Could Google's Massive Antitrust Win Set Up Its Next Monopoly?

Google's win comes at a potentially very dangerous time

By now, I’m sure you’ve read about Google’s undeniably huge victory in the Department of Justice’s lawsuit over Google’s monopolistic practices in search. I want to make as clear as I possibly can that I’m not mincing words: it’s a huge victory, and Google’s practices are monopolistic. Some quick refreshers for those who may not remember the key findings in this case. Over a year ago, Judge Amit Mehta found that Google violated the Sherman Act’s second section.

Mehta’s ruling declared that, in no uncertain terms, “Google is a monopolist, and it has acted as one to maintain its monopoly.” Although Mehta denied part of the Department of Justice’s argument, specifically pointing to allegations that Google had a monopoly in parts of the online ad market, his findings for labeling Google a monopolist in Search included steps executives took to ensure that other companies couldn’t come close to Google’ size or, in the case of Apple, were disincentivized from launching their own competitor. As Mehta wrote, “The prospect of losing tens of billions in guaranteed revenue from Google — which presently comes at little to no cost to Apple — disincentivizes Apple from launching its own search engine when it otherwise has built the capacity to do so.” 

Remedies are taken once a company is deemed a monopolist. In Google’s case, ideas about forcing a spinoff of its Chrome browser — an idea that led AI giant Perplexity to make a $34.5 billion bid before remedies ever came down — or preventing Google from having exclusive contracts to exist as a partner’s sole browser were floated. These would both dismantle Google’s search monopoly and create new precedent for future cases much like the DOJ’s case against Microsoft did 25 years ago. So what actually happened? 

I’m going to quote the New York Times’ summary:

“Judge Mehta said in the 223-page ruling that Google must share some of its search data with ‘qualified competitors’ to resolve its monopoly…Judge Mehta also put restrictions on payments that Google uses to ensure its search engine gets prime placement in web browsers and on smartphones. But he stopped short of banning those payments entirely and did not grant the government’s request that Google be forced to sell Chrome, which the government said was necessary to remedy the company’s power as a search monopoly.

“Judge Mehta’s decision in the case, which is the first government monopoly lawsuit against a modern tech giant to go from filing to remedies, will set the tone as courts consider other antitrust cases accusing large tech companies of abusing their power, most prominently against Google.”

I’m also going to quote Matt Stoller and Eugene Wei, two of the most thoughtful writers on antitrust in the U.S. Here’s Stoller:

“This remedy, by contrast, is obviously going to fail. And the main reason is that, unlike Microsoft, Google’s leadership is utterly unchastened. Google CEO Sundar Pichai and chief legal officer Kent Walker will get bonuses for what they did. They see this conflict as one in which they fought bitterly, and kept at it, and shredded documents, and the result was… victory. They will have no compunction continuing to engage in unlawful behavior. After all, what’s the worst that could happen? Would a rival or the government really go before a weak judge who doesn’t want conflict, and convince him to act? I don’t think so. In other words, this decision isn’t just bad, it’s virtually a statement that crime pays.

There are also the technical reasons that, even if Google does adhere to the remedy, it won’t work. As Newman put it, “Google apparently remains free to pay smartphone OEMs & browsers for preloading + prime placement of Search. Without more, that's a ready-made recipe for ongoing monopoly.”

And Wu:

“The confusing part is:  The opinion says G "cannot secure exclusivity for its GenAI products..." yet allows Google "to pay distributors for default placement." But the judge himself found that defaults end up mimicking exclusives!

“What if Google now offers Samsung billions to preinstall Gemini as its operating AI -- yet in a way that technically can be switched?  Is that a banned exclusive, or is that paying for default placement?  A question for the technical committee?”

Alright, why did I make you read through this ridiculous long intro? (I promise, this won’t be a very long blog.) Posting Nexus is a newsletter about how incentives and power laws impact how information appears and travels on the internet. Google is the nexus point of information on the internet and, as much as Search is a problem from an antitrust perspective, the next battle is artificial intelligence. In fact, this is precisely why Mehta decided to take it easy on Google when it came to remedies. No one disagrees with Mehta on that realization. Where the big disagreement comes in is how this decision to not remedy the underlying incentives for Google’s monopolistic ambitions will impact tomorrow’s internet. Like everything these days, it’s about artificial intelligence.

