US DOJ's Proposed Split of Google Implications and Debates
Analysts said that the US Department of Justice's proposal to split Google might weaken Google's main profit engine and hinder its progress in the AI field, although the final outcome may still take several years.
The US Department of Justice said on Wednesday that it might ask the judge to force Google to spin off some of its businesses, such as the Chrome browser and the Android operating system, aiming to break Google's dominant position in the search market.
Of course, this is just one of many potential solutions being considered by the US Department of Justice. Other options include prohibiting Google from collecting sensitive user data, requiring it to provide search results and indexes to competitors, allowing websites to choose not to allow Google to use their content to train AI products, and having Google report to a court-appointed technical committee, etc.
These proposals hit Google right where it hurts. Nowadays, Google has long become a synonym for search, and products such as the Chrome browser and the Android operating system are the tools that Google uses to maintain its search dominance. Stripping these businesses will weaken Google's revenue and give competitors more room for growth.
Gil Luria, managing director and senior software analyst at investment bank D.A. Davidson, said: The US Department of Justice has reverse-engineered Google's success model and intends to disassemble it.
Luria said: The proposed privacy and data collection measures will lead Google to either share all the data it collects or stop collecting data from the very beginning. Since Google is likely to choose the former, this will strengthen the capabilities of its competitors and may create new competition.
Analysts also said that the US Department of Justice's remedies in the AI aspect might also disrupt Google's business. Currently, Google has already faced significant pressure from startups such as OpenAI and the AI search engine Perplexity.
The market research company eMarketer expects that by 2025, Google's share of the US search advertising market will fall below 50% for the first time in more than a decade.
Mark Shmulik, an analyst at research firm Bernstein, said: In the broader AI war, the last thing Google wants now is to have one hand tied behind its back by regulatory agencies.
Other companies that might benefit from these remedies of the US Department of Justice also include search engines such as DuckDuckGo and Microsoft Bing, AI competitors such as MetaPlatforms, and Amazon.
Kamyl Bazbaz, senior vice president of public affairs at DuckDuckGo, said: The Department of Justice's framework is clear. They know that there is no single remedy that can eliminate Google's illegal monopoly, but a series of behavioral and structural remedies are needed to liberate the market.
Whether it can pass is still unknown
But some industry observers and analysts said that these remedies are the largest antitrust effort since the US filed a lawsuit against Microsoft in 1999, and whether it will eventually pass is far from certain.
Adam Kovacevich, CEO and founder of the industry group Chamber of Progress representing technology companies, believes that the US Department of Justice has thrown out the remedies, but whether it can succeed remains to be seen.
Kovacevich said: This may make some headlines, but it doesn't necessarily succeed. The Department of Justice is introducing remedies that go far beyond the purview of the judge's ruling, and history tells us that these broad remedies cannot survive on appeal.
Russ Mould, investment director at investment ser vice firm AJBell, also said that this risk has long been known. He said: Investors don't seem to believe that this forced split will really happen.
Dan Ives, an analyst at investment bank Wedbush, said: Regarding the final outcome of this case, we still believe that it is unlikely that there will be a structural change in Google. In addition, any significant impact on the business model will be related to search distribution.
Legal experts said that splitting Google is not an easy thing. The Department of Justice will have to prove that smaller repair measures cannot solve the fundamental problem. In addition, some courts have realized that forced splitting is inappropriate, the most obvious example being the lawsuit against Microsoft by the US Department of Justice 20 years ago.
Rebecca Haw Allensworth, a professor at Vanderbilt Law School, believes that judges are unlikely to approve the US Department of Justice's proposal.
Antitrust thinkers support splitting
However, some antitrust thinkers believe that courts should consider splitting technology giants such as Alphabet.
Rory Van Loo is one of them. As a law professor at Boston University, Van Loo pointed out that the oil and telecommunications industries are now booming after breaking the monopoly, and shareholders have also received good returns.
Van Loo said: The defendants will inevitably warn that if they are split up, the sky will fall. But when the facts of the case prove that there is a legitimate reason, the judge should not show mercy.
The antitrust leaders of the Biden administration also hold this view. They believe that for platforms like Google, the remedies must cross the moat.
And Lee-Anne Mulholland, Google's vice president of regulatory affairs, said that splitting Chrome or Android will damage Google. The reason why smartphones are cheaper is that Google provides Chrome and Android for free.
Mulholland also said that other proposals of the Department of Justice, such as forcing Google to share its customers' search results with search competitors, will endanger users' privacy.
The US Department of Justice is expected to submit a detailed proposal to the court by November 20, and Google will propose its own remedies by December 20, 2024.