Google's monopoly drama should have Apple, Meta, and Amazon nervous

• The court ruling finding Google illegally monopolized search has Big Tech companies on their heels.
• It gives a road map for other antitrust rulings and makes cases easier to bring in the first place.

A federal judge's blistering ruling describing Google as a monopoly should have other big tech companies worried.

In the nearly 300-page ruling, US District Judge Amit Mehta wrote that parent company Alphabet's deals to make Google the default search engine on other platforms violated corporate competition laws while accruing billions of dollars in revenue.

"Google is a monopolist, and it has acted as one to maintain its monopoly," Mehta wrote.

The Department of Justice is now mulling whether to seek a potential breakup of the company, Bloomberg reported earlier this week.

Google has previously said it plans to appeal Judge Mehta's ruling, and that the decision "recognizes that Google offers the best search engine, but concludes that we shouldn't be allowed to make it easily available." Business Insider reached out to the company for any further comment.

With Google on its heels — the developments are a clear signal to other Big Tech companies that they should be worried.

It's not the first time Big Tech has lost an antitrust suit and faced a potential split. Microsoft was ruled a monopoly in the 90s, and while the initial remedy was to break up the company, the tech giant ended up settling.

But the Google development is the biggest Big Tech antitrust ruling since then, and Wedbush Securities analyst Dan Ives wrote in an analyst note Wednesday that the decision comes after the industry has gotten stronger under the AI revolution. He told Business Insider that Google's loss gives the Justice Department momentum in its "Big Tech battle."

"The Big Tech antitrust drumroll will continue," Ives told BI, adding that "Big Tech has a target on its back."

Under President Joe Biden's administration — and in particular, with the appointment of FTC Commissioner Lina Khan — the US government has taken an aggressive antitrust approach toward major tech companies.

In addition to the case against Alphabet that Mehta presided over, the Justice Department and an array of states have brought antitrust lawsuits against Apple for how it treats competitors to its in-house iPhone apps, Amazon for using its retail dominance to squeeze third-party sellers on its platform, and Meta amid its attempts to dominate the social media market through acquisitions like Instagram and WhatsApp.

All of these cases are resource-intensive, have little precedent, and are the most ambitious antitrust lawsuits in decades. One big consequence of the Google ruling is it will give federal agencies a boost of confidence that the risk is worth it, according to former Federal Trade Commission chair William Kovacic.

"It's a huge shot in the arm to your team," Kovacic, now a professor at the George Washington University Law School, told BI. "And your success in all these other matters involves having more people fully committed and willing to work their fingers to the bone to make this work. Judge Mehta's ruling suggests that the sacrifice, the effort, is worth it."

Apple, Meta, and Amazon did not immediately respond to requests for comment.

What is a 'market,' anyway?

To win an antitrust case, plaintiffs need to prove that a particular company illegally dominates a particular market.

Often, the cases get stuck on the question of how to define a particular market in the first place.

Defendants typically define the market broadly, arguing they're just one fish in a big pond. Plaintiffs try to define the market in narrow terms, arguing the companies are such big fish that they are illegally taking up space in a very small pond.

A federal judge previously tossed a lawsuit against Meta over these ambiguities, ruling that regulators didn't sufficiently define the social media market that the FTC alleged Meta monopolized before the regulator refiled its case.

Judge Mehta's mammoth Google ruling shows judges exactly how to handle the market-definition puzzle, according to Bill Baer, a former top antitrust lawyer at the Justice Department.

The judge used a landmark 2001 United States Court of Appeals decision against Microsoft and demonstrated how its findings could be mapped onto Alphabet's conduct to dominate the search market for Google. That same strategy could be used by other judges overseeing cases against Amazon, Apple, or other tech companies, Baer told BI.

"That analytical process of figuring out what, in real terms, competes with other things, and not let the defendant kind of throw spaghetti at the wall and see what sticks, is one of the hallmarks of the Google decision," Baer said.

Big Tech companies normally hire econometricians to create big, complicated models to define big, complicated markets, according to Rebecca Allensworth, a professor of antitrust law at Vanderbilt University Law School.

It's an expensive, resource-intensive approach to defining markets for these cases.

Mehta, however, adopted a more commensensical standard, favored by the Justice Department.

Instead of complex mathematical models, Mehta looked at internal documents, the conduct of the businesses themselves, and testimony from rival companies to define the "search market" Google monopolized.

If other judges follow suit and follow the same standard, it could lower the bar for bringing antitrust lawsuits in the first place.

"If the bar is you have to prove this to a mathematical certainty, you're just going to throw out a lot of cases," Allensworth said.

Big Tech companies may be more cautious about acquisitions

Tech companies may not be rushing to change their entire business models, but the recent court decision could make them more cautious about acquisitions.

But the Google ruling doesn't necessarily mean regulators will face success pursuing similar judgments against other tech giants.

Wolfe Research analyst Shweta Khajuria told BI Google's lawsuit may be different from other Big Tech players because Google has a "much more dominant presence" in Search than any other company has in its respective categories.

Meta still competes with Snapchat and TikTok, Khajuria said. But the Google lawsuit is significant because it's "by far the biggest" antitrust case, and it will serve as a bellwether for other companies, Khajuria said.

"The underlying takeaway is that no company, no matter how big they are, is above the law," Khajuria said.

Emarketer analyst Max Willens isn't convinced that the ruling should make other tech giants concerned. He told BI that the ruling against Google "shouldn't necessarily signal that these other companies" are in bad shape.

"All of these lawsuits involve very different circumstances," Willens said.

Aside from the difference in lawsuits, Willens also said Google will "vigorously defend itself" and appeal the decision, which will probably delay the final verdict by years. Until the final verdict comes out, companies aren't going to preemptively change their businesses, Willens said.

"It's a change of pace to Big Tech," Willens said. "It's new, but it's not going to cause them to take a measure so drastic that it would impair their businesses."

Khajuria also said she doesn't anticipate companies taking proactive action to prevent a similar outcome. However, she said the tech giants might be more cautious about making large acquisitions that could draw attention to them.

Ives also said that it's unlikely business models will dramatically change, but he said the decision may push Apple to settle its lawsuit before it goes to court.

Ives wrote in a Wedbush note to investors that although the case is expected to last for years, he predicted a settlement will likely be reached in the next 12 to 18 months.

But it's clear that Judge Mehta's decision in the Alphabet cases has pierced any perception that Big Tech companies — with their high-powered lawyers and massive resources — are invincible in the courts.

"There's a vibe, and that's really important," Allensworth told BI. "There's a sense that in a very high profile case, by a very thoughtful, legalistic, kind of nonpartisan judge saying that this Big Tech company is a monopolist."

A bombshell ruling like that is bound to make the other tech giants sit up straight.