CMA urged to move against Google following US antitrust decision
Google is a monopolist.
That is, at least, according to a US federal judge overseeing a years-long antitrust case against the tech giant. Amit Mehta concluded that not only is Google a monopoly, but it also “has acted as one to maintain its monopoly”.
One key factor influencing the decision was the revelation that Google pays Apple an estimated $20bn annually to be Safari’s default search engine.
Google’s president of global affairs, Kent Walker, has already stated the company intends to appeal the decision, arguing that Google’s dominant market position is a result of its superior product.
The US Department of Justice alleged that Google’s search engine conducted 90% of web searches (Google disputed that figure) and spends billions to ensure it is the default search engine on Apple’s Safari and Mozilla’s Firefox browsers, apart from Google’s own browser, Chrome.
Analysis: A break-up?
Assuming the decision is ultimately upheld, it is currently unclear what penalty will be enforced. Analysts have previously speculated that punishment could vary from a sizeable fine to breaking up Google’s core ad business.
However, analyst Alex DeGroote believes a wholesale break-up of Alphabet is “very unlikely”.
“Courts would be reluctant to sanction such a groundbreaking penalty and there would have to be international regulatory approval,” he told The Media Leader. “Too complicated, too many potential unintended consequences and Alphabet would revert to US supreme court and higher courts for an appeal, which could last for years.
“At the same time, the supremacy of the Big Seven stocks is making people think about natural monopolies and walled gardens, and the so-called detrimental effect on market dynamics.”
Google did not respond to a request for comment.
Role of CMA Digital Markets Unit
Beyond the US antitrust case, it is also possible that Google faces further regulatory scrutiny in other regions.
The EU’s competition watchdog, in particular, has repeatedly signalled an interest in investigating the tech giant and has already fined Google more than €8bn since 2021 over various anti-competitive practices.
Additional concerns exist over Google’s post-cookie solution, known as the Privacy Sandbox. A spokesperson for Movement for an Open Web, a non-profit advocating for a fully accessible internet, told The Media Leader: “There are other important areas of monopoly power still outstanding.”
Google touts AI Overview strategy amid mixed financial results
In response to the US verdict, News Media Association CEO Owen Meredith urged the UK’s Competition & Markets Authority (CMA) to move quickly on enabling the newly empowered Digital Markets Unit to conduct its own work against Google’s behaviour in the UK.
The Digital Markets Unit was created in 2021 to promote greater competition in the digital sphere. Earlier this year, it was granted additional regulatory powers through the passage of the Digital Markets, Competition and Consumers Act.
The act enables the CMA to directly enforce consumer protection laws and fine companies up to 10% of their global turnover for breaches. It also gives the Digital Markets Unit the capacity to compel Big Tech to pay for news content that appears on their platforms.
“This is a landmark ruling that exposes and confirms the power Google exercises over search and the consequences of that monopolistic power for advertisers and users,” Meredith said. “The sheer scale of payments made to other platforms through exclusive distribution agreements to maintain its dominance is staggering. Importantly, the court also found that the exclusive distribution agreements do not result in pro-competitive benefits.
“With an appeal likely, and legal wrangling that could continue to rumble on, here in the UK this ruling provides more evidence which the CMA can rely on when considering which tech platforms and services to prioritise for designation under the new Digital Markets Unit regime.
“Which is why it is important the new government moves quickly to approve the guidance and secondary legislation required to bring the new law into effect.”
A challenge to search dominance?
The ruling comes at a time when the tech giant’s dominance in search is being threatened by AI-focused competitors.
OpenAI and Perplexity, among others, have released their own generative AI-based search experiences in recent months that seek to undermine the business model of traditional search. Knowing it is being challenged for perhaps the first time in decades, Google also launched AI Overviews, its own AI search product, earlier this year in the US to middling reviews.
These AI companies are all betting that user behaviour will eventually shift to preferring asking queries to a chatbot rather than the more classic search experience that has dominated the internet for the past two-and-a-half decades.
For Google, the competition for AI search may come down to not just the quality of its product, but also the distribution of that product.
By integrating AI Overviews into Google search, it bakes in a significant consumer base. Similarly, OpenAI’s partnership with Apple to integrate ChatGPT into its next-generation operating system will provide a boost to its user base.