Google won search business via innovation, but Google made a mistake by hoping to use money to sustain its position when it decided to pay $billions to Apple and other device makers for premium positions in their ecosystems. That is illegal and must be condemned.
That said, Google does not need to be broken apart as the US justice department is considering: “The U.S. Department of Justice (DOJ) on Tuesday proposed significant recommendations regarding Google’s search engine business practices, hinting at a potential breakup of the tech giant as a remedy for antitrust concerns.” Doing that will hurt many businesses and consumers. Let me return to business history.
In the 19th century, railroads played a pivotal role in shaping the American economy, with intense competition and financial struggles characterizing the industry. However, this era also saw the rise of monopolies like Standard Oil, which revolutionized the oil industry through efficient production and transportation methods. The Panic of 1873 further exacerbated economic challenges, leading to significant repercussions for both businesses and consumers. In response to concerns about monopolistic practices, the Sherman Antitrust Act was introduced in 1890 to regulate anti-competitive behavior and promote fair competition. Fast forward to today where tech utilities dominate.
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For Rockefeller’s Standard Oil, the real antitrust issue was not about crude oil. Standard Oil won via innovation in the oil industry, and became the category-king. What caused the problem was that it wanted to use railroads distribution pricing competitiveness, via bulk discounts, to keep its position. Those discounts provided asymmetric unfair positioning which other oil producers could not match. The government stepped in and helped, breaking the oil giant into pieces.
Today, breaking Google will not deliver any better result for consumers unlike what the government accomplished in the era of Rockefeller. If you live in our modern world, it is going to be nearly impossible to live a day without using a Google product, and that can happen at zero bill to you. No other company can boast of that feat. So, changing this equilibrium via breakup means consumers would be hurt.
What the government needs to do is to fine Google, and put a suspension on any contracted lead generation that offers exclusivity for a decade. We expect Apple to build a native search since it cannot be bribed out with $20 billion yearly from Google anymore. That is enough of a problem for Google besides what OpenAI ChatGPT is bringing along. Breaking Google is not necessary because that can reposition Apple once Apple Search goes live.
More so, Amazon runs a big search business now, and that means that Google has lost ad revenues from many SMEs since those firms prefer Amazon which puts their products before those actually in the spirit and process of shopping, unlike what Google delivers in the free web. You can also put what Meta via Facebook and Instagram is doing in that sector. Google’s payment to Apple and others was out of panic, and not necessary out of strength. Stop that payment with a fine, and that will do it.
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If you break Google, you will simply hand the search business to Apple and Samsung. Network effects make it impossible for level playing field or equality of competition, because most users will congregate in any platform they find most relevant. You cannot put a ceiling on the number of users a digital platform should have, so the equilibrium point will continue to shift.
If Google has been monopolizing search business, it does not call for the government to monopolize Google too, else it will amount to using problem to solve problem.