Dear DOJ and state AGs: Settle the Google antitrust cases
There’s going to be ever building momentum in the coming months to take one of the most innovative companies in American history – Google – and blow it up. The company has been judged an illegal monopolist in two Federal courts. And the rulings, when read together, paint a picture of a company that literally has gone rogue. Whatever penalties are handed down will feel entirely justified to many of us.
The rulings show that Google is not only an illegal rapacious monopoly in search and its corner of online display advertising. They demonstrate that it’s been operating like one for at least a decade. When I was done reading both briefs I couldn’t help shaking my head and wondering “How did we let these violations go on for so long?”
Even Microsoft, once thought to be the king of monopolies in the digital age, was brought to heel in just six years. Both cases against Google – the search case in front of Federal District Judge Amit Mehta and the display ads case in front of Federal District Judge Leonie Brinkema – say that Google started violating antitrust laws as early as 2015.
In display ads Google figured out a way to not only control the pricing mechanism, AdX, but the supply and demand for space on publisher websites through its ad server business. It was “akin to Goldman Sachs or Citibank also owning the New York Stock Exchange,” said a Google manager quoted in Brinkema’s brief.
Meanwhile in search, Google has been paying Apple billions of dollars a year since 2016, and $20 billion a year since 2022 to make Google the default search engine on all iPhones, iPads and Macs. The goal, both Google and Apple acknowledge, was to pay Apple enough not to compete with Google in search, something Apple had seriously considered.
Google has had similar deals with wireless carriers and with device makers running its Android mobile operating system. They said in effect “If you want to use Android, you must make Google the default search engine and Chrome the default internet browser.”
And hammering Google is certainly what the Justice Department and the various states in the lawsuits are asking for. If you combine their requests for both cases they amount to a full scale break up of the company.
They want Google to spin off Chrome, its ad pricing exchange, and its business serving ads to websites. They also want to force Google to supply competitors way more visibility into how Google’s search and search advertising algorithms work. Judge Mehta’s penalty phase is to wrap up May 29 with a decision by the end of Summer. Judge Brinkema’s penalty phase is expected to start in September. .
But here’s the thing: Hammering Google isn’t actually the best way to go here. Sure, it allows the DOJ and state attorneys general to beat their chests about how no one is above the law – how they took on a big bad monopoly and restored competition and innovation in search, in online advertising and Silicon Valley generally. But if that’s truly the goal, the DOJ and the states should find a way to settle these cases as fast as possible.
Why? Because this case is no longer about protecting the competitive dynamics of the search and online ad business. It was when the DOJ and the states filed the first case five years ago and even the second case two years ago. But the competitive dynamics of Silicon Valley have meaningfully shifted since then. Search is a mature, arguably dying business. What’s replacing it are AI chatbots like ChatGPT, Perplexity, Claude, Anthropic and more than a dozen others.
Indeed, during testimony just last week, Apple senior vice president Eddy Cue said the number of Google searches through Apple’s Safari internet browser in April actually declined. “That has never happened in 22 years,” he said. Google immediately disputed this. But anyone who has used an AI chatbot understands what Cue is talking about. It’s just a better way to find most information than a traditional Google search.
This is a hugely competitive new market. And it has ignited an explosion of technology innovation not seen since the internet bubble of 1999 or the mobile revolution ignited by the iPhone in 2007. It’s part of the reason we started this newsletter.
The big tech oligarchy of Google, Meta, Amazon, Microsoft and Apple are certainly the dominant companies in the world right now. But the future will be dominated by the companies – likely new ones – who are best at harnessing the new revolution in AI.
That means that Google can’t be allowed to use its monopoly in either search or display ads to muscle itself into a dominant spot in this new market. A fast settlement would likely prohibit Google from doing that. At the very least, the DOJ and states should find a way to consolidate the penalty process of these cases into one case, and make one joint ruling.
Otherwise, especially with two cases, we’re likely headed for years of litigation without any meaningful remedies at all. If the marketplace has to wait years for the courts to finally put a stop to Google’s monopolistic behavior, Google may already have acquired an unassailably dominant market share in AI by then.
Sure, both courts could issue injunctions requiring certain immediate changes. But chances are high that Google would slow their implementation with litigation too without some kind of settlement in the offing. Indeed, if Google believes its only option is the kind of breakup currently on the table – if it’s made to think that it has nothing to lose – that might perversely encourage it to actually accelerate its illegal behavior.
