Noah Jakel – Dec 22, 2024
Introduction
This company is one of the most valuable in the world. Their browser owns 63.87% of the global market share. Their search engine, besides being used 99,000 times per second, is a verb, and they are the subject of one of the greatest comedies of all time, “The Internship”. The company I am talking about is Alphabet, and more specifically, Google. Google/Alphabet plays a role in everyone’s life. Besides Chrome and the search engine, they also own YouTube and are major investors in AI. Google is a company that we will continue to rely on in the future, and the US Department of Justice does not like this.
Background on Google Lawsuit
In 2020, the Department of Justice filed a lawsuit against Google. They alleged that Google violated section 2 of the Sherman Act by creating barriers to entry to the general search market. The Sherman Antitrust Act’s goal is to prohibit activities that restrain competition. One of the main things that the Sherman Act prevents is monopolies. Early August this year, courts found that Google did violate antitrust laws by maintaining a monopoly in the search engine market. The DOJ’s initial solution has been for Google to divest Google Chrome, prevent exclusive and default agreements with third parties, and acquisitions of emerging competitors. All of these sound nice in paper, but it is unlikely all of this will get done.
Likely Outcome
Most likely, far less of the DOJ’s proposed solutions will be enacted. Legal experts predict the only thing Google will have to do is get rid of exclusive agreements, like the one they have with Apple. A similar antitrust lawsuit occurred in 1999 involving Microsoft. Microsoft was determined a monopoly, and the DOJ initially proposed splitting the company. After appeals, however, the court overturned the initial solution. A lesser antitrust penalty was determined, which forced Microsoft to share some information about its programming interface with competitors.
Company is Split Up
In an alternate universe, Google could end up like Standard Oil. Standard Oil was broken into 34 different companies in 1911. Investors benefited from this as their Standard Oil stock became a fraction of the new companies, and some of these new companies became the major oil companies we see today such as Exxon, Chevron, and bp. If Google is split up, it is not likely to become 34 separate companies. Some predict Google could be split into three different companies, Search, Android, and Media. Investors in Google’s stock could become stock in each of these new companies, but Google’s outlook if this happened is uncertain.
A breakup in Google’s advertising dominance would likely reduce other firms’ advertising costs. Lower advertising costs would help bring many smaller companies to light, which should spur innovation and competition. Simultaneously, however, the three companies should be able to innovate faster, as all of their assets are devoted to one area, rather than diverting their attention into three divisions under one parents company. This should promote efficiency among the new companies allowing them to prosper.
Conclusion
It is important to remember that all of this is in the air. Google will appeal the decision, meaning the solution likely will not come for a few years. However, it will be interesting to see what comes of it. I became interested in the story when Alphabet fell 5% after the DOJ’s recommendation to divest Chrome, as we all know that appeals and other things will prevent anything from happening soon. Regardless of what happens, it would be cool to see three new companies pop out of Google. At a minimum, we should see more innovation in the search engine market, which will improve all of our lives.