August 7, 2024
The judge’s decision read: “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.”
This landmark decision comes almost one year after the American Department of Justice (DOJ) initiated legal action against Google. This historic trial challenged the company’s business practices and their impact on U.S. antitrust laws.
But what does this ruling mean? What will happen next? And how could it impact search? We answer all of your questions below.
Before we can assess Judge Mehta’s ruling, or Google’s illegal monopoly, first we need to touch on the trial. The lawsuit in question, the DOJ vs. Google, concluded in September 2023. This 10-week trial assessed Google’s practices, analysing the techniques and deals used to maintain its dominance.
The DOJ’s team of lawyers argued that Google achieved and sustained its position by entering into partnerships, paying their partners to promote and exclusively use their services. This includes making Google the default search option on web browsers and mobile devices.
The proceedings also featured evidence and testimony from some of the world’s biggest tech firms, including representatives from Microsoft and Apple.
After a tense wait, Judge Mehta released his 286-page ruling. This ruling outlined Google’s methodology, tracing the billions of dollars the company invested in order to become the world’s biggest—and in many cases, default—search engine.
The tech giant has followed a carefully curated path, one paved with ‘anticompetitive’ deals. These deals have effectively prevented rivals from entering the search market and led to the creation of an illegal monopoly.
In his comprehensive ruling, Judge Mehta outlined Google’s techniques. Mehta detailed how the company systematically planned its domination, stifled competition and kept their rivals at bay—both in search and advertising markets.
In outlining Google’s approach, Judge Mehta said:
“For more than 15 years, one general search engine has stood above the rest: Google. The brand is synonymous with search.”
Mehta quantified Google’s dominance, noting that by 2009, 80% of searches in the U.S. were conducted via Google. Eleven years later, in 2020, this figure had increased to almost 90%—this increases to almost 95% on mobile. In stark contrast, Microsoft’s Bing handled approximately 6% of the country’s search queries.
The ruling also highlighted how Google used its position to increase profits, further improve its quality of search and ultimately, ensure that both third-party companies and users have only one real option. But how has Google achieved this? The answer: default distribution.
Judge Mehta describes this as “major, largely unseen advantage over its rivals” and explains: “Most users access a general search engine through a browser (like Apple’s Safari) or a search widget that comes preloaded on a mobile device. Those search access points are preset with a “default” search engine. The default is extremely valuable real estate. Because many users simply stick to searching with the default, Google receives billions of queries every day through those access points.”
These default placements are secured via distribution contracts with key partners. These partners include some of the world’s biggest tech firms. For example, Google has signed “out of the box” deals with developers, manufacturers and mobile providers such as Apple, Samsung, Sony, Verizon and T-Mobile.
Google refers to these deals as ‘traffic acquisition costs’ (TAC). These TACs come at a huge price. The tech firm spent a total of $26.3 billion to secure these default deals in 2021. As Judge Mehta explained, this figure “is nearly four times more than all of Google’s other search-specific costs combined.”
But why does this matter? To put this sum in context, court proceedings revealed that half of all U.S. search queries occurred as a result of these contracts. In total, 28% of queries come from Apple users, 19.4% from Android devices and 2.3% via third-party browsers like Firefox. With an additional 20% of searches conducted through Chrome, this means Google is the default for around 70% of the country’s search-related activities.
https://x.com/glenngabe/status/1820780973052584273
Judge Mehta found that Google’s practices have enabled the company to dominate the search market unchecked, without fear of any real competition.
In particular, the ruling highlights Google’s exclusivity deals on Apple and Android devices, as well as third-party browsers. Judge Mehta painted a picture of the firm’s monopoly, concluding that no other search engine can compete while Google continues to dominate.
The judge found that if a new competitor were to enter the market, they would face a myriad of insurmountable barriers:
“Such a firm could compete only if it were prepared to pay partners upwards of billions of dollars in revenue share and make them whole for any revenue shortfalls resulting from the change… No current search engine in the market can compete on those terms.”
Mehta also analysed the lack of choice for its partner firms. The ruling found that it is ‘financially infeasible’ for partners to switch to another search offering. In other words, “Google has monopoly power in this market.’”
In contrast, Mehta did recognise the quality of Google’s search. The document refers to the company as “the industry’s highest quality search engine” and states that “Google has used its scale advantage to improve the quality of its search product.” Additionally, the ruling also alluded to the company’s reliance on these third-party contracts.
