Efforts by U.S. antitrust regulators to break up Alphabet by forcing the sale of its Google Chrome browser and other proposals to limit its search dominance are likely to face legal challenges because the remedies are extreme.
Following a ruling in August that Google illegally monopolized the search market, U.S. Justice Department prosecutors argued before a judge on Wednesday that the company should sell Chrome, share data and search results with rivals and possibly sell its Android smartphone software.
Alphabet shares fell as much as 7%, on track for their biggest daily percentage decline since Jan. 31.
The proposals are part of a groundbreaking case aimed at transforming the way users find information. But a new pro-business administration of newly elected President Donald Trump next year could change that effort and legal challenges could take years, experts say.
“It seems like an exaggerated ask to me,” said Kevin Walkush of Jensen Investment Management, which owns Google stock and is skeptical about a Chrome divestiture. “You ask for everything possible, not necessarily with an eye to what would be likely and proportionate, and then see what sticks.”
The DOJ sought a breakup of Microsoft in the early 2000s after claiming it had illegally monopolized the Web browser market. That ruling was overturned by an appeals court, and Microsoft and the DOJ ultimately reached a settlement.
Walkush expects the Google case to take years before the company appeals. “The wheels of justice do not turn quickly,” he said.
Google called the DOJ's approach “an unprecedented government overreach that would harm American consumers, developers and small businesses,” citing the example of reduced user privacy and less funding for companies like browser maker Mozilla if they offer Google Search.
The case could also face challenges from Trump.
While the Trump administration originally filed the search lawsuit against Google during his first term, he indicated in October that he might not break up the company because it could hurt the U.S. tech industry at a time when competition with China is heating up the field of AI, among other things, is increasing.
Trump representatives did not immediately respond to a request for comment.
'SIGNIFICANT HEADWIND'
Chrome, the most widely used web browser, is a mainstay of Google's business, providing the company with valuable user data to help it target ads. The search advertising sector brought in more than half of Alphabet's total revenue of $88.3 billion in the last quarter.
The value of Chrome, which is estimated to have about two-thirds of the global browser market, is declining sharply as a standalone browser.
“The reason it's valuable to Google is because Google uses it to improve its advertising and search operations,” said Megan Gray, former general counsel at search rival DuckDuckGO, who has also worked as a lawyer at the Federal Trade Commission. “If you don't have that, Chrome would just be a data broker.”
A forced sale would not resolve several key issues raised in the DOJ lawsuit, including a search monopoly, critics say. U.S. antitrust enforcers, who are also pursuing Apple and Amazon in other monopoly cases, would have to approve any potential Chrome buyer.
“DOJ will face significant headwinds with this fix” because Chrome can use search engines other than Google, said Gus Hurwitz, senior fellow and academic director at the University of Pennsylvania Carey Law School. “Courts expect each remedy to have a causal relationship to the underlying antitrust problem. Divesting Chrome does absolutely nothing to address this problem.”
The DOJ proposed a blanket ban on offering incentives to Google to give its search engine preferential treatment. That would include Google's lucrative partnership with Apple, in which it pays the smartphone maker billions of dollars annually to make Google Search the default on Apple smartphones.
Evercore analysts called the proposed measures “draconian.”
Given the popularity of Google Search, Apple will likely continue with Google as the default search engine even without any agreement or payment, Hurwitz said.
DOJ's proposals also include requirements for Google to license search results at a nominal price and share collected user data with competitors for free.
DA Davidson analyst Gil Luria said it was harder to determine the impact of Google having to open up its search data until the terms were clearer. The Center for Journalism & Liberty said licensing Google for its search data would be “transformative” for news publishers as it would help them better understand their audiences.
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