The end of Google’s monopoly lawsuit has Silicon Valley on edge

The stakes are high as a federal judge considers whether to break up the tech giant’s search empire.

This also applies to the rest of Silicon Valley.

A landmark antitrust case pitting Google (GOOG, GOOGL) against the Justice Department entered its final stages this past week, as prosecutors from the federal government and 14 states said in closing arguments that Google illegally controlled the online search engine. and monopolized search advertising markets.

Google’s attorney, John Schmiddlein, pushed back again with a claim the company has made from the beginning: “Google wins because it’s better,” he said.

A government victory would certainly threaten a large portion of Google’s $237.8 billion profit engine. But the outcome, which will be decided in the coming weeks or months by U.S. District Judge Amit Mehta, also has massive implications for some of the other big names in the tech world.

WASHINGTON, DC - OCTOBER 30: Sundar Pichai, CEO of Google and Alphabet, leaves federal court on October 30, 2023 in Washington, DC.  Pichai testified Monday to defend his company in the largest antitrust case since the 1990s.  The US government is trying to prove that Google Inc.  of Alphabet has an illegal monopoly in the field of online search.  The trial is expected to last until November.  (Photo by Drew Angerer/Getty Images)

Alphabet CEO Sundar Pichai will leave federal court in Washington, D.C., on October 30 after testifying in the antitrust case against his company. (Drew Angerer/Getty Images) (Drew Angerer via Getty Images)

That’s because Apple (AAPL), Amazon (AMZN) and Meta (META) are defending themselves against a series of other federal and state-led antitrust lawsuits, some of which make similar claims, and because all three could lose or win. depending on the outcome.

In Apple’s case, US lawyers have alleged that the iPhone maker has denied rivals access to the smartphone market by using a “web of contractual restrictions.”

A similar claim was made by the government in the case of Google, which hinges on various types of contracts that Google is said to have used to strengthen its dominance in the search business.

“The broad lessons here are still a ways off, but this is clearly a very important moment when the very first of these technical cases will be decided,” said antitrust professor Douglas Ross of the University of Washington.

“I think they will be interested in how narrowly or broadly (the judge) defines the markets here,” Ross added, “and whether there is any knowledge in what he writes that could apply elsewhere.”

The government alleges that Google violates Section 2 of the Sherman Act by denying competitors access to three different markets: general online search, search advertising, and search text advertising.

In general, Ross said, prosecutors tend to use narrower market definitions to make it easier to prove that a defendant has a monopoly.

How courts will respond to these arguments, he added, will be key.

New York University law professor Harry First said the impact of Google’s case also depends on whether the judge accepts or rejects one of the government’s antitrust theories: that Google’s class actions can be classified as anticompetitive .

That strategy has not been successful for the DOJ so far, including in the landmark 1990s case that ultimately forced Microsoft (MSFT) to settle in the early 2000s to open its operating system to competitors.

Attorneys for Dominique Strauss-Kahn, Amit Mehta (L), William Taylor (C) and Hugh Campbell present their case in Strauss-Kahn vs.  Nafissatou Diallo at the New York State Supreme Court in the Bronx on March 28, 2012 in New York.  A lawyer for Dominique Strauss-Kahn asked a US judge on Wednesday to dismiss a civil suit filed by a New York hotel maid.  He said the disgraced French politician had diplomatic immunity when he allegedly attacked her.  The suit

Amit Mehta, left, is the judge overseeing Google’s antitrust case. He is pictured here in 2012, when he was an attorney at the New York State Supreme Court. (DON EMMERT/AFP via Getty Images) (DON EMMERT via Getty Images)

But if the judge in the Google case is convinced that the theory has some merit, First explained, it could change the way future antitrust cases are judged.

“I’m curious to what extent the government is trying to return to that theme and maybe take it in a direction that might be useful in other cases,” First said.

Many companies can be affected by what the judge decides, even outside the tech world.

A government victory would put at stake billions of dollars in mutually lucrative contracts between Google and Apple, as well as deals with other device makers and telecom companies.

The government alleged in its case that Google pays LG, Motorola (MSI) and Samsung billions of dollars annually; major US wireless carriers such as AT&T (T), T-Mobile (TMUS) and Verizon (VZ); and browser developers such as Mozilla, Opera and UCWeb.

Prosecutors have alleged that Google paid Apple an estimated $8 billion to $12 billion a year — a portion of its search advertising revenue — in exchange for granting Google Search default placement on Apple devices.

According to prosecutors, these payments totaled about $20 billion by 2022. The DOJ said this figure represented 15% to 20% of Apple’s global net income.

Apple CEO Tim Cook looks on as he addresses journalists after meeting Indonesian President Joko Widodo at the presidential palace in Jakarta, Indonesia, April 17, 2024. REUTERS/Willy Kurniawan

Apple CEO Tim Cook in April. (REUTERS/Willy Kurniawan) (REUTERS/Reuters)

However, some tech companies will stand to gain if the government ultimately gains the upper hand.

Breaking Google’s contractual agreements could boost rival search engines such as Bing and Microsoft’s DuckDuckGo.

It could also open the door to new search engines and mobile manufacturers.

Amazon, in turn, exited the mobile phone market after Google’s contracts reportedly prevented it from attracting manufacturers to its alternative operating system, Fire OS, a competing “fork” to Google’s Android operating system.

Prosecutors said manufacturers were concerned that Amazon’s partnership with Bing for mobile search services would jeopardize lucrative deals with Google.

The government has yet to say what precise solution it wants if it gains the upper hand over Google. If the government wins any of its claims, there would be a separate remedies phase of the trial.

The outcome of November’s presidential election could also impact the case, which was brought under former President Donald Trump’s administration.

If Biden is defeated, a new administration could decide to seek other solutions or drop the matter altogether.

The judge in the case, Mehta, may or may not have raised his hand in his final questions to the attorneys during closing arguments this past week.

He returned to the arguments of both sides.

“You can talk about competition, but the competitor bears some responsibility for the competition,” Mehta said, while also wondering why new rivals aren’t pushing to enter Google’s market – and whether that’s even possible.

“It seems very, very unlikely, if not impossible, under current market conditions,” Mehta said.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.

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