Google’s search monopoly verdict likely to strengthen competition and regulatory efforts

In a major setback for Google, a US District Court has declared the search engine giant a monopoly, asserting it used its dominance in the online search market to stifle competition.

This ruling is likely to increase regulatory scrutiny and changes in Google’s business practices, potentially allowing more room for competitors to gain market share.

Google has said it will appeal the ruling, which adds to its other legal challenges.

A separate trial focusing on Google’s advertising practices is scheduled for later in 2024.

The ruling is also likely to bolster antitrust enforcers targeting other major tech firms, like Microsoft, Nvidia, and OpenAI. In recent years, regulators have also acted against Meta, Amazon, and Apple.

Impact on Google’s business

While the latest ruling marks a significant legal victory for antitrust regulators, it is only the first step in what could be a prolonged legal battle, as Google plans to appeal.

Consequently, there may not be any immediate impact on partners, advertisers, or consumers.

However, analysts speculate on the potential next steps, noting that the court found Google has spent tens of billions of dollars on exclusive contracts to maintain its dominant position.

“The court’s decision opens the door for a range of potential remedies, including forced divestitures, breaking up Google’s search and advertising operations, or prohibiting exclusive search engine deals,” said Prabhu Ram, VP of the industry research group at Cybermedia Research. “The ultimate outcome of this case will determine the shape of the search market for years to come.”

Advantages to competition

A notable impact of the ruling could be the encouragement of market competition.

In his 277-page opinion, Judge Amit Mehta noted that Google commands nearly 90% of the search market and almost 95% on mobile devices. In contrast, Microsoft’s Bing holds about 6% of all search queries, significantly lower than Google’s share by 84%.

“Even if a new entrant were positioned from a quality standpoint to bid for the default when an agreement expires, 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,” Mehta wrote.

Hyoun Park, CEO and chief analyst at Amalgam Insights pointed out that Google’s competitors in search, most notably Microsoft Bing, definitely will try to use this antitrust ruling to open up exclusive contracts that Google has with Apple and other large companies.

“The multi-billion-dollar contracts that exist here to allow Google to be an exclusive search provider have long been a target for every other search company,” Park said. “Google’s competitors would like a situation where the search is treated more as a utility that can be chosen by the user in all of the areas that are currently exclusive to Google search.” 

Potential to transform web search

Significantly, the ruling comes just weeks after OpenAI announced the launch of SearchGPT, a potential rival to Google. Ram said that while Google has long been the dominant search engine, this ruling could transform the search landscape.

“With the rise of AI, the paradigm is shifting from traditional search to a more dynamic ‘seek’ approach, where users can ask AI for answers,” Ram pointed out. “The antitrust ruling potentially opens the door for alternatives, including AI-powered search. For new market entrants, such as SearchGPT, this ruling is a boon.”

Park added that it would be interesting to see if other smaller providers, such as DuckDuckGo or Perplexity, will also get a fair shot at these competitive search contracts or whether they are simply handed to Microsoft.

“That market opportunity will largely determine whether this decision actually breaks up a monopoly or simply redistributes billions of dollars from one large tech company to another to create a mostly uncompetitive duopoly,” Park said.  

Response from other regulators

The latest ruling may also prompt regulators to scrutinize Google more closely. The company has already been fined €2.4 billion ($2.6 billion) by the European Union for violating antitrust rules, a penalty Google sought to appeal last year.

“The current American Federal Trade Commission led by Lina Khan is very aggressive in enforcing antitrust law and trying to break up monopolies,” Park said. “Now that there is also a judge who has shown a willingness to make rulings on antitrust, this strengthens the current US government stance on trying to break up or modify monopoly services.” 

However, despite more scrutiny, customers are still likely to choose Google for search, according to Faisal Kawoosa, chief analyst at Techarc.

“I believe other regulators will examine this issue, but it’s unlikely to lead to significant changes,” Kawoosa added. “For example, in India, the competition regulator has already mandated that Android smartphones unbundle search engines, allowing customers to choose their preferred option. However, many still select Google, making it a customer-driven choice rather than one limited by OEMs.”