- Justice Department leading the charge
- Google’s search dominance under fire
- Break-up the ultimate option
In a court filing on Tuesday, the US Justice Department said it was considering asking a federal judge to force tech giant Alphabet (GOOG:NASDAQ) to break up Google on competition grounds.
The news emerged after US markets had closed, where Alphabet shares were up $0.80 at $165.70, leaving them flat on the year, although the stock was called down $2 or 1.25% pre-market on Wednesday.
LANDMARK MOMENT
In early August, Judge Amit Mehta ruled Google was operating an illegal monopoly in online search and search text advertising and asked for input from outside companies on how best to resolve the situation.
Mehta went on the record as saying Google’s distribution agreements ‘foreclose a substantial part of the general search services market and impair rivals’ opportunities to compete’.
One of the suggestions put forward was to break Google up, along with less severe options such as forcing the company to share its underlying data with competitors and preventing it from gaining an unfair advantage in AI (artificial intelligence) products.
In its latest filing the Justice Department said it was considering ‘behavioural and structural remedies that would prevent Google from using products such as Chrome, Play, and Android to advantage Google search and Google search-related products and features — including emerging search access points and features, such as artificial intelligence — over rivals or new entrants’.
If Washington does push to break up Google for operating an illegal monopoly it will be the first time since it unsuccessfully tried to dismantle Microsoft (MSFT:NASDAQ) two decades ago.
Google criticised the court filing, calling it ‘radical’ and saying it would have ‘significant unintended consequences for consumers, businesses and American competitiveness’ according to a report by Bloomberg.
EXPERT VIEWS
‘A forced break-up of Google would be an unprecedented move and potentially be the first domino to fall in a long line of dominant tech giants,’ commented AJ Bell investment director Russ Mould.
‘What’s certain is Google will fight any challenges to the bitter end as it won’t want to give up its ‘king of the hill’ position.’
Mould added: ‘The writing has been on the wall as authorities have got tired of the big players commanding too much market share and making it near-on impossible for others to compete. Antitrust investigations have resulted in massive fines, but these giants of industry are so cash-rich that they pay the penalty and move on without a blink of the eye.’
However, investors appeared unmoved said Mould, possibly because the risk has been known for some time and investors don’t believe the end result will be a forced break-up.
Quilter Cheviot technology analyst Ben Barringer described the Justice Department’s filing as ‘a shot across the bows’ in its attempt to curb Google’s search-engine dominance.
‘If these changes were to take effect it would be a huge change in how people and businesses use and interact with the internet in their daily lives, so this is clearly a high-stakes game of poker just now,’ added Barringer.
Disclaimer: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (Ian Conway) and the editor (James Crux) own shares in AJ Bell.
