What would a Google break-up mean for Alphabet?

The term “structural remedies” doesn’t sound too intimidating for the uninitiated. In competition circles, however, it’s a corporate bombshell, given it is shorthand for a forced break-up.
The US Department of Justice has said it is considering pushing for this radical move to tackle the market dominance of Google, a $2 trillion business that processes 90 per cent of internet searches in the United States.
If a break-up goes ahead —and that is far from certain — it would be the first such move in the US in more than 20 years when a move against Microsoft failed.
What is clear is that the case adds to the mounting legal pressure on Alphabet, Google’s parent company, from competitors and competition authorities in the US and Europe and raises questions about the future of everything from its search business to its Chrome browser, Play app store, Android phone operating system and its investments in artificial intelligence. All this comes as Google is belatedly facing emerging search competition from AI and social media.
In August, Amit Mehta, a federal judge, ruled that the technology company had built an illegal monopoly over the online search and advertising industry. This followed a complaint from the Department of Justice that began four years ago.
The DoJ said Google’s “anti-competitive conduct” had resulted in “pernicious harms” in markets that were “indispensable to the lives of all Americans”.
Google’s “illegal monopolies” in search and search advertising have run for more than a decade, the DoJ said, creating a gap between it and competitors that “unlawfully enriches Google”. It wants competitors to have more room to grow so that consumers and businesses have more choice.
The barriers to entry arising from the “network effects” of Google’s dominance are such that a rival would need to manage the seemingly impossible task of simultaneously having a search engine, an enormous distribution network, broad user data, integrated artificial intelligence and a network of advertisers, the DoJ said.
Prosecutors have outlined potential “remedies” to tackle the issue in court filings.
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Competition cases move slowly and all the DoJ has done at this stage is set out potential solutions, ranging from a break-up to restrictions on the distribution deals that Google makes with partners such as Apple.
Google paid Apple $20 billion in 2022 to be the default search engine on Safari, the web browser on Apple devices. That left rivals with “little-to-no incentive to compete for users”, the DoJ said, while phone manufacturers had scant motivation to deal with rivals to Google.
The DoJ is considering measures including limiting or prohibiting Google’s ability to have its products being the default on phones, for example.
The ability of Google’s search business to benefit from group products including Android, Chrome, and Play could be restricted. Chrome defaults to the Google search engine, while the Play store is all but essential for users on Android phones.
Its monopoly of text advertising resulted in little choice for advertisers and high prices, the DoJ said, meaning that investors would not fund new search ventures with no obvious way to break into this market. Google could be forced to share more information with advertisers.
Once appropriate remedies have been identified, Google could be forced to pay for a technical committee that would monitor its behaviour, make a senior executive responsible for compliance and/or be prevented from owning a stake in potential competitors.
The ideas proposed by the DoJ are broad, but there is no sign yet which options might be favoured.
Prosecutors are expected to file a more detailed proposal with the court by November 20, and Google, which believes the DoJ risks unintended consequences with such broad proposals, will have a chance to suggest its own remedies in December. A final ruling is expected by next August and Google has said it is likely to appeal, meaning that the saga could rumble on for years.
There are echoes here of a previous competition battle between the US and a big technology company. Microsoft was accused in the 1990s of running an illegal monopoly in the web browser market for Windows and the case centred on the “power of the default”.
Microsoft was told it must split into two but the court ruling that led to this was partially overturned on appeal after the original judge was found to have shown bias, including in comments that likened Microsoft’s executives to “drug traffickers” and “gangland killers”. Prosecutors dropped their pursuit of a break-up.
That was more than two decades ago, but the case will be in the mind of prosecutors when they consider the uphill battle they would face if they did pursue a break-up.
● Google attacks ‘radical’ US proposal to break up parent company
Google said the outlined plans were “radical” and “go far beyond the specific legal issues in this case”. Its Chrome browser and Android operating system might seem obvious candidates to be spun off but, as Google points out, it is not obvious that standalone services would mean lower prices for consumers. Its lucrative advertising businesses pay for free and low-cost services for consumers and businesses. It is also unclear how spinning off Chrome and Android would end Google search being a default choice, or at least a strong preference, for phone manufacturers or consumers.
Analysts at Wedbush said a break-up was “unlikely” and predicted “any material business model impact” will relate to its search distribution deals with partners such as Apple.
If a break-up did proceed, however, it might produce more nimble, smaller businesses. Some have attributed the innovation that led to the mobile phone industry to the break-up 40 years ago of AT&T, which dominated the telephone market for most of the 20th century.