Google loses antitrust trial in major blow to tech giant

The foundation of Google’s (GOOG, GOOGL) empire took a major blow Monday after a judge found that its search and advertising businesses violated antitrust laws.

The decision, made by the judge of the District of Columbia Amit Mehtahas sided with the U.S. Department of Justice and a group of states in a series of cases alleging the tech giant abused its dominance in online searches.

“After carefully considering and weighing the testimony and evidence of witnesses, the court reaches the following conclusion: Google is a monopolist and acted as such to maintain its monopoly. He violated Section 2 of the Sherman Act,” Mehta wrote in his ruling.

Although Google is expected to appeal the decision, the findings, if upheld, could prohibit contracts that for years virtually guaranteed Google’s search advertising dominance.

In 2023, Google’s search advertising business generated more than $175 billion in revenue.

Along with Google’s YouTube ads and Google network revenue, both promoted on its general search engine, advertising was responsible for a staggering $237 billion of the company’s $307 billion in total revenue.

As of June 2023, Google controls 91% of the global search engine market across all computing platforms, according to Statcounter. On mobile, Google’s market share was even higher, at 95%.

Nearly four years ago, in October 2020, when the DOJ and states filed suit, Google’s annual revenue was $162 billion, about half its most recently reported revenue for the year.

The decision is a huge victory for the Department of Justice and could have huge implications for some of the other big names in the tech world.

That’s because Apple (AAPL), Amazon (AMZN), and Meta (META) are defending themselves against a series of other antitrust lawsuits led by federal and state governments, some of which make similar allegations.

The scrutiny is part of a broad effort by the Biden administration to rein in what it sees as anticompetitive behavior across a range of industries, from healthcare to groceries to technology.

Google’s decision comes after a two-month trial late last year that included testimony from Google CEO Sundar Pichai, as well as executives from search market rivals Microsoft (MSFT) and DuckDuckGo.

The DOJ and 35 states, along with Guam, Puerto Rico. and the District of Columbia, accused Google in separate lawsuits of unfairly maintaining its market dominance in search, including search engines, search engine advertising and search engine text advertising.

The cases were handled together because of nearly identical allegations that Google maintained its monopoly by paying companies like Apple, Amazon, Mozilla and Firefox to make Google the default search provider on cell phones, tablets and browsers.

The story continues

At the time of the process, Google had a 90% share of online searches. At trial, its lawyers said that Google achieved and maintained this outsized share not by anticompetitive conduct but by providing a superior product.

Google’s disputed behavior revolved around contracts it entered into with computer device and mobile device manufacturers, as well as browser services, browser developers and mobile carriers.

These contracts, the government alleged, violated antitrust laws because they made Google the mandatory default search provider.

Companies that have entered into these exclusive agreements include Apple, LG, Samsung, AT&T, T-Mobile, Verizon and Mozilla. These deals are the reason why smartphones from manufacturers like Samsung, one of the largest smartphone makers in the world, come preloaded with various Google apps.

At trial, Google claimed that despite holding monopolies in search markets, its contracts did not violate antitrust laws or harm competition.

Microsoft’s Bing represents just 3.74% of the global market across all platforms, while Yahoo Finance’s affiliate Yahoo accounts for 1.16%. In the US, Google controls 87% of the search market across all platforms. Bing has 7.2%, Yahoo has 2.4%, and DuckDuckGo has 1.9%. On mobile, Google captures 95% of the US search market.

The global search industry is also in the midst of major change, as companies increasingly add generative AI responses to their services.

Google has added its AI Overviews feature to its default search service, providing users with AI-powered generative answers to their queries that summarize content found across multiple sites in a dedicated window on top of the search engine’s default site links.

Microsoft offers its Copilot feature on its Bing search engine, which provides functionality similar to Google’s AI overviews.

The shift to AI-powered generative search results raises additional questions about the fate of the search industry, including whether websites that are used to summarize AI results receive appropriate credit for their contributions.

Likewise, the features have raised concerns that providing users with answers to their questions in a box that collects content from third-party sites will deter users from visiting those sites, which would dramatically impact their page views and revenue.

At the end of the trial, the jurists foreseen that the DOJ’s landmark cases against Microsoft in 1998 and AT&T in 1974 could be instructive for the outcome of its Google case.

All three cases are “vertical foreclosure cases,” antitrust challenges that target companies that use vertical integration of their different businesses or services to exclude competition.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.

Email Daniel Howley at dhowley@yahoofinance.com. Follow him on X at @DanielHowley.

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