A federal judge on Monday ruled that Google has illegally monopolized the search market, handing the government an epic win in its first major antitrust case against a tech giant in more than two decades.
Judge Amit Mehta in Washington said that the Alphabet Inc. unit’s $26 billion in payments to make its search engine the default option on smartphones and web browsers effectively blocked any other competitor from succeeding in the market.
“Google’s distribution agreements foreclose a substantial portion of the general search services market and impair rivals’ opportunities to compete,” Mehta said in a 286-page ruling.
By monopolizing distribution on phones and browsers, Google has been able to consistently raise the prices of online advertising without consequences, Mehta said.
“The trial evidence firmly established that Google’s monopoly power, maintained by the exclusive distribution agreements, has enabled Google to increase text ads prices without any meaningful competitive constraint,” he wrote.
Alphabet shares slipped 4.5% to $159.13 as of 3:50 p.m. in New York. Apple Inc., which depending on the remedy could stand to lose billions in payments Google makes to have its search engine be the default browser on iPhones, fell 5.8% to $207.14.
The Justice Department didn’t immediately have a comment. Google didn’t respond to a request for comment.
Antitrust enforcers alleged that Google has illegally maintained a monopoly over online search and related advertising. The government said that Google has paid Apple, Samsung Electronics Co. and others billions over decades for prime placement on smartphones and web browsers. This default position has allowed Google to build up the most-used search engine in the world, and fueled more than $300 billion in annual revenue largely generated by search ads.
Mehta found that Google doesn’t have a monopoly in the market for general search advertising, noting that competitors like Amazon.com Inc., Walmart Inc. and other retailers have begun to offer advertising related to searches on their own websites. But Google does have a monopoly over search text ads, which appear at the top of a search results page to draw users to websites, he said.
Mehta’s decision focuses solely on Google’s liability, nine months after the Justice Department and a group of states held a 10-week trial in federal court. He plans to hold a separate trial on what remedy to impose at a later date.
The Justice Department hasn’t yet said what changes it will seek, though it presented evidence that efforts by European regulators to require Google to offer users a choice of search engines led few to switch. The agency could demand the separation of Alphabet’s search business from other products, like Android or Chrome, which would mark the biggest forced breakup of a US company since AT&T was dismantled in 1984.
Antitrust enforcers separately sued Google for allegedly monopolizing the technology used to buy, sell and serve display advertising online. In that case, which is set for trial in Virginia federal court next month, the government is seeking to force Google to sell off some of its advertising technology products.