A court could impose new rules to promote competition in the search business—or it could just break Google apart.
The antitrust case opened against Google this morning by the U.S. Department of Justice claims that Google has accumulated so much power over Internet search and advertising that it’s harming consumers and competition. The Justice Department complaint doesn’t specify what fixes it would like to see, though, and officials this morning told reporters those would be laid out in court.
But the 64-page complaint paints a clear picture of why the Justice Department believes Google’s search business is an anticompetitive monopoly. Here are four possible fixes for those problems, from new rules to an outright corporate breakup, that could be ordered if Google winds up on the losing end of the case.
At the heart of the DOJ’s complaint are Google’s deals to secure prominent placement and other special treatment for its search engine within third-party services and on mobile devices. These deals are why, for instance, Google is currently the default home screen search on most mobile phones. Those placements are crucial to Google’s advertising business, which accounts for more than 70% of the company’s revenue.
But the DOJ describes the deals as a “set of contractual ‘carrots’ and ‘sticks’” that effectively lock competing search engines out of the market. The DOJ claims that placement agreements direct nearly 60% of all general search in the United States to Google.
A settlement or judgment against Google, then, would likely restructure search engine placement and exclusivity agreements. One solution is currently being tried in Europe: A parallel antitrust judgment led to a system of auctions for search placement. That system, though, hasn’t clearly benefited Google’s smallest search competitors, so it wouldn’t necessarily be imitated in the U.S.
The DOJ complaint is particularly focused on Google’s huge payments to Apple in exchange for search placement in Apple products. Google pays Apple an estimated $8 billion to $12 billion a year to make Google the default search engine for everything from the Safari web browser to the Siri voice assistant. This gives Google huge captive search traffic; the company estimated that 50% of searches came from Apple devices in 2019 and has said that losing its Apple exclusivity would fundamentally harm Google’s profitability.
But again, the DOJ argues that the close arrangement is anticompetitive, suggesting there could be a specific push to somehow create more search competition on Apple devices. That would have unclear but major implications not just for Google traffic, but for Apple’s revenue, as well. The DOJ says Google’s payments currently amount to an estimated 15% to 20% of Apple’s global profits.
The DOJ complaint also describes how Google leverages its control of the Android mobile operating system to funnel more users to its search engine. Though Android is “open source,” meaning it can be freely used and modified, the DOJ argues that Google nonetheless effectively forces device makers to use its own version of Android, which gives prominent placement to Google’s search services.
For instance, Google requires device makers to use its version of Android to get access to other basic services powered by Google, including in-app purchases, integration of Google Maps data, and the Google Play app store itself. As with Apple, these agreements also often include the “carrot” of shared App Store revenue.
As an example of how these agreements stifle innovation, the DOJ cites Amazon’s failed Fire Phone, which used a modified fork of Android. According to the DOJ, “major manufacturers declined to support Amazon’s phone out of fear doing so would risk their lucrative deals with Google.”
The potential remedies here could parallel the DOJ’s 1998 settlement with Microsoft, which made it harder for Microsoft to squash competitors by bundling its own software with its Windows operating system. In this case, the DOJ could push for Google to give access to the Play Store and other services even to devices that use non-Google versions of Android.
Google’s use of Android to benefit its search business also highlights a more radical possible solution: splitting Google up into multiple companies. The DOJ complaint specifically calls on the court to “enter structural relief as needed to cure any anticompetitive harm”—legalese for breaking a company up.
It’s less clear what might be on the chopping block. State attorneys general have recently focused on separating Google’s ad sales business from the services, such as search, Gmail, and YouTube, which generate ad views. Another possibility suggested by today’s filing would be separating Android from Google.
For years, there has been a broad perception that regulators were unlikely to pursue corporate breakups on antitrust grounds. But some of Google’s harshest critics, including former antitrust regulator Sally Hubbard, see the call for structural relief as a sign that the most extreme solution is genuinely possible this time around.