I’ve seen many corporations in situations like this already start to back away from the deals that got them in trouble. Is Google doing that? Nope. Google understands better than anyone what kind of existential threat these new technologies create for its businesses. It doesn’t take much cynicism to expect Google to leverage those deals to boost their own market share in AI chatbots with Gemini for as long as they can.
The parallels to Microsoft’s dilemma 30 years ago are striking. Some of my earliest tech reporting was about the Microsoft trial and about the early days of Google when it had less than 300 employees. I’ve watched the evolutions of both companies for a long time. And ten years ago I wrote a book about the Apple Google fight in smartphones, back when they were actually competing with each other instead of what they are today – frenemies.
For Microsoft back then the internet revolution itself was its existential threat. Almost overnight the internet browser – Netscape in particular – became a competitive application platform to Microsoft Windows. It’s why Microsoft tried so hard to tie its own browser Internet Explorer to its Microsoft Windows monopoly.
Expect similar behavior from Google. The AI revolution caught it totally flatfooted. It invented a lot of the technology 10 years ago and published those findings in the now famous Transformers Paper in 2017. But it was slow to turn that technology into products partly because they threatened its search business. It wasn’t until OpenAI unleashed ChatGPT more than two years ago that Google realized it needed to scramble to catch up.
The threat to Google’s business isn’t hard to understand. Aside from being a better way to find most information, you don’t get Google text ads next to ten blue search links when you use an AI chatbot. You just get the answer. That means that to survive in the new AI dominated world, Google needs to completely reinvent the way it makes money for the first time in its history.
Want proof of how desperate and aggressive Google has become? Google is already in conversations with Apple about how to leverage its search deal into one that also includes the Gemini chatbot on iPhones. Apple already has a deal with ChatGPT as part of Apple Intelligence, and it’s expected that Google’s Gemini will also play a role. But Cue said in testimony last week that during the bake off between ChatGPT and Gemini last year, Google’s terms “had a lot of things Apple wouldn’t agree to and didn’t agree to with OpenAI.” Expect Google to apply this leverage at every point in their ecosystem.
All of this is complicated by the fact that existing Google partners want the litigation to go on as long as possible too. Apple stands to lose $20 billion a year, more than 20 percent of its annual income. Mozilla, which is behind Firefox, said last week that ending its $400 million agreement with Google would effectively kill the browser and Mozilla itself.
What could a settlement look like? In return for not breaking up the company, the DOJ and states could likely convince Google to stop striking deals for its products to be the default internet browser, search engine or AI chatbot. It could also require Google to give users a choice of which browser, search engine and AI chatbot they want to use on all the platforms it controls. I’d not only require that at initial set up, but also require it once a year.
They could legitimately demand Google spin off its ad exchange business or its ad server business or create some kind of firewall between them akin to the way this works on Wall Street. No company should ever have that much control over such an important marketplace just as a matter of principle.
And they could create an entity to monitor Google’s behavior to ensure compliance and ensure that Google wasn’t finding surreptitious ways of retaliating against competitors who maybe want Google’s search engine but don’t want any of its other products.
I’m not spitballing here. We know arrangements like this work because we did it 24 years ago with Microsoft. All I did was look at some of those remedies – the ones the government and Microsoft settled on at the end of 2001 – and broadly apply them here. Few liked those remedies back then. Most thought Microsoft escaped with just a slap on the wrist. But looking back it’s hard to argue they had zero impact. Google, Apple and later Amazon and Facebook became the most powerful companies in tech. Microsoft struggled for a decade to regain its past dominance. And the settlement ended what would have likely been years of litigation.
Do I actually think there will be a fast settlement? Sadly, no. The political pressure on the courts, the DOJ and the states to hammer Google is super high. There’s nothing worse for antitrust cops than spending five years and millions of dollars prosecuting a corporate giant, only to have the final verdict be a settlement they could have had at the start.
The Microsoft antitrust case was only settled after an appeals court overturned the breakup but remanded the case back to the district court with the same findings of fact. That took 17 months.
But if the DOJ and states aren’t careful, the litigation in these cases could drag on much longer than that. And the risks to the explosion of competitiveness and innovation in Silicon Valley from a protracted legal battle are real. The last thing anyone wants is for the DOJ and states to be so obsessed with winning these cases that they allow Google to become even more powerful and dominant than it is now.
Many have long believed that suing tech companies for antitrust is folly because the competitive dynamics change too fast for the slow moving legal system to keep up. It would be a shame if these two Google cases helped prove that.
