The foundation of Google’s (GOOG, GOOGL) empire was dealt a major blow on Monday when a judge found that the company’s search and advertising businesses violated antitrust laws.
The ruling, handed down by U.S. District Judge Amit Mehta, sided with the Department of Justice and some states in a series of lawsuits alleging the tech giant abused its dominance in online search.
“Google is a monopoly and has acted as a monopoly to maintain its monopoly,” Judge Mehta wrote in his ruling.
If the ruling stands, it could make illegal contracts that have all but guaranteed Google dominance for years.
Google said it plans to appeal the ruling, saying, “While we acknowledge that Google offers the best search engine, we conclude that it should not be allowed to make it easily available.”
Judge Mehta ruled that Google violated antitrust laws in the market for “general search” and “general search text” ads, which appear at the top of search result pages.
He said Google was not liable because it did not have a monopoly in the “search advertising” market.
The ruling is a major win for the Department of Justice and could have major implications for other major companies in the tech industry.
“This pro-competitive ruling is a victory for the American people,” the White House said in a statement.
Apple (AAPL), Amazon (AMZN) and Meta (META) are defending themselves against a series of federal and state-led antitrust lawsuits, some of which make similar claims.
The investigation is part of a broader effort by the Biden administration to curb what it sees as anticompetitive behavior in a number of industries, from health care to groceries to technology.
For Google, the judge’s decision affects a huge source of profit: Google’s search advertising business generated more than $175 billion in revenue in 2023.
When you combine the YouTube ads that Google promotes on its comprehensive search engine with revenue from the Google Network, advertising revenue accounts for a staggering $237 billion of the company’s total revenue of $307 billion.
According to Statcounter, as of June 2023, Google controls 91% of the global search engine market across all computing platforms. On mobile, Google’s market share was even higher, at 95%.
In October 2020, nearly four years before the Justice Department and states filed their lawsuit, Google’s annual revenue was $162 billion, roughly half of its most recently reported revenue for that year.
Google’s decision came after a two-month trial late last year that included testimony from Google CEO Sundar Pichai and executives from search rivals Microsoft (MSFT) and DuckDuckGo.
The story continues
The Department of Justice and 35 states, Guam, Puerto Rico and the District of Columbia have accused Google in separate lawsuits of improperly maintaining market power in search, including its search engine, search engine advertising and search engine text advertising.
Google and Alphabet CEO Sundar Pichai. REUTERS/Carlos Barria (REUTERS)
The cases were lumped together because of nearly identical allegations that Google maintained its monopoly by paying companies like Apple, Amazon, Mozilla and Firefox to be the default search provider on phones, tablets and browsers.
At the time of the lawsuit, Google controlled 90% of online searches, and its lawyers argued that Google gained and maintained its huge market share by offering a superior product, not through anticompetitive behavior.
Google’s challenged conduct revolved around contracts the company entered into with manufacturers of computing devices and mobile devices, browser services, browser developers, and wireless carriers.
The government argued that these agreements violated antitrust laws because they forced Google to become the default search provider.
These exclusive deals include Apple, LG, Samsung, AT&T, T-Mobile, Verizon, and Mozilla, among others. Thanks to these deals, a variety of Google apps are preloaded on smartphones from manufacturers including Samsung, one of the world’s largest smartphone makers.
At trial, Google argued that despite its monopoly position in the search market, the deal did not violate antitrust laws or stifle competition.
Microsoft’s Bing accounts for just 3.74% of the global market across all platforms, while Yahoo, the subsidiary of Yahoo Finance, has 1.16%.
In the US, Google controls 87% of the search market across all platforms, compared to Bing at 7.2%, Yahoo at 2.4% and DuckDuckGo at 1.9%. On mobile, Google controls 95% of the US search market.
The global search industry is also in the midst of major change as companies increasingly add generative AI responses to their services.
Google has added an AI Overview feature to its standard search service, which provides AI-powered generative answers to user queries summarizing content found across different websites in a dedicated window on the search engine’s standard website links.
Microsoft offers a Copilot feature in its Bing search engine, which offers similar functionality to Google’s AI Overviews.
The shift towards AI-powered generative search results raises further questions about the fate of the search industry, including whether websites used to summarize AI results will receive proper recognition for their contributions.
Similarly, there are concerns that these features could allow companies to provide answers to users’ questions in boxes that pull content from third-party websites, preventing users from visiting those sites, dramatically impacting page views and revenue.
These new search options will give Google the opportunity, at a separate “remedy” stage of the trial, to argue that the anti-competitive issues identified in the complaint no longer exist or have diminished.
Google could appeal the case and ask for the relief stage to be stayed until the case goes through the appellate system.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter. Alexis Weed.
Contact Daniel Howley at dhowley@yahoofinance.com. Follow him on X. Daniel Howley.
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