The U.S. Justice Department is seeking to dismantle components of Google’s parent company, Alphabet, in response to a recent court decision that found the tech giant guilty of violating antitrust laws. Following this ruling in September, which determined that Google had unlawfully monopolized the search market through substantial payments to remain the default search engine, Alphabet’s shares experienced a notable drop of over 5%.
The court, led by U.S. District Judge Amit Mehta, indicated that Google’s financial practices were anti-competitive, calling not only for an end to such payments but also proposing restrictions that would prevent Google from designating itself as the default search engine on its Pixel smartphones. Perhaps most significantly, the DOJ has requested that the court compel the sale of Google’s popular Chrome browser.
On Thursday, Alphabet’s Class C shares closed down 4.5%, further declining in after-hours trading, reflecting investor concerns over the proposed changes.
In defense of the company, Kent Walker, Alphabet’s chief legal officer, criticized the DOJ’s proposed remedies, claiming they could jeopardize consumer safety and privacy, inhibit investment in artificial intelligence, and ultimately harm the economy and technological leadership of the United States.
Interestingly, while these antitrust measures might seem damaging, they could also benefit Google’s financial performance if the significant expenses associated with “traffic acquisition costs”—which are projected to reach $40 billion in the first nine months of 2024—were eliminated, thereby enhancing gross margins.
However, selling the Chrome browser presents its own challenges. Many potential buyers, like Amazon, are currently facing their own antitrust investigations, complicating any sale.
A final judgment on the proposed changes will be made by Judge Mehta in August 2025, but Google has already indicated its intention to appeal any ruling against it. The future direction of the case also remains uncertain with the impending Trump administration, which may approach the situation differently than the current Biden administration.
In summary, the Justice Department’s actions reflect a significant moment in corporate regulation and antitrust enforcement, indicating a potential shift in how big tech companies operate. The outcome may not only shape Google’s business practices but could also set precedents for the broader technology sector, leading to a more competitive environment that ultimately benefits consumers and fosters innovation.