US antitrust regulators' attempts to dismantle Alphabet by mandating the sale of Google Chrome and other measures to curb its search dominance may face legal hurdles due to the perceived extremity of the remedies. Following a ruling in August that found Google had unlawfully monopolized the search market, US Department of Justice prosecutors urged a judge on Wednesday to order the company to divest Chrome, share data and search results with competitors, and potentially sell its Android smartphone software. Alphabet's shares dropped by up to 7%, marking their steepest daily decline since January 31. These proposals are part of a significant case aimed at reshaping how users access information. However, experts predict that the incoming pro-business administration of President-elect Donald Trump could alter this effort, and legal proceedings may extend for years.
"It would strike me as an over-ask," commented Kevin Walkush from Jensen Investment Management, which holds Google stock and doubts a Chrome divestiture will occur. "You ask for everything possible, not necessarily with an eye towards what would be probable and proportional, and then see what sticks." The DOJ previously sought and achieved the breakup of Microsoft in the early 2000s after accusing it of illegally monopolizing the web browser market. That ruling was later overturned by an appeals court, and Microsoft eventually settled with the DOJ. Walkush anticipates the Google case will take years to resolve as the company appeals. "The wheels of justice do not turn quickly," he noted.
Google criticized the DOJ's approach as "unprecedented government overreach that would harm American consumers, developers, and small businesses," citing potential reductions in user privacy and funding for companies like Mozilla, which features Google search. The case could also encounter challenges from Trump. Although his administration initially filed the search case against Google, he suggested in October that breaking up the company might harm the American tech industry, especially as competition with China intensifies in areas like AI. Representatives for Trump did not respond immediately to a request for comment.
Chrome, the most widely used web browser, is a cornerstone of Google's business, providing valuable user data that aids in targeted advertising. Search ads accounted for over half of Alphabet's total revenue of $88.3 billion in the latest quarter. The value of Chrome, which holds about two-thirds of the global browser market, would significantly diminish if sold as a standalone product. "The reason why it's valuable to Google is because Google uses it to enhance its ad business and its search business," explained Megan Gray, former general counsel at search rival DuckDuckGO and an attorney at the Federal Trade Commission. "If you don't have those, then Chrome would just be a data broker."
Critics argue that a forced sale would not address several key issues raised in the DOJ lawsuit, including the search monopoly. US antitrust enforcers, who are also pursuing cases against Apple and Amazon, would need to approve any potential Chrome buyer. "DOJ will face substantial headwinds with this remedy," said Gus Hurwitz, senior fellow and academic director at University of Pennsylvania Carey Law School, noting that Chrome can run search engines other than Google. "Courts expect any remedy to have a causal connection to the underlying antitrust concern. Divesting Chrome does absolutely nothing to address this concern."
The DOJ proposed a blanket ban on Google offering incentives to give its search engine preferential treatment, including its lucrative partnership with Apple, where it pays the smartphone maker billions annually to make Google Search the default on Apple devices. Evercore analysts described the proposed curbs as "draconian." Given Google Search's popularity, Apple is likely to continue using it as the default search engine even without any agreement or payments, Hurwitz added.
The DOJ's proposals also include demands for Google to license search results at a nominal cost and share user data with competitors for free. D.A. Davidson analyst Gil Luria noted that it was challenging to assess the impact of Google having to open up its search data until the terms are clearer. The Centre for Journalism & Liberty stated that Google licensing its search data would be "transformative" for news publishers, helping them better understand their audiences.
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