By David Shepardson and Mike Scarcella
WASHINGTON (Reuters) -Alphabet’s Google broke the law with monopolistic behavior over online search and related advertising, a federal judge ruled on Monday, the first victory for U.S. antitrust authorities who have filed numerous lawsuits challenging Big Tech’s market dominance.
The decision is a significant win for the Justice Department, which had sued the search engine giant over its control of about 90% of the online search market, and 95% on smartphones.
“The court reaches the following conclusion: Google is a monopolist, and it has acted as one to maintain its monopoly,” U.S. District Judge Amit Mehta wrote.
His ruling against Google paves the way for a second trial to determine potential fixes, such as breaking up the company or requiring the company to stop paying smartphone makers billions of dollars annually to set Google as the default search engine on new phones.
Ultimately, Google will have a chance to appeal the court’s rulings to the U.S. District Court of Appeal for the D.C. Circuit.
Shares of Google parent Alphabet fell 4.3% on Monday as part of a broad tech share decline.
Mehta noted that Google had paid $26.3 billion in 2021 alone to ensure that its search engine is the default on smartphones and browsers, and to keep its dominant market share.
“The default is extremely valuable real estate… Even if a new entrant were positioned from a quality standpoint to bid for the default when an agreement expires, such a firm could compete only if it were prepared to pay partners upwards of billions of dollars in revenue share and make them whole for any revenue shortfalls resulting from the change,” Mehta wrote.
He noted “Google, of course, recognizes that losing defaults would dramatically impact its bottom line. For instance, Google has projected that losing the Safari default would result in a significant drop in queries and billions of dollars in lost revenues.”
The ruling is the first major decision in a series of cases taking on alleged monopolies in Big Tech.
“A forced divestiture of the search business would sever Alphabet from its largest source of revenue. But even losing its capacity to strike exclusive default agreements could be detrimental for Google,” said Emarketer senior analyst Evelyn Mitchell-Wolf, who noted a drawn out legal process will delay any immediate effects for consumers.
In the past four years, federal antitrust regulators have also sued Meta Platforms, Amazon.com, and Apple Inc, claiming the companies have illegally maintained monopolies. Another case against Google over its advertising technology is scheduled to go to trial in September.
When it was filed in 2020, the Google search case was the first time in a generation that the U.S. government accused a major corporation of an illegal monopoly. Microsoft settled with the Justice Department in 2004 over claims that it forced its Internet Explorer web browser on Windows users.
(Reporting by David Shepardson, Mike Scarcella and Chris Sanders in Washington; additional reporting by Arsheeya Singh Bajwa; editing by Peter Henderson)
