Google’s Strategy to Delay Break-up

A court-ordered dissolution of Google would be unparalleled in contemporary US corporate record, striking a significant hit to the major tech firm that avoided the fate faced by Microsoft, which lost its own antitrust lawsuit in the US twenty years prior. The legal squad working on Google’s strategies against the possible sanctions disclosed by the Department of Justice recently, finds the timing of the case quite fortunate.

Previously, Google’s initial reaction to such DoJ initiatives – suggesting that there is significant competition in paid search ads and a high degree of competitiveness in the AI sphere – would not have been as impactful, especially before the revolutionary ChatGPT chatbot was debuted by OpenAI a couple of years ago.

Google’s tactical objective is to articulate strong arguments in the appeals courts in order to avert or postpone the effects of the groundbreaking judgment put forth by a federal judge in August, which determined that Google upheld an illicit monopoly by paying billions to device manufacturers, mobile networks, and browser creators.

The protracted nature of the legal processes in such a significant case will allow Google to halt any operational impact for the coming years. The company intends to question the decision about its liability when the judge decides on the suitable remedial actions, which is assumed to happen in mid-2025, and may also dispute any remedies imposed.

Google’s leadership is experiencing a fluctuating state consequential to increased investor concerns that the firm was lagging behind in the AI sphere while simultaneously having to defend itself against three distinct antitrust lawsuits.

Emerging rivalries in search advertisement from the likes of Amazon and TikTok, and wide-spread disruptions by AI start-ups like OpenAI and Perplexity, assist Google in asserting that it is encountering the fiercest competition since Bing, created by Microsoft, was launched a decade and a half ago.

On a recent Tuesday, Google cited a forecast by Emarketer suggesting that its share of the US paid search ad market would drop to less than half next year for the first time since 2008. This was attributed to the rapid expansion of Amazon’s marketing sector.

However, the Department of Justice successfully contended that Google holds a monopoly in the narrower sector of general search engines, which makes Amazon’s advancements irrelevant in a legal perspective. Current data from StatCounter indicates that more than 90% of online search queries are still being managed by Google.

Google has made a broad argument against what it has termed regulatory “over-reach,” especially in the case revolving around its distribution agreements and the implications thereof. The tech giant voiced this in a blog post on Tuesday, suggesting that compelling it to divest its assets or share its data with rivals would exceed the specific legal boundaries of the case.

Google contended that it would be detrimental if it were required to separate from its Chrome or Android operating system or other “structural” divisions, a move which would disrupt the current competitive landscape. Instead, Google proposed focusing on the arrangements it has with companies like Apple and Mozilla, who make the Firefox browser, while still retaining the capacity to finance these partners for distribution, given the absence of exclusivity requirements.

However, John Kwoka, a professor at Northeastern University, rebutted this stance, arguing that Google, with its complex structure and numerous operational variables, demands an equally diverse range of complementary remedies, even possible divestitures where necessary. Drawing on historical examples of companies evading the consequences of regulators’ “conduct” remedies, he warned of the endless possibilities of circumvention, a concern also voiced by the DoJ.

Google also alluded to the implications of international competition in the AI sector from China, highlighting that weakening the tech giant could possibly undermine the US’s position on the global stage. Any demand to divulge key elements of its search engine, including data and algorithms, could risk them falling into the hands of foreign companies like China’s Baidu or Russia’s Yandex, who may not uphold the same privacy or security criteria as Google.

The company cautioned in its blog post that a government over-reach in such a rapidly progressing industry could inadvertently stifle American innovation, affecting American consumers. The company underlined the significance of AI technology for America’s technological and economic superiority.

The Department of Justice (DoJ) has proposed that the capacity of the firm to employ its monopoly position to promote artificial intelligence features places Google’s dominance at risk. Given the commencement of antitrust cases, the company is expected to appeal as high as the US Supreme Court, outlining that this marks the beginning of an extensive process as indicated in their Tuesday’s blog post.

However, Big Tech critic and leader of the Digital Content Next group of online publishers, Jason Kint, has said it’s unclear whether the top court will consider the case. He reckons that the case might necessitate two to three years to enforce any solutions if it proceeds through the legal system, stating: “Google is enduring legal defeats, grappling with a challenging set of facts in addition to spoliation due to destruction of evidence which may push them to settle or proactively orchestrate the result.”

The lawsuit is among the prominent legal confrontations supervised by Jonathan Kanter, a liberal anti-monopoly official initiated by President Joe Biden who has been cracking down on anti-business behaviour throughout the US economy. Given Google’s likely recourse to appeal against the judicial verdict, Kanter might not be leading the DoJ’s anti-monopoly division when the case concludes.

Upcoming presidential elections could also influence the decision-making. Historical instances include a case where Microsoft managed to resolve a settlement with the George W Bush administration in 2001, a year or less after the Republican president was elected. Still, a prospective Republican administration in the coming year might not necessarily challenge the sterner strategy revealed under Biden.

Over the years, Big Tech has captured both political sides’ wrath in Washington, and a new conservative populist influx—including JD Vance, a Republican nominee picked as Donald Trump’s vice-president—have applauded Washington’s stronger anti-monopoly posture. In the event of a second Trump enterprise, they may avoid jeopardising the specific Google search lawsuit as it was initially raised during Trump’s first administration.

Should new DoJ officers “be lenient” on remedies or during prospective appeals processes, such potential exists, as highlighted by Kwoka, referencing Trump’s erratic nature and Democratic presidential candidate Kamala Harris’s apparent inclination towards a milder anti-monopoly policy. Nonetheless, Kwoka adds, “neither party has treated Big Tech as deferentially as they did five years ago, therefore some form of this will likely proceed.”

Google is confronted with multiple challenges. Recently, a judge in California mandated that Google must allow its competitors to access Android, enabling them to construct their own app stores as a rival to Google Play. Furthermore, Google is being sued by the DoJ for its alleged monopoly over online advertising.

However, despite these setbacks, Alphabet, Google’s parent company, experienced only a 1.5 per cent drop in shares on Wednesday, maintaining its market worth slightly under $2tn, and securing its standings as the fourth largest publicly traded company worldwide.

In the viewpoint of Bernstein’s analysts, the proposal of the DoJ “goes wide as a mile and deep as an inch”, with the initial round of the fight showing the remedial measures to be extensive but lacking in details.

– Copyright The Financial Times Limited 2024

Written by Ireland.la Staff

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