Silicon Valley is on the verge of ending Google’s monopoly experiment

Google has a lot at stake as a federal judge weighs whether the tech giant’s search empire should be broken up.

So is the rest of Silicon Valley.

A landmark antitrust case against the Justice Department against Google (GOOG, GOOGL) reached its final stage last week, with federal and 14 state prosecutors arguing in their closing arguments that Google illegally monopolized the online search and search advertising markets.

Google’s lawyer, John Schmittlin, once again pushed back with a claim the company has made from the start: “Google wins because it’s better,” he said.

A government win would certainly threaten a huge chunk of Google $237.8 billion Profit machine. But the decision, the decision will be made US District Judge Amit Mehta In the coming weeks or months, some other big names in the tech world also have huge implications.

WASHINGTON, DC - OCTOBER 30: Google and Alphabet CEO Sundar Pichai leaves a federal courthouse on October 30, 2023 in Washington, DC.  Pichai testified Monday to defend his company in the biggest antitrust case since the 1990s.  Alphabet's Google Inc. in the online search business.  The US government seeks to demonstrate that it maintains an illegal monopoly.  The trial is expected to last until November.  (Photo by True Anchorer/Getty Images)

Alphabet CEO Sundar Pichai leaves federal court in Washington, DC on October 30 after testifying in an antitrust lawsuit against his company. (Drew Angerer/Getty Images) (True Anchorer via Getty Images)

That’s because Apple ( AAPL ), Amazon ( AMZN ) and Meta ( META ) are defending themselves against federal and state-led antitrust lawsuits, some of which make similar claims, and all three are either losing or winning. Depending on the outcome.

In the Apple case, US prosecutors accused the iPhone maker of using a “web of contractual restraints” to block competitors from entering the smartphone market.

The government made a similar claim in Google’s case, which hinged on several types of agreements Google allegedly used to assert its search dominance.

“The broader lessons here are far-reaching, but this is a very important time when the first decision is made in these technical cases,” said University of Washington antitrust professor Douglas Rose.

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“I think they’re interested in how narrow or broad they are [the judge] Rose added, defining the markets here, “and if there’s any learning from what he’s writing, it can be applied elsewhere.”

The government argues that Google violates Section 2 of the Sherman Act by preventing competitors from entering three distinct markets: general online search, search advertising, and search text advertising.

In general, Rose said, lawyers prefer to create narrower market definitions to make it easier to prove that a defendant has a monopoly.

How the courts respond to those arguments is noteworthy.

New York University law professor Harry Furst said the impact of Google’s case will depend on the extent to which the judge accepts or rejects one of the government’s antitrust theories — that Google’s collusive actions qualify as anticompetitive.

That strategy has so far failed the DOJ, including its landmark case in the 1990s, which eventually forced Microsoft ( MSFT ) into a settlement in the early 2000s to open up its operating system to competitors.

Attorneys for Dominique Strauss-Kahn, Amit Mehta (L), William Taylor (C) and Hugh Campbell present the case of Strauss-Kahn v. Nafizato Diallo in New York State Supreme Court in the Bronx on March 28, 2012 in New York.  Dominique Strauss-Kahn's lawyer asked a US judge on Wednesday to dismiss a civil lawsuit brought by a New York hotel maid, who said the disgraced French politician had diplomatic immunity for allegedly assaulting her.  coat Attorneys for Dominique Strauss-Kahn, Amit Mehta (L), William Taylor (C) and Hugh Campbell present the case of Strauss-Kahn v. Nafizato Diallo in New York State Supreme Court in the Bronx on March 28, 2012 in New York.  Dominique Strauss-Kahn's lawyer asked a US judge on Wednesday to dismiss a civil lawsuit brought by a New York hotel maid, who said the disgraced French politician had diplomatic immunity for allegedly assaulting her.  coat

Amit Mehta, left, is the judge overseeing the Google antitrust case. Here she is pictured in 2012 when she was a lawyer on the New York State Supreme Court. (DON EMMERT/AFP via Getty Images) (DON EMMERT via Getty Images)

But if the judge in the Google case believes the theory has some merit, as originally explained, it could change the way future antitrust cases are judged.

“I’m interested to see the extent to which the government is trying to return to that theme and move it in a direction that might be useful in other cases,” First said.

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Even beyond the tech world, many companies could be affected by what the judge decides.

The government’s victory puts at risk billions of dollars in mutually beneficial deals between Google and Apple, as well as contracts with other device manufacturers and telecommunications companies.

The government alleged in its lawsuit that Google pays billions of dollars each year to LG, Motorola ( MSI ) and Samsung; Major U.S. wireless carriers such as AT&T ( T ), T-Mobile ( TMUS ) and Verizon ( VZ ); and browser developers such as Mozilla, Opera and UCWeb.

Prosecutors allege that Google paid Google between $8 billion and $12 billion a year — a portion of search ad revenue — in exchange for giving Google Search the default spot on Apple devices.

By 2022, those payments will be about $20 billion, according to prosecutors. The DOJ said the figure was 15%-20% of Apple’s global net income.

Apple CEO Tim Cook speaks to reporters after meeting with Indonesian President Joko Widodo at the Presidential Palace in Jakarta, Indonesia on April 17, 2024.  REUTERS/Willy KurniawanApple CEO Tim Cook speaks to reporters after meeting with Indonesian President Joko Widodo at the Presidential Palace in Jakarta, Indonesia on April 17, 2024.  REUTERS/Willy Kurniawan

Apple CEO Tim Cook, in April. (REUTERS/Willy Kurniawan) (REUTERS/Reuters)

Some tech companies, however, stand to gain if the government ultimately wins.

Breaking Google’s contractual arrangements could boost rival search engines like Microsoft’s Bing and DuckDuckGo.

This opens the door to new search engines and mobile manufacturers.

Amazon, for its part, pulled out of the mobile phone market after it said Google’s contracts prevented it from attracting manufacturers to its alternative operating system. Four OSa match”Pin spoon” for Google’s Android platform.

Manufacturers worry that Amazon’s partnership with Bing for mobile search services could jeopardize lucrative contracts with Google, lawyers said.

It has yet to say what precise settlement the government wants if it wins against Google. If the government succeeds in any of its claims, a separate remedial phase of the trial will be held.

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The outcome of the November presidential election could also affect the case brought under former President Donald Trump’s administration.

If Biden is defeated, a new administration could decide to pursue different remedies or drop the case altogether.

The judge in the case, Mehta, may or may not have dipped his hand in his closing questions to the lawyers during arguments last weekend.

He pushed back both sides of the argument.

“You can talk about competition, but the competitor bears some responsibility to compete,” Mehta said, while also questioning why new competitors aren’t motivated to enter Google’s market — if that’s even possible.

“Under the current market conditions, it seems highly improbable, impossible,” Mehta said.

Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on Twitter @Alexisquiet.

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