Google May Become More Insidious 

My biggest concern is an echo of Wu’s argument: “The Google remedy is a paradox. It says ‘Google cannot use the same anticompetitive playbook for its GenAI products that it used for Search.’ But it then says payments for default placement are fine? What if Google now offers Samsung billions to preinstall Gemini as its operating AI — yet in a way that technically can be switched? Is that a banned exclusive, or is that paying for default placement?”

Acknowledging that we don’t know what the next phase of computing will look like, it seems pretty likely that phones and smart glasses will be at the center of this next stage. Phones aren’t going away until there’s something as ubiquitous in its function to replace having a tiny, light, fully operable computer in your pocket. The phone didn’t replace the laptop, but it became a component of day-to-day computing because it solved problems (convenience) that the laptop couldn’t. Smart glasses seem poised to be another additive technological component of our daily lives. Everything else? Total crapshoot. But I digress.

If phones and smart glasses remain central to our connection to the internet, then operating systems, large language models, and tools that provide the least amount of friction will become the only technology that matters to some of the largest conglomerates in the world — and their partners. Though AI is built on systems and technologies I won’t pretend to even pretend to be an expert in, much of the forward facing consumer interaction does come down to some level of search and building upon that search ability. Hence why Mehta thought that a one-time information sharing system on search indexes should be one remedy.

Search is still the biggest part of Google’s business, representing about 51 percent of Google’s nearly $100 billion in total revenues in Q2. It’s also a business that is fundamentally changing, and Google executives under Sundar Pichai aren’t fretting about taking a chainsaw to its very foundations to ensure that Google isn’t caught up in the slow decay cycle that traditional media has struggled to fight off with each passing year after executives decided to ignore the internet until too late. For example, Google is cannibalizing part of its Search ads business to make Overview AI, and Search, more lucrative down the road. Being the default browser on Apple devices, or others, provides more interaction for those AI tools and arguably provides Google an advantage in building out its Gemini (or other) product.

Again, think about Wu’s argument: “What if Google now offers Samsung billions to preinstall Gemini as its operating AI?” As of right now, Search is a destination that, while egregiously bad in the way that monopolies tend to be as defined by the issues that follow monopolies, is arguably limited to the space it occupies. It’s within Safari. It’s within Firefox. Data is collected, ads are sold, Google grows. That’s nowhere near as incendiary as an operating software that other apps are built on, that connects all activity, all information, and all connection — and then monetizes it.

If Google and Gemini are underpinning everything, then even if OpenAI and ChatGPT continue to grow, Google could have a majority share of activity in the U.S. Google runs on our willingness to trade it all for a slightly better search result and a far more interesting ad. With each step Google takes to being more intertwined in the base operations of a device (see: Android), the more invasive and insidious it becomes. Why do you think Google is reportedly interested in talking to Apple about Gemini being used on iOS devices? It’s not solely because of licensing revenue. 

Think of it like so: 

I want to take a second to quote from Google’s statement on Mehta’s decision. There’s a line reminding the public “how much the industry has changed through the advent of AI, which is giving  people so many more ways to find information.” That’s followed up by a declaration upon competition, claiming that “competition is intense and people can easily choose the services they want.” Naturally, Google reminds people that following the end of this oh so nightmarish period for the company, in which its market cap rose by $525 billion, its teams are committed to focusing “on what matters — building innovative products that people choose and love.” 

How This May Go 

It’s all a crock of shit. People in the United States who own iPhones — about 57 percent of the market — didn’t choose to use Google Search. It was imposed upon them the minute Apple executives took billions of dollars from Google to make it the default option, to choose not to create a product that could compete, and were incentivized to make it far more challenging to swap out for other search options. 

Now, with precedent set by Mehta in this case that may be used in Google’s next ambitions in the AI and generative AI space, with the type of established partnerships that give its executives a leg up over much of the other competition (save OpenAI), and with no incentive to do anything but ramp up efforts, it’s likely that it’ll be far more difficult to escape Google at all even if people want. OpenAI may be its biggest competitor in this space (perhaps Meta on the smart glasses front), but Google has the largest email client in the world. Its productivity apps grow in popularity each year. YouTube is a monopoly in its own right.

