google plans to appeal the decision. “As this process continues, we will remain focused on making products that people find helpful and easy to use,” said Kent Walker, President of Google Global Affairs.
Judge Mehta noted that Google does not have a monopoly in the market for general search advertising, where competitors like Amazon and Walmart offer advertising related to searches on their own websites. However, he stated that Google does have a monopoly over search text ads, which appear at the top of search results pages to draw users to websites.
Mehta’s decision focuses on Google’s liability, nine months after the Justice Department and several states held a 10-week trial in federal court. He scheduled a hearing for next month to discuss the timing for a separate trial on the remedy.
The Justice Department hasn’t yet stated what changes it will seek. They could demand the separation of Alphabet’s search business from other products like Android or Chrome, which would be the biggest forced breakup of a US company since AT&T in 1984. The judge might also unwind the exclusive search deals or require Google to license its search index.
Antitrust enforcers have also sued Google for allegedly monopolizing the technology used to buy, sell, and serve display advertising online. This case is set for trial next month in Virginia federal court, with the government seeking to force Google to sell some of its advertising technology products.
Dan Morgan, a senior portfolio manager at Synovus Trust, said the decision adds to the “black cloud” of legal and regulatory uncertainty over the company. “It does create some doubt in a company that already kind of disappointed on the quarter,” he said.
Judge Mehta’s decision is seen as “reasonable and balanced,” accepting some but not all of the government’s arguments. This balanced approach will likely help in any appeals, said William Kovacic, who teaches antitrust at George Washington Law School.
Rebecca Allensworth, an antitrust professor at Vanderbilt Law School, praised Mehta’s decision as “bold in a legally careful way that will do well on appeal.” She believes it will “lay the blueprint for other tech cases going forward.”
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