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What a toothless ruling. And absolute disappointment in one of the largest antitrust cases in history.
Earlier this week, a U.S. judge, Amit Mehta, provided his final opinion and remedies – if you can call them that – on the United States et. al. vs. Google LLC case.
As disappointing as the outcome is, the case is still quite interesting, nonetheless.
We’ve dived into the murky waters of Google’s antitrust woes before in a recent issue of The Near Future Report…
In August 2024, a federal court ruled that Google had illegally maintained a monopoly in general search and search advertising. The company paid billions to be the default search engine on phones and browsers, including Apple’s Safari and Mozilla’s Firefox.
[…]
But the second trial matters more[…] And it cuts even deeper in Google’s core business.
Because this time, Google was found guilty of monopolizing the digital infrastructure that underpins most of the open web: publisher ad servers and ad exchanges.
These are the core systems that connect advertisers with publishers. These two platforms route billions of ad impressions per day. And Google owned them both.
The U.S. Department of Justice (DOJ) showed that Google illegally tied the two together. This way, advertisers and publishers were effectively forced to use Google’s entire stack, even when cheaper or more effective alternatives were available.
Yet Google’s flagrant disregard for antitrust procedures and principles persists.
Now, with this most recent case, Google’s violation of antitrust regulations was crystal clear. The company had been found by the court to violate those regulations, specifically:
The court found that Google’s distribution agreements:
Regarding the general search text advertising market, the court found that Google’s exclusive agreements:
As we can see, there was no ambiguity in the court’s ruling. Google’s anticompetitive actions over the years have damaged rivals, reduced consumer access to other services, leveraged its position to raise advertising prices in the absence of competition, and reduced the incentives for competitors to invest in the space.
Making matters worse, while not in the court’s decision, we have all learned that Google’s search is heavily biased. It suppressed scientific research during the pandemic and used its platform to influence election outcomes. It has historically pushed a political narrative using its search and advertising technology.
It became a $2.7 trillion company conducting data surveillance and collection on all of us without our explicit consent or knowledge.
Yes, Google does reveal what it does with our data, intentionally buried within long documents posted online like the Google Privacy Policy and the Google Terms of Service that most people wouldn’t even know existed.
And have we ever seen a plain language disclaimer or check box from Google before using its products? Something along the lines of…
Our business is built upon the collection of your data related to the use of any of our applications, web browsing, e-mails sent using Gmail, pictures that you share through Photos, travel itineraries that you share with Google, anything you save in Drive, and any documents, sheets, or slides that you create.
We also may listen to you when you are and aren’t using your smartphone or Google Home device using active listening software so that we can better understand your intent. We’ll collect and preserve all this data year after year and sell access to that data to advertisers, as well as provide that data to law enforcement when asked to do so.
When using Google’s products and services, you explicitly consent to the above.
Nope, I sure haven’t seen truthful and clear language like that, and I’m pretty sure you haven’t either.
The fact is that Google didn’t need to engage in such extensive anti-competitive behaviors to have one of the most successful businesses in history.
It was such an early mover that its success was all but guaranteed. But it clearly wanted more. More of us, more money, more control, more profit.
That’s why the judge’s ruling was so disappointing. It was such a clear-cut case, with a definitive antitrust decision already levied by the court.
As a result of Judge Mehta’s ruling…
The judge’s opinion allows Google to continue to pay technology companies to be the default technology on their devices or software. While it can’t be an exclusive agreement, Google can still outbid just about anyone, which is why this ruling is toothless.
Alphabet (GOOGL) is sitting on $95 billion in cash right now and will generate more than $60 billion in free cash flow this year, and an additional $75 billion in free cash flow next year.
There are only a handful of companies that could sit at a table and bid for default rights, which means Google’s dominance is protected and ensured.
The judge’s argument heavily depended on the existence of generative AI technologies as a competitive threat to Google.
This was basically the argument used as the reason why it was not necessary for Google to spin out and sell its Google Chrome browser business, a topic that we explored in August in The Bleeding Edge – Perplexity AI’s Ambitious Offer.
Not surprisingly, the opinion of the judge sent shares of Google’s parent company, Alphabet, soaring to all-time highs to a $2.735 billion valuation at more than $230 a share.
5-Year Chart of Alphabet (GOOGL) | Source: Bloomberg
Yes, the sharing of Google’s index (one time), its click-and-query data (two times), and its web search results (for five years) will be useful to competitors, whether they be traditional search engines or generative AI models.
But these conditions will not upend Google’s business, which is why the stock soared to record highs.
One of the most interesting comments made by the judge in his opinion was his confession of his own ignorance of the technology…
Notwithstanding this power, courts must approach the task of crafting remedies with a healthy dose of humility. This court has done so. It has no expertise in the business of general search engines (GSEs), the buying and selling of search text ads, or the engineering of GenAI technologies. And, unlike the typical case where the court’s job is to resolve a dispute based on historic facts, here the court is asked to gaze into a crystal ball and look to the future. Not exactly a judge’s forte.
I have to say, I found this incredible. The basis for the judge’s opinion was based on:
That’s why Alphabet won big. And so did Apple. After all, Apple is already taking in more than $25 billion a year from Google for making Google the default search engine on Apple devices.
You know who else won?
Institutional and self-directed investors in Alphabet.
I know that rulings like this might seem unfair, but there are things that we, as consumers, can do. In this case:
Despite the judge’s self-proclaimed ignorance of related technologies, what he did get right was that it will be future technology that disrupts Google’s search monopoly.
It won’t be generative AI, per se, but a dramatic shift in how we interact with computing systems, which will be largely driven by the consumer employment of agentic AI through voice prompts and commands.
Agentic AIs will be able to utilize a range of artificial intelligence models and applications to perform complex tasks on our behalf, freeing up countless hours a week of our time, making us more productive at work and less busy in our free time.
It’s a technology and trend we follow closely here at Brownstone Research.
Prominent venture capitalists and private investors understand this. That’s why:
These are foundational disruptors to Google’s legacy business. And Google’s legal team smartly and successfully convinced the judge of that.
As a consumer, I’m disappointed. As an investor, I’m quite happy. And if I were a member of the executive team at Google, I’d be quite happy that every dollar spent on lawyers to support this case was worth every penny.
Well done.
Jeff
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
The Bleeding Edge is the only free newsletter that delivers daily insights and information from the high-tech world as well as topics and trends relevant to investments.
