The U.S. Justice Department is taking significant steps to dismantle one of the nation’s most influential companies, Google, following a September court ruling declaring that the tech giant had breached antitrust laws. On Thursday, shares of Google-parent Alphabet saw a sharp decline of over 5% as prosecutors detailed potential remedies that would dramatically change how Google operates.
The ruling from U.S. District Judge Amit Mehta found that Google had unlawfully monopolized the search engine market through substantial payments to maintain its status as the default option on smartphones and web browsers. The Justice Department is not only seeking to halt these practices but is also pushing for Google to be prohibited from designating itself as the default search engine on its own Pixel smartphones. Perhaps most controversially, the DOJ is suggesting that Google be compelled to sell its widely-used Chrome browser.
Following the news, Alphabet’s Class C shares ended the day down 4.5%, with further declines during after-hours trading.
In his response, Google’s chief legal officer, Kent Walker, cautioned that the proposed measures could undermine consumer security and privacy, and hinder the company’s investments in artificial intelligence. Walker criticized the DOJ’s approach, labeling it an unprecedented overreach that could negatively impact American consumers, developers, and small businesses, particularly at a time when the U.S. needs to maintain its global economic and technological edge.
Interestingly, the ruling against Google’s ‘traffic acquisition costs’—payments that amounted to $40 billion in the first nine months of 2024—could, paradoxically, enhance the company’s financial performance. Removing these expenses could substantially increase Google’s gross margins. However, the ownership of Chrome, which drives the largest portion of Google’s advertising revenue and has introduced many users to its AI tools like Gemini, plays a critical role in its business strategy.
The prospect of selling Chrome may prove challenging as most companies capable of affording such a transaction, including Amazon, are also under antitrust scrutiny.
Regardless of the potential remedies Judge Mehta may approve—expected by August 2025—Google has indicated plans to appeal the decision. The stance of the forthcoming Trump administration on this case remains uncertain, as it originated during the previous administration and continued under President Biden.
In summary, the Justice Department’s scrutiny of Google highlights a significant moment in the ongoing debate over monopolistic practices in tech. This regulatory scrutiny may lead to beneficial changes in the market landscape, fostering increased competition and innovation while addressing consumer protections. There is potential for rejuvenation and market evolution, paving the way for new entrants and enhancements that can serve the public interest.