In the nearly 300-page ruling, U.S. District Judge Amit Mehta wrote that parent company Alphabet’s agreements to make Google the default search engine on other platforms violated competition law while generating billions in revenue.
“Google is a monopolist and has acted like one to maintain its monopoly,” Mehta wrote.
Bloomberg reported earlier this week that the Justice Department is currently considering a possible breakup of the company.
Google has already announced that it will appeal Judge Mehta’s ruling. The decision “recognizes that Google offers the best search engine, but concludes that we should not be allowed to make it easily accessible.” Business Insider has reached out to the company for further comment.
With Google hot on their heels, the developments are a clear signal to the other major technology companies that they should be concerned.
This isn’t the first time Big Tech has lost an antitrust case and is facing a potential breakup. Microsoft was labeled a monopoly company in the 1990s, and although the first solution was to break up the company, the tech giant eventually settled.
But the Google development is the largest antitrust case against Big Tech since then, and Wedbush Securities analyst Dan Ives wrote in an analyst note on Wednesday that the decision was made after the industry became stronger thanks to the AI revolution. He told Business Insider that Google’s defeat gave the Justice Department a boost in its “Big Tech fight.”
“The antitrust drumbeat of big tech companies will continue,” Ives told BI, adding, “The big tech companies have become targets.”
Under the administration of President Joe Biden – and particularly with the appointment of FTC Commissioner Lina Khan – the U.S. government has taken an aggressive antitrust approach against big technology companies.
In addition to the case against Alphabet led by Mehta, the Justice Department and a number of states have filed antitrust lawsuits against Apple over the company’s mishandling of competitors that offer its in-house iPhone apps. Amazon is being sued for using its dominant position in retail to force third-party sellers onto its platform. Meta is also facing antitrust lawsuits for trying to dominate the social media market by acquiring companies such as Instagram and WhatsApp.
All of these cases are resource-intensive, have little precedent and are the most ambitious antitrust cases in decades. A big consequence of the Google ruling is that it gives federal regulators a boost of confidence that the risk is worth it, says former Federal Trade Commission Chairman William Kovacic.
“This is a huge incentive for your team,” Kovacic, now a professor at George Washington University Law School, told BI. “And your success in all these other matters depends on more people being fully engaged and willing to work their fingers to the bone to make this work. Judge Mehta’s ruling shows that the sacrifice and effort are worth it.”
Apple, Meta and Amazon did not immediately respond to requests for comment.
What is a “market” anyway?
To win an antitrust case, plaintiffs must prove that a particular company illegally dominates a particular market.
Often the cases get stuck on the question of how a particular market should be defined at all.
Defendants typically define the market broadly, arguing that they are just one fish in a big pond. Plaintiffs try to define the market narrowly, arguing that the companies are such big fish that they are illegally taking up space in a very small pond.
A federal judge had previously dismissed a lawsuit against Meta because of these ambiguities, finding that regulators had not adequately defined the social media market that the FTC said Meta monopolizes before the regulator refiled its complaint.
According to Bill Baer, a former top antitrust lawyer at the Justice Department, Judge Mehta’s massive ruling in the Google case shows judges exactly how to handle the market definition conundrum.
The judge cited a landmark 2001 U.S. Court of Appeals decision against Microsoft and showed how the findings could be applied to Alphabet’s behavior in trying to dominate the search market for Google. The same strategy could be used by other judges hearing cases against Amazon, Apple or other technology companies, Baer told BI.
“This analytical process of figuring out what actually competes with other things, rather than just letting the defendant throw spaghetti at the wall and see what sticks, is one of the hallmarks of the Google decision,” Baer said.
According to Rebecca Allensworth, a professor of antitrust law at Vanderbilt University Law School, large technology companies typically hire econometricians to build large, complicated models to define large, complicated markets.
This is an expensive and resource-intensive approach to market definition for these cases.
However, Mehta advocated a more reasonable standard, which was endorsed by the Ministry of Justice.
Instead of complex mathematical models, Mehta looked at internal documents, the behavior of the companies themselves, and statements from competitors to define the “search market” that Google monopolizes.
If other judges follow this example and apply the same standards, this could lower the hurdle for initiating antitrust lawsuits.
“If the hurdle is that you have to prove it with mathematical certainty, many cases will simply be dismissed,” Allensworth said.
Large technology companies could be more cautious about acquisitions
While technology companies are in no hurry to change their entire business model, the recent court decision could make them more cautious about acquisitions.
However, the ruling in Google does not necessarily mean that regulators will be successful with similar rulings against other technology giants.
Shweta Khajuria, an analyst at Wolfe Research, told BI that Google’s lawsuit may be different from those of other Big Tech companies because Google has a “much more dominant presence” in search than any other company in their respective categories.
Meta still competes with Snapchat and TikTok, Khajuria said, but Google’s lawsuit is significant because it is “by far the largest” antitrust case and will serve as a precursor for other companies, Khajuria said.
“The fundamental conclusion is that no company, no matter how big, is above the law,” Khajuria said.
Emarketer analyst Max Willens is not convinced the ruling should worry other tech giants. He told BI that the ruling against Google “should not necessarily be a sign that these other companies are doing badly.”
“All of these lawsuits involve very different circumstances,” Willens said.
Aside from the various lawsuits, Willens also said Google will “vigorously defend” itself and appeal the decision, which will likely delay the final ruling for years. Until the final ruling is made, companies will not preemptively change their businesses, Willens said.
“It’s a change for the big technology companies,” Willens said. “It’s new, but it won’t cause them to take such drastic measures that they would harm their business.”
Khajuria also said she does not expect companies to take proactive steps to prevent a similar outcome. However, she said the tech giants may be more cautious about large acquisitions that could draw attention to them.
Ives also said it was unlikely that business models would change dramatically, but he said the decision could prompt Apple to settle its lawsuit before going to trial.
Ives wrote in a Wedbush note to investors that while the case is expected to take years, he predicts a settlement will likely be reached in the next 12 to 18 months.
But it is clear that Judge Mehta’s decision in the Alphabet cases has shattered the notion that big technology companies, with their high-profile lawyers and enormous resources, are invincible in court.
“There’s a certain sentiment, and that’s really important,” Allensworth told BI. “There’s a sense that in a very high-profile case, a very thoughtful, legalistic, somewhat bipartisan judge is saying that this Big Tech company is a monopolist.”
Such a sensational ruling will certainly make the other tech giants sit up and take notice.
