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Many consider Google, now referred to as Alphabet ((GOOGL - Free Report) ), as the most powerful and dominant enterprise worldwide. However, regulators believe that Google’s dominance over the online search industry has grown too far. As of the latest data, Google controls roughly 92% of the massive search engine market, and Yahoo! and Bing, its closest competitors (if you can even call them that) cling to a tiny, obsolete sliver.
Google Antirust Case
Though the nearly $2 trillion company has a monopoly in the search market, and its monopolistic tentacles reach many other areas, the company has been able to avoid legal scrutiny for years. However, that streak finally ended when Google lost a momentous antitrust lawsuit to the U.S. Department of Justice (DOJ).
“Google is a monopolist, and it has acted as one to maintain its monopoly.” ~ Antitrust Suit Judge Mehta
Filed in 2020, the lawsuit claimed that Google is taking anti-competitive measures to eliminate competition. For example, Google paid Apple ((AAPL - Free Report) ) a jaw-dropping $20 billion to ensure it was Safari’s default search engine in 2022. With a verdict reportedly reached in the case, the U.S. DOJ and Google have until September 4th to come to a resolution. Potential resolutions to the case include forcing the company to unwind its default search engine deals or become more transparent.
However, the most significant and newsworthy would be a forced spin-off (which would mean breaking up the company into pieces like YouTube, Android, Search etc.) A breakup of Google would be equally shocking and devastating. Nevertheless, it is highly unlikely. Below are five reasons why:
1. Historical Antirust Precedent
Mark Twain once said, “History doesn’t repeat itself, but it often rhymes.” The last comparable case occurred in 1999 when the DOJ sued Microsoft ((MSFT - Free Report) ) for aggressive tactics to outcompete the Netscape browser. Initially, the court ordered Microsoft to be divided in two. However, a later appeal ruled that MSFT could remain the same as long as it ceased the anticompetitive practices it was conducting. Because of the similarity of these cases, Google is likely to face a similar fate.
Meanwhile, forced spin-offs have been absent in recent history. To find the last time a company was broken up by regulators, you would have to go all the way back to 1982 when AT&T ((T - Free Report) ) was forced to cede control of Bell System.
2. Appeals Process
The fact that Google has largely held off monopoly punishment for so long points to how strong its legal team is. Even if the court were to rule that Google should be broken up, the appeals process would drag on for years. As such, the government’s incentive to force a spin-off would be low due to the sheer time and cost to taxpayers.
3. Snowball Effect
The issue of fairness is another factor in the case. Though Google is clearly a monopoly, it’s far from the only one. Apple ((AAPL - Free Report) ) dominates the smartphone market with ~60% footprint. Meta Platforms ((META - Free Report) ) is the undisputed leader in the social media industry. Finally, Amazon ((AMZN - Free Report) ) has reportedly used anticompetitive tactics to keep its stranglehold on the e-commerce market.
4. Price Action Versus News
Investors should always defer to how price acts versus headlines. Tuesday, the news that Google lost the case broke. Wednesday, GOOGL was down a mere 2.31%. If investors truly believed a breakup was coming, the selling would be far more intense.
Bottom Line
Google lost its antitrust case to the U.S. DOJ. However, several pieces of evidence suggest that it is doubtful the company will be forced to be broken up.
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DOJ Crackdown: Will Google be Forced to Break Up?
Many consider Google, now referred to as Alphabet ((GOOGL - Free Report) ), as the most powerful and dominant enterprise worldwide. However, regulators believe that Google’s dominance over the online search industry has grown too far. As of the latest data, Google controls roughly 92% of the massive search engine market, and Yahoo! and Bing, its closest competitors (if you can even call them that) cling to a tiny, obsolete sliver.
Google Antirust Case
Though the nearly $2 trillion company has a monopoly in the search market, and its monopolistic tentacles reach many other areas, the company has been able to avoid legal scrutiny for years. However, that streak finally ended when Google lost a momentous antitrust lawsuit to the U.S. Department of Justice (DOJ).
“Google is a monopolist, and it has acted as one to maintain its monopoly.” ~ Antitrust Suit Judge Mehta
Filed in 2020, the lawsuit claimed that Google is taking anti-competitive measures to eliminate competition. For example, Google paid Apple ((AAPL - Free Report) ) a jaw-dropping $20 billion to ensure it was Safari’s default search engine in 2022. With a verdict reportedly reached in the case, the U.S. DOJ and Google have until September 4th to come to a resolution. Potential resolutions to the case include forcing the company to unwind its default search engine deals or become more transparent.
However, the most significant and newsworthy would be a forced spin-off (which would mean breaking up the company into pieces like YouTube, Android, Search etc.) A breakup of Google would be equally shocking and devastating. Nevertheless, it is highly unlikely. Below are five reasons why:
1. Historical Antirust Precedent
Mark Twain once said, “History doesn’t repeat itself, but it often rhymes.” The last comparable case occurred in 1999 when the DOJ sued Microsoft ((MSFT - Free Report) ) for aggressive tactics to outcompete the Netscape browser. Initially, the court ordered Microsoft to be divided in two. However, a later appeal ruled that MSFT could remain the same as long as it ceased the anticompetitive practices it was conducting. Because of the similarity of these cases, Google is likely to face a similar fate.
Meanwhile, forced spin-offs have been absent in recent history. To find the last time a company was broken up by regulators, you would have to go all the way back to 1982 when AT&T ((T - Free Report) ) was forced to cede control of Bell System.
2. Appeals Process
The fact that Google has largely held off monopoly punishment for so long points to how strong its legal team is. Even if the court were to rule that Google should be broken up, the appeals process would drag on for years. As such, the government’s incentive to force a spin-off would be low due to the sheer time and cost to taxpayers.
3. Snowball Effect
The issue of fairness is another factor in the case. Though Google is clearly a monopoly, it’s far from the only one. Apple ((AAPL - Free Report) ) dominates the smartphone market with ~60% footprint. Meta Platforms ((META - Free Report) ) is the undisputed leader in the social media industry. Finally, Amazon ((AMZN - Free Report) ) has reportedly used anticompetitive tactics to keep its stranglehold on the e-commerce market.
4. Price Action Versus News
Investors should always defer to how price acts versus headlines. Tuesday, the news that Google lost the case broke. Wednesday, GOOGL was down a mere 2.31%. If investors truly believed a breakup was coming, the selling would be far more intense.
Bottom Line
Google lost its antitrust case to the U.S. DOJ. However, several pieces of evidence suggest that it is doubtful the company will be forced to be broken up.