Google’s interoperability is what makes its services work for billions of people globally and, one could argue, Mehta just now gave the go-ahead for Pichai and team to go even bigger. All Google has to do is be willing to pay for it…and collect enough data to become the undeniable go-to technology in the space down the road. As Ben Thompson wrote, “Google’s pay-off strategy didn’t just foreclose competition; it foreclosed any remedies that might have mattered.”

Let’s use Apple as one example again, but to Wu’s point, you can apply this to a number of other companies. Currently, Google pays about $20 billion to Apple for Search to be the dominant engine. As Mehta wrote, “The rationale for a payment ban is straightforward: It would pry open the market to competition. The revenue share payments shape the market for general search services in Google’s favor. They “provide an incredibly strong incentive for the ecosystem to not do anything”; they “effectively make the ecosystem exceptionally resist[ant] to change”; and their “net effect [is to] basically freeze the ecosystem in place”.

“A payment ban in theory could bring about a much-needed thaw. Distributors would have to look to other GSEs to earn revenue share, thereby stimulating competition among Google’s rivals to secure default distribution. It also could encourage new entrants, including Apple. In addition, as discussed, revenues are a ‘fruit’ of Google’s exclusionary conduct.” 

Mehta didn’t want to do that because of trickle down concerns, including “lost innovation in the browser market,” “less product innovation from Apple,” and “higher mobile phone prices and less innovative phone features.” Arguing that if Google were to stop paying a company like Apple, which has a market cap of $2.8 trillion dollars, Apple would simply fail to innovate is fucking ridiculous. But what really gets to me is the counterargument Mehta makes to himself about how this could change down the road if Google were to abuse it in new ways. As he wrote, “Still, ‘judges must be open to clarifying and reconsidering their decrees in light of changing’ — or unchanging — ‘market realities.’ The court is thus prepared to revisit a payment ban (or a lesser remedy) if competition is not substantially restored through the remedies the court does impose.” 

But wouldn’t Google being allowed to continue paying companies for its new products like Gemini to be the default, collect information, and distill it in new ways — again, like AI, where Mehta rightfully notes that Google does not have a monopoly yet — provide Google with enough partnerships, data, and revenue to move that monopoly position in general search to AI? How much of a problem does Gemini and Search, or whatever it may be down the road, have to get before Mehta and co even try to impose a payment ban? I know it’s a big theoretical and Gemini is nowhere close to ChatGPT’s usage. But others have argued that Google could use its monopoly status in search to help with AI, where consumer-facing products are increasingly based around search queries. As DuckDuckGo’s Gabriel Winberg tweeted, “Google will still be allowed to continue to use its monopoly to hold back competitors, including in AI search.”

These payments don’t have to be for exclusivity; new tools that are built into various apps or the underlying operating software just need to be the default placement, which Mehta is allowing. Default placement could then create dominance. Uncontested dominance creates monopolies. Pre-established advantages that came from the first monopoly era could theoretically seep into the second one. Mehta’s argument is murky enough that any kind of attempt to try and punish Google after the fact would get caught up in years of legal back-and-forth while Google more firmly establishes its empire at the cost of people around the world. 

Look, I’m not saying this will happen. I’m saying Mehta’s resolve sets up Google with the opportunity and thinly-veiled allowance to try and make it happen. The company’s stock is up nearly 20 percent since yesterday at the time of publish. It’s not because shareholders think that Chrome was integral to Google’s business. It’s because FAANG, a collection of stocks that reflect the various monopolies many of those companies hold, just got permission to continue doing what it’s doing…and then some. Confusing. Pessimistic. Waste of time. This is how some of the most insightful antitrust and technology experts refer to Mehta’s decision. 

I want to end on a note from Stoller, who again, is one of the most foremost experts on antitrust. He succinctly and bitingly gets to my real issue here, and it doesn’t go back to last September when this suit was filed from the Biden administration. It goes back to when Sundar Pichai, alongside Jeff Bezos, Tim Cook, Mark Zuckerberg, and others stood behind President Donald Trump at his inauguration, most of them looking glum, but realizing that in this era of AI building and AI protection, they were going to need all the good fortune they could buy. It goes back to who controls the flow of information, and how it reaches people. It goes back to incentives, and allowance. 

“I’m increasingly pessimistic. And not just about antitrust, but about being able to impose limits on corporate power for the time being. It shouldn’t be this hard to enforce the law against the powerful. But it is. And that’s why America is getting angrier by the day.”