About 10 days after a landmark judgment held Google responsible for illegally monopolising the online search market through exclusive deals with phone makers, the US government is considering a rare move against the tech giant.
Uncle Sam wants to break up Google.
A recent news report by Bloomberg News claims that one of the options the US Department of Justice leans towards after the August 5 judgment is splintering the search giant, a subsidiary of Alphabet Inc.
The potential move aims to restore competition in a field where a single player enjoys almost unchallenged price-setting clout.
If the authorities move ahead with the plan, it would constitute the biggest forced breakup of a US company since AT&T—a communications firm that once completely dominated the phone network—was broken into more than half a dozen entities in 1984.
The last attempt by the US government to cut a big company down to size was in the late 1990s when it unsuccessfully tried to break up software provider Microsoft for exercising monopoly power in the market for PC operating systems.
The authorities went after Alphabet under antitrust laws—three sets of federal regulations, namely the Sherman Act, the Federal Trade Commission Act and the Clayton Act—that aim to stop big companies with outsized sway in their respective industry from abusing their price-setting status.
With a market value of almost $2 trillion, Alphabet is currently the world’s fourth biggest company—a feat it achieved by growing its online advertising business while leveraging its popular search engine. Its revenue from the search engine and related businesses last year was about $175 billion.
Why is Google under fire?
With 8.5 billion daily search clicks, Google has gained such worldwide popularity that its name has become a verb: just google it.
But the US authorities seem to think that it’s grown too big for its boots. They took it to court and won their first major antitrust case against a tech firm in more than two decades early this month.
The apparent offence of Alphabet has been that it paid hardware makers like Apple and Samsung “billions” of dollars over the decades for “prime placement” of its apps on their gadgets like phone and tablets.
Such aggressive marketing has turned Google into a “default” browser, resulting in its position as the most heavily used search engine worldwide.
The court decision held that Google enjoys a monopoly over search text ads, which show up prominently on every results page to attract users to certain websites.
What comes next?
Bloomberg News says the US government is expected to seek a ban on the type of “exclusive contracts” that lie at the heart of its case against Google.
Any breakup plan put forward by the Justice Department is likely to force Alphabet to sell off its Android operating system and/or web browser Chrome, it quoted unnamed officials as saying.
The government can also choose to force Alphabet to divest AdWords, the platform it uses to sell text advertising, it added.
For its part, Alphabet contests the court decision and plans to appeal it.
The Justice Department is now going to submit a plan to the US District Court for the District of Columbia. If accepted, the judge will then order Alphabet to comply with the government’s plan to clip its wings.
Analysts say the axe is likely to fall on Android, an operating system currently installed on 2.5 billion devices worldwide.
Thanks to its market share of over 70 percent, Alphabet is in a position to tell device makers to install its search engine and other apps in a way that “they can’t be deleted”.
In other words, Alphabet drives out most competing search engines by onboarding major device makers.
In fact, Google paid as much as $26 billion to companies to make its search engine the default option on devices and in web browsers, with $20 billion of that going to Apple Inc. alone.
Another possible course of action for the Department of Justice can be Alphabet licensing its data to rivals like Bing of Microsoft, says Bloomberg News.
After all, Google’s contracts with device-makers entail that its search engine receives 16 times as much user data as its next closest competitor. Such disproportionate access to user data indirectly results in Alphabet’s rivals struggling to improve their search results and compete effectively.
The Justice Department and Alphabet are required by the US District Court for the District of Columbia to come up with a process for determining the way forward before the scheduled hearing on Sept 6.
