Google's antitrust ruling has experts looking to 25-year-old Microsoft case for answers (2024)

  • A U.S. judge ruled Monday that Google holds a monopoly in the search market, and invoked the case of Microsoft from more than two decades ago.
  • "All along, the government has implicitly and explicitly said they're basing this case on the Microsoft case," said Sam Weinstein, law professor at Cardozo Law School and a former DOJ antitrust lawyer.
  • In its appeal, Google is likely to argue that the emergence of artificial intelligence services like ChatGPT has created new competition.

In ruling Monday thatGoogle has held a monopoly in internet search, U.S. judge Amit Mehta invoked the company at the center of the most famous tech antitrust case in U.S. history: Microsoft.

📺 Watch News4 now: Stream NBC4 newscasts for free right here, right now.

A federal judge determined in 1999 that Microsoft had illegally used the market power of its Windows operating system to box out rival browsers, namely Netscape Navigator. A settlement in 2001 forced the software giant to stop disadvantaging competitors in its PC deals.

Google'slandmark case, filed by the government in 2020, alleged that the company has kept its share of the search market by creating strong barriers to entry and a feedback loop that sustained its dominance. The court found that Google violated Section 2 of the Sherman Act, which outlaws monopolies.

329 medal events. 32 sports. Endless drama. Catch all the action at the Paris Olympics. Sign up for our free Olympics Headlines newsletter.

"The end result here is not dissimilar from the Microsoft court's conclusion as to the browser market," Mehta wrote in his 300-page ruling. "Just as the agreements in that case help[ed] keep usage of Navigator below the critical level necessary for Navigator or any other rival to pose a real threat to Microsoft's monopoly, Google's distribution agreements have constrained the query volumes of its rivals, thereby inoculating Google against any genuine competitive threat."

Mehta said one key similarity is the "power of the default." For Google, that refers to its search position on Apple's iPhone and Samsung devices — deals that cost the company billions of dollars a year in payouts.

"Users are free to navigate to Google's rivals through non-default search access points, but they rarely do," Mehta wrote.

Money Report

news4 hours ago

Harris responds to Trump Fed comments, will release economic plan in coming days

Mehta said a separate trial will take place on Sept. 4, to determine the remedies, or penalties against Google. At that point, Google can appeal, a process that experts said could take around two years. Microsoft appealed its initial ruling before ultimately settling with the Department of Justice.

"All along, the government has implicitly and explicitly said they're basing this case on the Microsoft case," said Sam Weinstein, law professor at Cardozo Law School and a former DOJ antitrust lawyer.

In the case of Microsoft, Judge Thomas Penfield Jackson found that the company forced PC makers to include its Internet Explorer browser in Windows, and threatened to punish them for installing or promoting Navigator. The judge proposed that Microsoft divest either its operating system business or its applications business, which both enjoyed market leadership.

After Microsoft's successful appeal, a U.S. District Court banned the software company from retaliating against device makers for shipping PCs that include multiple operating systems. Microsoft was required to give software and hardware companies the same programming interfaces that Microsoft middleware employs to work with Windows.

Nicholas Economides, an economics professor at New York University's Stern School of Business, said the similarities in the Google case are clear.

"My first reaction on this is that Google appears to lose across the board," Economides said. "This big blow reminded me of the Justice Department's win against Microsoft."

Risk to core search

The most likely outcome, according to some legal experts, is that the court will ask Google to do away with certain exclusive agreements. The court could suggest that Google make it easier for users to try other search engines.

While a monetary penalty is also on the table, the bigger risk is that Google will have to alter its business practices in a way that undermines profitability. For example, if Google can no longer be considered a default search engine on smartphones, it could lose a significant chunk of business in its core market.

In the second quarter, "Google Search & Other" accounted for $48.5 billion in revenue, or 57% of Alphabet's total revenue.

In its appeal, Google will likely introduce fresh evidence that artificial intelligence has played more of a role in competition, a dynamic that didn't exist when the DOJ filed its initial lawsuit. However, it's a perception Google has tried to downplay since being upstaged by OpenAI's ChatGPT.

Neil Chilson, former chief technologist for the Federal Trade Commission and currently head of AI policy at the Abundance Institute, sees increased competition for Google due in part to AI, which could help the company's case.

"The rigid market definitions means the court finds that Google has illegally maintained a monopoly in general search," Chilson said. But "search vertical providers" like Amazon and AI services like ChatGPT "threaten to upend Google's entire general search advertising business model," Chilson said.

