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According to CCTV News, on August 5 local time, U.S. federal district judge Amit Mehta ruled that Google had violated the law by monopolizing the online search market. This was the first victory for the U.S. government in a series of antitrust lawsuits against large technology companies.

In a 277-page ruling, Mehta said: "Google is a monopoly and its actions are designed to maintain its monopoly." According to the court's ruling, its distribution agreement violated Section 2 of the Sherman Act.

The case began in 2020, when the U.S. Department of Justice and attorneys general from 52 states and jurisdictions jointly sued Google, accusing it of paying billions of dollars each year to smartphone manufacturers, wireless operators, and browser developers such as Apple, Samsung, AT&T, and Mozilla in exchange for Google as the default choice for their search engines, and in many cases, prohibiting the above-mentioned partners from trading with Google's competitors.

Google Inc. (China Business News)

Judge Mehta also pointed out in his ruling that Google paid $26.3 billion to phone manufacturers in 2021 alone to ensure that they set Google as the default search engine for new phones. A court document showed that in 2022 alone, Google paid Apple $20 billion, while Apple's annual service business revenue was $85 billion.

"The trial evidence strongly demonstrates that the monopoly maintained by Google through exclusive distribution agreements enabled Google to raise text advertising prices without any meaningful competitive constraints," Mehta said in his ruling. "Unrestrained price increases drove substantial revenue growth for Google and enabled it to maintain high and very stable operating profits."

In response to the ruling, Kent Walker, president of global affairs at Google's parent company Alphabet, said Google plans to appeal the decision.

Zhang Longtian, associate professor at the School of International Economics and Trade of the Central University of Finance and Economics, said in an interview with Yicai Global that "this ruling is a milestone in the field of antitrust enforcement and may have a profound impact on the business practices and market competition landscape of the technology industry."

In recent years, European and American antitrust enforcement agencies have filed a series of major lawsuits against technology giants: the US Federal Trade Commission (FTC) accused e-commerce giant Amazon of illegally monopolizing the online sales market in September last year, and the US Department of Justice's antitrust department sued Apple for monopolizing the smartphone market in March this year. Facebook's parent company Meta is facing its first fine from the European Union for allegedly abusing its dominant position in the advertising market. Google is also facing another case accusing its advertising technology of suspected monopoly, which will go to trial in September.

Zhang Longtian said, "This ruling shows that the U.S. Department of Justice and federal judges are becoming less tolerant of the monopolistic behavior of technology giants, which may prompt the government to step up its scrutiny and litigation against other technology giants, and provide an important legal basis and precedent for future antitrust enforcement."

He also said that antitrust agencies in other countries may follow the United States' example and strengthen supervision and enforcement of their own technology giants.

What kind of punishment will Google face?

The proceedings will now enter the second phase, where the court will decide what penalties Google will face for violating antitrust laws. Considering that Google has already stated that it will appeal, it is foreseeable that it will take a long time for the case to be truly settled.

Li Liang, associate professor and master's supervisor at the Institute of Comprehensive Rule of Law at China University of Political Science and Law, said in an interview with the First Financial reporter, "The forms of anti-monopoly penalties and relief measures include fines, behavioral relief and structural relief. Among them, behavioral relief refers to requiring the companies involved to stop certain behaviors or perform certain behaviors to restore and promote competition, and structural relief involves the splitting up of companies. Structural relief involves the splitting up of companies, and because it involves fundamental changes to the structure of the company, the degree of intervention is very large and is generally less used. In this case, it is more likely to be a combination of fines and behavioral relief."

Zhang Longtian also said, "Google may face various types of penalties, including huge fines, behavioral restrictions, company splitting, adjustment of contracts and business agreements, supervision and auditing, and consumer compensation, but the more likely penalties should be the first two."

After the ruling was announced, the stock price of Google's parent company Alphabet widened its decline that day, falling by more than 5% at one point, and eventually fell 4.6% to close at $160.64 per share, the lowest closing price since April 25, with a total market value of $2.02 trillion.

Is Microsoft the biggest winner in this ruling?

In its indictment, the Justice Department said that Google has captured approximately 90% of the U.S. online search market and 95% of the mobile device search market in recent years, largely due to Google's exclusive agreements and anti-competitive behavior.

The ruling is believed to have a direct impact on one of Google's core businesses. Last year, Google earned $175 billion in revenue from search advertising, accounting for more than half of its total revenue of $307 billion. In contrast, Microsoft's Bing earned about $12 billion in revenue from search advertising, with a market share of less than 5%.

Microsoft CEO Satya Nadella, who also testified during the trial, said he had tried unsuccessfully every year as Microsoft's CEO to convince Apple to drop Google as its default search partner.

According to closed court documents, Google paid Apple $20 billion in 2022 alone, which is a large part of Apple's $85 billion annual services business.

Nadella also said that the large amount of search data provided to Google through default agreements can help it train artificial intelligence models, which will give Google a dominant position in the AI ​​development race.

Adam Kovacevich, a former Google policy chief, said, "The biggest winner from today's ruling is not consumers or small tech companies, but Microsoft." He added, "Microsoft has underinvested in search for decades, but today's ruling opens the door for courts to force Bing to make a default deal."

Talking about the impact of this ruling on the search engine market, Zhang Longtian said: "There may be some changes. If this antitrust ruling takes effect, users will no longer be the default choice to use Google search engine, but may turn to similar products such as Microsoft's Bing. But for now, Google search engine is still the first choice of users in most scenarios, so it depends on whether other similar products can achieve similar results."

Apart from Microsoft, which is eyeing the market covetously, some analysts say that with the arrival of Apple Intelligence & Siri, Apple can guide users to use artificial intelligence and Siri instead of web browsers.

Editor on duty: Xiaoyang