In monetary terms, losing these search defaults would have a huge impact on their bottom line. For example, the company would lose billions of dollars if they were no longer the default search engine for Android devices. In fact, more than 50% of Android searches are done via the Google Search Widget alone.
As Mehta puts it: “The defaults are more than just “incremental promotion.”” These deals “supply Google with unequalled query volume that is effectively unavailable to rivals.”
Following judge Mehta’s ruling, the next phase of this process will be determined via a second trial. The purpose of this trial will be to decide upon the potential penalties and remedies that could be imposed on Google.
These remedies could mean stark changes for Google, from losing their exclusivity deals to the possible breakup of Alphabet, Google’s parent company. However, this is expected to be a long and extensive process, one that is likely to take many years to conclude.
According to John Bryne, a former Fortune 100 lawyer, we may not see any changes until 2030 onwards.
In a post on X, Bryne outlined his experience and discussed the next steps: “The penalty phase probably won’t start till 2027 at earliest, and that outcome will also get appealed. So no real changes until probably end of this decade.”
As expected, Google has said it will appeal the decision. Kent Walker, Google’s president of Global Affairs, said: “This decision recognizes that Google offers the best search engine, but concludes that we shouldn’t be allowed to make it easily available.” However, the appeals process could take several years.
https://x.com/Google_Comms/status/1820558371285508123
Of course, all websites rely on search engines to generate traffic. As a result, the news that Reddit is blocking a range of popular search engines from viewing its content is incredibly interesting.
Regardless of remedies, this ruling has the potential to shake up the world of search. While it’s a major roadblock for Google, it’s a significant victory for the DOJ. It also sets a timely precedent, as the department is currently contesting a wave of lawsuits against other Big Tech firms.
These concurrent lawsuits include three of Google’s biggest rivals: Apple, Amazon and Meta. These companies have recently faced their own monopolisation trials: Apple for its smartphones, Amazon for its retail practices and Meta for several issues including algorithmic discrimination.
However, while Google’s ruling marks a major milestone for the American government, this case is not unique. There is another trial that provides clues as to what could happen next: the United States vs. Microsoft. This lawsuit was brought to trial during the late 1990s.
In this case, the government successfully contested Microsoft’s licensing terms. These licensing terms were deemed as anticompetitive, as they required users to install Internet Explorer. The judge ruled in the government’s favour and found that the company’s practices prevented fair competition.
It was a landmark case that led to major reform. Ironically, it was this reform that saw the rise of the current market leader, Google Chrome.
The DOJ vs. Google mirrors this Microsoft lawsuit in several ways. In particular, judge Mehta highlights how Google’s stronghold makes it almost impossible for other companies to compete, or for a partner to sever ties.
In his ruling, Mehta poses the following question: ‘What would it take for a new market entrant to convince Mozilla—a small distribution channel—to walk away from Google as the default?’
His answer is three-fold. The company would have to overcome huge entry barriers; create an ads platform that was capable of monetising search; and offset losses that would occur as a result of lower search volume and less profitable ads.
Mehta solidifies Google’s anti-competitive approach by stating that “A new entrant would need billions of dollars to meet these three conditions… The truth is, no new entrant could hope to compete with Google for the default on Firefox or any other browser. Google’s query and quality advantage and high revenue share payments are strong incentives simply to stay put.”
This ruling against Google is a pivotal moment. It is a landmark result for the DOJ and a major milestone in the ongoing battle between regulators and Big Tech. However, while it represents a significant step towards promoting competition and curbing monopolistic practices, this road to change is long and complex.
The upcoming penalty phase and subsequent appeals will determine the future landscape of search and digital advertising. But regardless of Judge Mehta’s decision, we predict Google will remain synonymous with search.
Since its inception, Google has been at the forefront of search. The company has continuously innovated, using artificial intelligence to advance machine learning, revolutionise the way people access information and improve the quality of results.
If changes are imposed, we expect Google will further innovate and enhance its offerings. The company may focus on establishing more equitable relationships, both with its partners and users. This could mean more flexible deals, working with smaller emerging firms and additional changes that enhance and prioritise user privacy.
In doing so, Google could foster a more dynamic and competitive environment—one that complies with antitrust laws, creates a more level playing field and empowers its users.
Do you have questions about the ruling? Want to know how any penalties could impact your SEO strategies or search rankings? Then speak to our team today. We can help you stay on top of every search update, embrace upcoming changes and prepare your business for the future of search.
