Thematic Spotlight: Is Google Monopolising the Internet?

Big Tech & Internet

In a historic ruling by the US Department of Justice (DOJ), Alphabet inc., the owner of renowned search engine Google, has been found guilty of possessing an illegal monopoly of the online search and advertising market.¹ While investors did not react positively to the news, sending the stock down 2.3% on the day, to most users of the internet, this probably did not come as too much of a surprise. Roughly 1.11 billion websites exist in the world, with three new websites built every second, but more than 93% of global traffic originates from google.com with the search engine receiving upwards of 85 billion visitors per month.² YouTube, another subsidiary of Alphabet, is the second most visited site, with over 33 billion visitors per month.³ But all that could be changing. Now that the ruling has come to be, what does it mean for Google and what can investors expect as an outcome?

In what could be the most important anti-trust case in US history since the breakup of AT&T in 1982, the DOJ is reportedly also considering breaking up Google, potentially forcing the company to divest key assets like Android or Chrome.⁴ However, looking at history, this appears rather unlikely. Big US anti-trusts that targeted major tech firms such as those against Microsoft in the early 2000s (monopolising the PC OS market), Apple in 2014 (manipulating e-book pricing) or Qualcomm in 2018 (anticompetitive practices in chip supply contracts), rarely resolved in divestiture.⁵ In fact, outside of AT&T, which involved major infrastructure and social implications, there has been no notable forced break-up in 40 years. Given this context, the most likely outcomes for Google could simply involve increased data-sharing requirements and/or restrictions on AI content usage.

What about in the case of an actual break-up? Well investors have reason to be positive even in this scenario. In the short list of historical break-ups, companies created from divestitures tend to do better than those held as part of a conglomerate. The seven publicly traded ‘Baby Bells’ created from the split up of AT&T outperformed the US market for years to come.⁶ On the flip side, IBM, who once successfully weathered an antitrust case, has failed to keep pace with the broader index.⁷ Indeed, there is a case to be made that increased competition from the break-up of a monopoly spurs innovation and prevents complacency – which is, well, the whole point of an anti-trust.

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