DOJ wants Google (NASDAQ: GOOGL) to ditch Chrome, but an even bigger battle looms
An endgame in the Department of Justice’s long-running antitrust case against Alphabet’s Google (NASDAQ: GOOGL) may be in sight, with the agency telling a court late last month that the tech company should be forced to divest its popular Chrome browser after a judge ruled earlier this year that the firm had illegally monopolized the search engine industry. That was just the start, however, and the agency seems to be adopting an agenda that would not only reshape the future of search but also rapidly evolving AI technologies.
In the 23-page outline of proposed remedies to counter Google’s dominance over search, the DOJ went on to demand more oversight of the Android mobile ecosystem, and it wants the company to be prohibited from paying other companies—like Apple (NASDAQ: AAPL)—to prioritize its products. The agency additionally wants to force Google to syndicate its data and indexes to rivals who would only have to pay marginal costs, essentially allowing competitors to re-sell Google services without having to bear any of the development costs.
Eliminating Google’s search monopoly is central to the government’s case, but the most eyebrow-raising part of the proposal is a would-be prohibition on “owning or acquiring any investment or interest” in any “rival query-based AI product.” That could risk the company’s commitment to invest $2 billion in Anthropic—an AI upstart that competes with industry leader OpenAI—and has fueled speculation that the DOJ’s case could be politically charged because of Google’s perceived influence over public discourse. Going after Chrome is a frontal attack on the company’s lucrative search business, as the browser is a key tool that’s used to keep people in the ecosystem. But a prohibition on AI partnerships is more of a nuclear option that could have significant political and economic consequences.
Kent Walker, Google’s Chief Legal Officer, accused the DOJ of pushing a “radical interventionist agenda” that would break a range of products beyond Search, while CEO Sundar Pichai told investors that it will “vigorously defend” itself. The company plans to file its own proposals to the court this month, and it could ultimately appeal whatever the judge, Amit Mehta, decides. “We’ve reached a position of success because we have deeply innovated and we are continuing to do so,” Pichai said during a recent earnings call. “People have chosen us because they view it as the best product, be it consumers or partners.”
Judge Mehta will likely have a lot on his mind as the penalty part of the case unfolds over the coming months in court, where Microsoft (NASDAQ: MSFT) will loom large because of the precedents set more than 20 years ago after the DOJ went after that tech leader over its alleged monopolization of the then-emerging browser market. The government had initially sought to break up the company, but it eventually stepped back from the brink after an appeal process and agreed to a more nuanced settlement. That could give investors some reason to hope the current struggle won’t result in a worst case scenario.
Alphabet shares surged to an all-time high this week after the company announced the release of its Gemini 2.0 AI model that it says will soon be integrated into Search and bring “advanced reasoning capabilities” to “tackle more complex topics and multi-step questions, including advanced math equations, multimodal queries and coding.” The company, however, is still trading at a substantial discount to peers including Apple, Meta and Microsoft in terms of forward price-to-earnings—even after a solid third quarter that saw big gains in both revenue and profit—and that means any kind of eventual settlement or resolution with the DOJ could set up the company for even more gains. The news earlier this month that Gail Slater—a longtime antitrust lawyer—had been nominated to head the agency’s antitrust division was widely seen as a hawkish signal on the part of the incoming administration of President-elect Donald Trump, with The Tech Oversight Project saying that “antitrust enforcement is a popular, bipartisan, political winner and here to stay.”
Amid the ongoing legal uncertainty, Google’s most pressing challenge in the near to mid-term may actually be the rising threat from OpenAI, which has a partnership with Microsoft and is reportedly developing its own web browser that would work hand-in-hand with its chatbot. All of that has emerged without any government action, and that’s exactly the point Aswath Damodaran, a finance professor at New York University’s Stern School of Business, tried to make in a lengthy post about the recent efforts to go after big tech with antitrust enforcement.
“Doing nothing is, in fact, the most sensible option, with big tech companies,” he wrote, arguing that lawyers are usually ill-prepared to regulate business. Indeed, the tech graveyard is filled with examples of firms like BlackBerry and Yahoo! that quickly fell from dominance to irrelevance, and OpenAI is showing once again that disruption is always just around the corner, with or without the DOJ. As the latest legal drama unfolds, the eventual fate of Chrome or even Search may not be the most impactful developments. The real story to watch is how effectively the government can shape the future of emerging AI technologies. Alphabet, meanwhile, captivated widespread attention this week with news about a new quantum computing chip called Willow, signaling the next horizon in a long-term roadmap that investors are only starting to get their heads around.
