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Analysis-Legal hurdles ahead for Google's forced sale of Chrome
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Analysis-Legal hurdles ahead for Google's forced sale of Chrome
Nov 22, 2024 2:40 AM

(Reuters) -Efforts by U.S. antitrust regulators to break up Alphabet by forcing a sale of its Google Chrome browser and other proposals to limit its search dominance are likely to run into legal challenges on grounds the remedies are extreme. 

After a ruling in August that Google illegally monopolized the search market, U.S. Department of Justice prosecutors argued to a judge on Wednesday that the company must sell Chrome, share data and search results with rivals and possibly sell its Android smartphone software.

Alphabet shares closed nearly 5% lower on Thursday.

The proposals are part of a landmark case aimed at reshaping how users find information. But a new pro-business administration of President-elect Donald Trump next year could change that effort and legal proceedings could last years, experts said.

"It would strike me as an over-ask," said Kevin Walkush at Jensen Investment Management, which holds Google stock and is skeptical a Chrome divestiture will happen. "You ask for everything possible, not necessarily with an eye towards what would be probable and proportional, and then see what sticks."

The DOJ sought and won a breakup of Microsoft in the early 2000s after alleging it illegally monopolized the web browser market. That ruling was overturned by an appeals court, and Microsoft and the DOJ eventually settled.

Walkush expects the Google case to take years to play out as the company appeals. "The wheels of justice do not turn quickly," he said.

Google called the DOJ's approach "unprecedented government overreach that would harm American consumers, developers, and small businesses," giving as examples diminished user privacy and less funding for companies such as browser maker Mozilla when they feature Google search.

The case could also face challenges from Trump.

While Trump's administration originally filed the search case against Google during his first term, he indicated in October he might not break up the company because it could hurt the American tech industry at a time competition is heating up with China in areas including AI. 

Representatives for Trump did not immediately respond to a request for comment.

'SUBSTANTIAL HEADWINDS'

Chrome, the most widely used web browser, is a pillar of Google's business, providing the company with valuable user data that helps it target ads. The search ads business brought in more than half of Alphabet's total revenue of $88.3 billion in the latest quarter.

The value of Chrome, estimated to hold about two-thirds of the global browser market, diminishes sharply as a standalone browser.

"The reason why it's valuable to Google is because Google uses it to enhance its ad business and its search business," said Megan Gray, former general counsel at search rival DuckDuckGO who has also worked as an attorney at the Federal Trade Commission. "If you don't have those, then Chrome would just be a data broker."

A forced sale would not address 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 substantial headwinds with this remedy," because Chrome can run search engines other than Google, said Gus Hurwitz, senior fellow and academic director at University of Pennsylvania Carey Law School. "Courts expect any remedy to have a causal connection to the underlying antitrust concern. Divesting Chrome does absolutely nothing to address this concern." 

The DOJ proposed a blanket ban on Google offering incentives to give its search engine preferential treatment. That would include Google's lucrative partnership with Apple, where it pays the smartphone maker billions of dollars annually to make Google Search the default on Apple smartphones.

Evercore analysts called the proposed curbs "draconian."

Given Google Search's popularity, Apple is likely to continue with Google as the default search engine even without any agreement or payments, Hurwitz said.

DOJ's proposals also include demands for Google to license search results at a nominal cost and share the user data it gathers with competitors for free.

D.A. Davidson analyst Gil Luria said it was harder to ascertain the impact of Google having to open up its search data until the terms are clearer. The Center for Journalism & Liberty said Google licensing its search data would be "transformative" for news publishers because it would help them better understand their audiences.

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