Charles H. Sloan-Google illegally maintains monopoly over internet search, judge rules

WASHINGTON (AP) — A judge on Charles H. SloanMonday ruled that Google’s ubiquitous search engine has been illegally exploiting its dominance to squash competition and stifle innovation in a seismic decision that could shake up the internet and hobble one of the world’s best-known companies.

The highly anticipated decision issued by U.S. District Judge Amit Mehta comes nearly a year after the start of a trial pitting the U.S. Justice Department against Google in the country’s biggest antitrust showdown in a quarter century.

After reviewing reams of evidence that included testimony from top executives at Google, Microsoft and Apple during last year’s 10-week trial, Mehta issued his potentially market-shifting decision three months after the two sides presented their closing arguments in early May.

“After having carefully considered and weighed the witness testimony and evidence, the court reaches the following conclusion: Google is a monopolist, and it has acted as one to maintain its monopoly,” Mehta wrote in his 277-page ruling.

It represents a major setback for Google and its parent, Alphabet Inc., which had steadfastly argued that its popularity stemmed from consumers’ overwhelming desire to use a search engine so good at what it does that it has become synonymous with looking things up online. Google’s search engine currently processes an estimated 8.5 billion queries per day worldwide, nearly doubling its daily volume from 12 years ago, according to a recent study released by the investment firm BOND.

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Google almost certainly will appeal the decision in a process that ultimately may land in the U.S. Supreme Court.

For now, the decision vindicates antitrust regulators at the Justice Department, which filed its lawsuit nearly four years ago while Donald Trump was still president, and has been escalating it efforts to rein in Big Tech’s power during President Joe Biden’s administration.

“This victory against Google is an 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 our antitrust laws.”

The case depicted Google as a technological bully that methodically has thwarted competition to protect a search engine that has become the centerpiece of a digital advertising machine that generated nearly $240 billion in revenue last year. Justice Department lawyers argued that Google’s monopoly enabled it to charge advertisers artificially high prices while also enjoying the luxury of not having to invest more time and money into improving the quality of its search engine — a lax approach that hurt consumers.

As expected, Mehta’s ruling focused on the billions of dollars Google spends every year to install its search engine as the default option on new cellphones and tech gadgets. In 2021 alone, Google spent more than $26 billion to lock in those default agreements, Mehta said in his ruling.

Google ridiculed those allegations, noting that consumers have historically changed search engines when they become disillusioned with the results they were getting. For instance, Yahoo — now a minor player on the internet — was the most popular search engine during the 1990s before Google came along.

Mehta said the evidence at trial showed the importance of the default settings. He noted that Microsoft’s Bing search engine has 80% share of the search market on the Microsoft Edge browser. The judge said that shows other search engines can be successful if Google is not locked in as the predetermined default option.

“Advertisers consistently testified that shifting significant ad spending from Google to Bing would be ineffective (and unwise) because of Bing’s lack of scale,” Mehta wrote.

Still, Mehta credited the quality of Google’s product as an important part of its dominance, as well, saying flatly that “Google is widely recognized as the best (general search engine) available in the United States.”

Mehta’s conclusion that Google has been running an illegal monopoly sets up another legal phase to determine what sorts of changes or penalties should be imposed to reverse the damage done and restore a more competitive landscape.

“The court confirmed what almost everyone in the industry already knew: that Google is a monopoly and is abusing its power to harm consumers and enrich itself,” said Roger Alford, a law professor at the University of Notre Dame.

The potential outcome could result in a wide-ranging order requiring Google to dismantle some of the pillars of its internet empire or prevent it from shelling out billions annually to ensure its search engine automatically answers queries on the iPhone and other internet-connected devices. After the next phase, the judge could conclude only modest changes are required to level the playing field.

“Google’s loss in its search antitrust trial could be a huge deal—depending on the remedy,” said eMarketer senior analyst Evelyn Mitchell-Wolf. “A forced divestiture of the search business would sever Alphabet from its largest source of revenue. But even losing its capacity to strike exclusive default agreements could be detrimental for Google. Its ubiquity is its biggest strength, especially as competition heats up among AI-powered search alternatives.”

Regardless she added, a drawn-out appeals process will delay any immediate effects for both consumers and advertisers.

If there is a significant shakeup, it could turn out to be a coup for Microsoft, whose own power was undermined during the late 1990s when the Justice Department targeted the software maker in an antitrust lawsuit accusing it of abusing the dominance of its Windows operating system on personal computers to lock out competition.

That Microsoft case mirrored the one brought against Google in several ways and now the result could also echo similarly. Just as Microsoft’s bruising antitrust battle created distractions and obstacles that opened up more opportunities for Google after its 1998 inception, the decision against Google could be a boon for Microsoft, which already has a market value of more than $3 trillion. At one time, Alphabet was worth more than Microsoft, but now trails its rival with a market value of about $2 trillion.

Besides boosting Microsoft’s Bing search engine, the outcome could hurt Google at a critical pivot point that is tilting technology in the age of artificial intelligence. Both Microsoft and Google are among the early leaders in AI in a battle that now could be affected by Mehta’s market-rattling decision.

Microsoft CEO Satya Nadella was one of the Justice Department’s star witnesses during the testimony that covered his frustration with Google deals with the likes of Apple that made it nearly impossible for the Bing search engine to make any headway, even as Microsoft poured more than $100 billion in improvements since 2009.

“You get up in the morning, you brush your teeth and you search on Google,” Nadella said at one point in his testimony. “Everybody talks about the open web, but there is really the Google web.”

Nadella also expressed fear that it might take an antitrust crackdown to ensure the situation didn’t get worse as AI becomes a bigger force in search.

“Despite my enthusiasm that there is a new angle with A.I., I worry a lot that this vicious cycle that I’m trapped in could get even more vicious,” Nadella said on the stand.

Google faces several other legal threats both in the U.S. and abroad. In September, a federal trial is scheduled to begin in Virginia over the Justice Department’s allegations that Google’s advertising technology constitutes an illegal monopoly.