End of Google Monopoly Trial Leaves Silicon Valley Nervous

Google has a lot at stake as a federal judge weighs whether the tech giant’s search empire should be broken up.

The same goes for the rest of Silicon Valley.

A landmark antitrust case pitting Google (GOOG, GOOGL) against the Justice Department entered its final phase last week, when prosecutors from the federal government and 14 states said in their closing arguments that Google illegally monopolized online search and search advertising markets.

Google lawyer John Schmidtlein pushed back once again on a claim the company has made from the beginning: “Google is winning because it’s better,” he said.

A government victory would certainly threaten a giant share of Google US$237.8 billion profit engine. But the result, which will be decided US District Judge Amit Mehta In the coming weeks or months, it will also have massive 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 claims, and because all three stand to lose or win depending on the result.

In the Apple case, US prosecutors alleged that the iPhone maker blocked rivals from entering the smartphone market using a “web of contractual restrictions”.

A similar claim was made by the government in the Google case, which relies on several types of contracts that Google allegedly used to consolidate its search dominance.

“The overall lessons here are a long way off, but this is clearly a very important moment when the first of these technology cases will be decided,” said University of Washington antitrust professor Douglas Ross.

“I think they will be interested in how narrowly or broadly [the judge] defines the markets here,” Ross added, “and whether there are any learnings in what he writes that might have application elsewhere.”

The government argues that Google is violating Section 2 of the Sherman Act by preventing competitors from entering three distinct markets: general online search, search advertising, and search text advertising.

Generally, Ross said, prosecutors tend to craft narrower market definitions to make it easier to prove that a defendant has a monopoly.

How courts react to these arguments, he added, will be significant.

New York University law professor Harry First said the impact of the Google case also depends on the extent to which the judge accepts or rejects one of the government’s antitrust theories — that Google’s class actions qualify as anticompetitive.

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So far, this strategy has been unsuccessful for the DOJ, including in its landmark case in the 1990s that ultimately forced Microsoft (MSFT) to reach an agreement to open its operating system to competitors in the early 2000s. .

But if the judge in the Google case is convinced that the theory has some merit, First explained, it could change the way future antitrust cases are evaluated.

“I’m curious to see to what extent the government tries to come back to this issue and perhaps move it in a direction that could be helpful in other cases,” First said.

Many companies could be impacted by the judge’s decision, even outside the world of technology.

A government victory would put at risk billions of dollars in mutually lucrative contracts between Google and Apple, as well as deals with other device makers and telecommunications companies.

The government alleged in its case that Google pays billions of dollars every year to LG, Motorola (MSI) and Samsung; major U.S. wireless carriers such as AT&T (T), T-Mobile (TMUS), and Verizon (VZ); and browser developers such as Mozilla, Opera and UCWeb.

Government prosecutors alleged that Google was paying Apple about $8 billion to $12 billion a year — a portion of search ad revenue — in exchange for granting Google Search default placement on Apple devices.

In 2022, according to prosecutors, these payments totaled about $20 billion. The DOJ said its value represented 15% to 20% of Apple’s worldwide net profit.

Some technology companies, however, stand to gain if the government ultimately prevails.

A breakdown in Google’s contractual agreements could boost rival search engines like Bing and Microsoft’s DuckDuckGo.

It could also open the door to newcomer search engines and mobile device makers.

Amazon, for its part, exited the mobile phone market after Google contracts reportedly prevented it from attracting manufacturers to its alternative operating system, Fire Operating Systema competitor”fork” for Google’s Android operating system.

Prosecutors said the manufacturers were concerned that Amazon’s partnership with Bing for mobile search services could risk lucrative deals with Google.

The government has not yet said what precise solution it wants if it prevails against Google. If the government wins any of its claims, a separate remedial phase of the trial will be held.

The outcome of November’s presidential election could also impact the case, which was brought before the administration of former President Donald Trump.

If Biden is defeated, a new administration could decide to seek different solutions or abandon the case altogether.

The judge in this case, Mehta, may or may not have hinted in his closing questions to lawyers during closing arguments last week.

He rejected the arguments presented by both sides.

“You can talk about competition, but the competitor has some responsibility for the competition,” Mehta said, while also questioning why new rivals weren’t pushing to enter Google’s market — and whether that’s even possible.

“It seems to be very, very unlikely, if not impossible, under current market conditions,” Mehta said.

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

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