There’s no question that Google dominates the world of internet search. But in attempting to open up this critical industry to more competition, the government is pursuing a cure worse than the disease. If the government is successful at breaking up Google, history tells us that consumers and many enterprises tied to our vast and flourishing internet may ultimately pay a price.
Judge Amit P. Mehta of the D.C. Federal District Court ruled earlier this year that Google, which the Justice Department claims controls over 90 percent of online search, illegally maintained a monopoly by paying manufacturers such as Apple to make Google the default search engine on their products. Last week, the Justice Department and a group of states presented the judge with a plethora of proposed remedies. Not only should Google be required to stop paying others for default status, it must also sell Chrome, its popular web browser. It would also be barred from making itself the default search engine on its own products and disallowed from preferring its own products in search results.
The entire point of antitrust law is to promote competitive markets. Antitrust remedies are not designed to punish a wrongdoer but rather to correct the effects of a monopoly. The test for a successful remedy is whether the market becomes more competitive, with higher output or a better experience for consumers.
At this point, the Justice Department has not sufficiently explained why its proposed actions are an appropriate remedy. Some of the proposals were not addressed at any length in the judge’s opinion in the Google trial at all. Others would split up complementary products, which often leads to poorer quality outcomes and higher coordination costs, both of which would be passed on to consumers. If the government gets everything it wants, the result could remove some of the features that have made Google products so successful and result in a fractured system that requires greater user effort to get inferior results.
History has shown us that courts are generally poor instruments for restructuring industries. Too often they simply make firms less competitive. The record of success is particularly poor in situations involving highly innovative companies that, like Google, have developed mainly by internal growth, rather than through acquisitions.
Breaking up Standard Oil in 1911 created firms too small to be as efficient as their predecessor was, which coincided with an increase in the price of gasoline mainly caused by increased demand. And breaking up United Shoe Machinery in 1968 was followed soon after by that firm’s closure as an independent entity.
In his earlier ruling, Judge Mehta concluded that Google’s monopolization of the market owed in part to the fact that it pays hardware makers large sums to ensure its products are the default option on their products. But if people were completely free to choose, Google would likely be the most popular option regardless — in the European Union, where Google’s Android system is required to ask users to select from a choice of browsers, most of them choose Google search.
Rather than force a company breakup, the most common and usually the most defensible remedy is an injunction against unlawful conduct. In this case, the court could prohibit Google’s large payments to hardware makers to make its product the default. That would resemble what happened in the Microsoft case over two decades ago. A court refused to break up Microsoft — and after the 2000 presidential election, the Justice Department stopped seeking the company’s breakup as the court case proceeded — but did prohibit it from tying Microsoft’s Internet Explorer browser to its Windows operating system, and from requiring other computer manufacturers to use its software. New entrants appeared, competition greatly improved and Internet Explorer’s market share dropped significantly, at least partly in response to the court’s injunction.
The problem with a simple injunction in this case is that Google’s large market share makes it uncertain that a rival could ever catch up. That fact very likely explains why the Justice Department wants more. In addition to the cornucopia described above, the government wants an additional injunction requiring Google to license its trove of search data to rivals for 10 years.
Such data is critical for search, and it illuminates exactly what users are looking for. Having multiple firms offering search out of a common database is a little like promoting airline competition by creating more travel agents. While that produces more competition in ticket sales, it does nothing to make the airlines themselves more competitive. That said, such licensing may help other search firms get established while they build out their own infrastructure.
A well-designed injunction barring Google’s exclusive contracts might motivate Apple and Microsoft to join forces to develop Bing, Microsoft’s long ailing search engine. Bing could then be placed as a default on Microsoft’s many devices and browsers, giving it the search engine revenue that Google would otherwise receive.
Eliminating exclusivity also opens up many avenues for future competition, particularly in rapidly developing markets embracing new technologies, such as artificial intelligence. In highly innovative markets mandated breakups are perilous, because the consequences are so hard to predict.
The fight will be long. Any decision is unlikely before summer 2025 and will almost certainly be appealed. In the meantime, the parties should focus on the right question: What remedy will best address the conduct actually found to be unlawful and lead to a more competitive, consumer-friendly search market?
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