Google's Antitrust Defeat: A New Era for Big Tech Regulation?

Google, the world’s largest search engine, has lost an antitrust lawsuit filed by the U.S. Department of Justice

Google, the world’s largest search engine, has lost an antitrust lawsuit filed by the U.S. Department of Justice. The court ruled that Google illegally excluded competitors, maintaining a near-monopoly on the global internet search market. This landmark decision, seen as the beginning of a potential reshaping of the global tech market, raises questions about the future of big tech and regulatory practices.

On August 5th, U.S. District Judge Amit Mehta ruled in favor of the Department of Justice (DOJ) in its antitrust lawsuit against Google. The court found that Google’s practice of paying to set its search engine as the default on smartphones and web browsers violated U.S. antitrust laws. This verdict marks a significant moment, especially as the world transitions to an AI-driven future, highlighting the potential for significant changes in the global tech landscape.

Google has long dominated the internet search market, controlling around 90% of it worldwide. The DOJ argued that Google’s payments to ensure its search engine was the default on devices like Apple’s iPhones constituted illegal behavior. Judge Mehta’s 286-page ruling stated, “Google is a monopoly,” emphasizing the company’s unlawful actions in maintaining its dominance.

For years, Google has spent billions annually to secure its position as the default search engine on popular browsers like Apple’s Safari. According to the court documents, Google paid over $26 billion to smartphone manufacturers in 2021 and $20 billion to Apple in 2022 alone. This financial muscle allowed Google to monopolize the search market and dominate the search advertising sector, leading to higher costs for consumers. The ruling pointed out that Google’s monopoly on search distribution enabled it to raise online ad prices consistently, leveraging its dominant position to increase text ad costs.

Unsurprisingly, Google announced plans to appeal the decision, likely prolonging the final judgment to the U.S. Supreme Court.

This case has been compared to the 1998 antitrust lawsuit against Microsoft, which challenged the software giant’s bundling of its internet browser. The New York Times highlighted this as the first major antitrust ruling against a tech giant in the modern internet era, suggesting it could fundamentally alter how many large tech companies operate.

The verdict is expected to have a ripple effect, impacting ongoing antitrust lawsuits against other big tech companies like Meta and Amazon. Regulatory bodies in the U.S. and Europe are likely to intensify their scrutiny and actions against tech monopolies. The Korea Fair Trade Commission (KFTC) also indicated that it would monitor Google’s market share in South Korea more closely following this decision.

Google’s potential penalties could include significant operational changes or, in the worst-case scenario, a breakup of the company. More realistically, Google might be prohibited from entering exclusive contracts with smartphone manufacturers, allowing these manufacturers to choose their default search engines. This could open the market to competitors like Microsoft’s Bing or OpenAI’s ChatGPT.

Judge Mehta’s decision underscores Google’s dominant market share, with the company holding an 89.2% share in the global search market and a 94.9% share in mobile searches. This dominance translates to enormous revenues from search ads, estimated at $300 billion annually.

The court identified Google’s payments to secure default status on devices as the key antitrust violation. In 2020, Google paid Apple around $10 billion, a figure that doubled within two years, ensuring its monopoly structure remained intact. This strategy created a feedback loop where market entry barriers blocked competitors, allowing Google to collect data, refine its search algorithms, and dominate the advertising market.

The implications of this ruling are vast. If upheld, it could lead to significant changes in how default search engines are chosen on devices, potentially diminishing Google’s dominance and allowing other search engines a fair shot at the market.

The financial authorities and the GA industry must continue their close cooperation to enhance the effectiveness of internal control systems. Learning from the failure of the self-reporting period, more practical and effective internal control measures must be developed. It is hoped that the activities of the TF and the improved manual will contribute to establishing a healthy competitive order in the GA industry.