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Chegg ( CHGG ) says AI overviews have taken its web traffic

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Publishers will lose incentive to keep internet alive

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Lawsuit first standalone antitrust action over Google AI

(Adds Chegg exploring sale in paragraph 4, comment from Google

in paragraphs 5-6, Chegg ( CHGG ) closing price in paragraph 7, bullets)

By Jody Godoy

Feb 24 (Reuters) - Alphabet's Google internet

search engine is eroding demand for original content and

undermining publishers' ability to compete with its artificial

intelligence-generated overviews, a U.S. educational technology

company said in a lawsuit filed on Monday.

Chegg ( CHGG ), an online education company that offers

textbook rentals, homework help, and tutoring, said in the

lawsuit filed in Washington, D.C., that Google is co-opting

publishers' content to keep users on its own site, erasing

financial incentives to publish.

This will eventually lead to a "hollowed-out information

ecosystem of little use and unworthy of trust," the company

said.

The Santa Clara, California-based company has said Google's

AI overviews have caused a drop in visitors and subscribers. The

company is now considering a sale or take-private transaction as

a result, the company's CEO Nathan Schultz said on Monday.

Google spokesperson Jose Castaneda called the claims

meritless.

"With AI Overviews, people find Search more helpful and use

it more, creating new opportunities for content to be

discovered. Every day, Google sends billions of clicks to sites

across the web, and AI Overviews send traffic to a greater

diversity of sites," Castaneda said.

Chegg ( CHGG ) shares closed at $1.57 on Monday, down more than 98%

from its peak price in 2021. The company announced it would lay

off 21% of its staff in November.

Schultz said Google is profiting off the company's content

for free.

"Our lawsuit is about more than Chegg ( CHGG ) - it's about the

digital publishing industry, the future of internet search, and

about students losing access to quality, step-by-step learning

in favor of low-quality, unverified AI summaries," he said.

Publishers allow Google to crawl their websites to generate

search results, which Google monetizes through advertising. In

exchange, the publishers receive search traffic to their sites

when users click on the results, Chegg ( CHGG ) said.

But Google has started coercing publishers to let it use the

information for AI overviews and other features that result in

fewer site visitors, the company said.

Chegg ( CHGG ) argued the conduct violates a law against conditioning

the sale of one product on the customer selling or giving its

supplier another product.

The lawsuit is believed to be the first where a single

company accuses Google of violating antitrust law through AI

overviews. An Arkansas newspaper made similar claims against

Google in a class action on behalf of the news industry in 2023.

U.S. District Judge Amit Mehta, who ruled in a case brought

by the U.S. Department of Justice that Google holds an illegal

monopoly in online search, is overseeing the news publisher

case.

Google has said it will appeal that decision, and has asked

the judge to dismiss the newspaper's case.