Google shares didn't move much after Monday's ruling, as the stock was already trading lower due to the broad market sell-off. The stock slipped another 0.6% on Tuesday to close at $158.29. Google didn't provide a comment for this story.

Since Mehta didn't discuss potential remedies in the ruling, investors and analysts are forced to wait. Experts say it's unlikely that Google will be forced to break itself up.

"I think there were obvious business lines you could spin off in the Microsoft case but it's not as obvious here," Weinstein said, adding that divestiture is rarely ordered for a Section 2 case.

The trial beginning Sept. 4 will produce some important answers. BillBaer, who formerly ran antitrust divisions at both the FTC and DOJ, said the Microsoft precedent makes the case against Google a strong one.

"It's hard to say at this point what the DOJ is going to seek and what the judge is going to accept," Baer said.

— CNBC's Jordan Novet contributed to this report.

WATCH: DOJ's Kanter on Google antitrust ruling

Google's antitrust ruling has experts looking to 25-year-old Microsoft case for answers (2024)

FAQs

Google's antitrust ruling has experts looking to 25-year-old Microsoft case for answers? ›

Google's antitrust ruling has experts looking to 25-year-old Microsoft case for answers. In ruling Monday that Google has held a monopoly in internet search, U.S. judge Amit Mehta invoked the company at the center of the most famous tech antitrust case in U.S. history: Microsoft.

What was the result of the Microsoft antitrust case? ›

The Verdict

Microsoft lost the case against the government, and the presiding judge, Thomas Penfield Jackson, ruled that the company violated multiple sections of the Sherman Antitrust Act. However, the trial was not a smooth one.

What was the Microsoft antitrust case based on? ›

On July 15, 1994, the United States commenced an action against Microsoft under Section 2 of the Sherman Act for unlawfully maintaining its monopoly in the market for PC operating systems.

What was the Microsoft antitrust case 1999? ›

The U.S. government accused Microsoft of illegally monopolizing the web browser market for Windows, primarily through the legal and technical restrictions it put on the abilities of PC manufacturers (OEMs) and users to uninstall Internet Explorer and use other programs such as Netscape and Java.

When did Microsoft get sued for monopoly? ›

October 1998 – A consolidated antitrust case against Microsoft goes to trial before Judge Thomas Penfield Jackson in the U.S. District Court for the District of Columbia. April 2000 – Judge Jackson rules that Microsoft unlawfully maintained a monopoly in Windows and unlawfully tied its Web browser to Windows.

What is the fine for Microsoft antitrust case? ›

The U.S. tech giant had to pay 2.2 billion euros ($2.4 billion) in EU antitrust fines in the previous decade for tying, or bundling, two or more products together and other offences. It risks a fine of as much as 10% of its global annual turnover if it is found guilty of latest alleged antitrust breaches.

What has the US argued in the Google antitrust trial? ›

Google LLC is an ongoing federal antitrust case brought by the United States Department of Justice (DOJ) against Google LLC on January 24, 2023. The suit accuses Google of illegally monopolizing the advertising technology (adtech) market in violation of sections 1 and 2 of the Sherman Antitrust Act of 1890.

What are the accusations against Google? ›

Justice Department lawyers argued that Google's monopoly enabled it to charge advertisers artificially high prices while also enjoying the luxury of not having to invest more time and money into improving the quality of its search engine — a lax approach that hurt consumers.

What was Microsoft accused of? ›

Microsoft was accused of trying to create a monopoly that led to the collapse of rival Netscape by giving its browser software for free.

What was the verdict of the Microsoft trial? ›

May 10 (Reuters) - Microsoft (MSFT. O) , opens new tab must pay patent owner IPA Technologies $242 million, a federal jury in Delaware said on Friday after determining that Microsoft's Cortana virtual-assistant software infringed an IPA patent.

What happened to Microsoft on May 18, 1998? ›

May 18, 1998: Microsoft Antitrust Case Forever Changes the Company's Business Strategy. By 1984, Microsoft (MSFT) was one of the most successful software companies in the world, with $55 million in 1983 sales. But 22 years ago today, Microsoft was sued by the Department of Justice for violating federal antitrust law.

Why did the U.S. government sue Microsoft in the 1990s Quizlet? ›

Why did the U.S. government sue Microsoft in the 1990s? Microsoft failed to voluntarily help its competitors. Which of the following is an example of a competitor's intention to cooperate in order to reduce competitive intensity?

What happened in the Microsoft vs Commission case? ›

Judgment. Citing ongoing abuse by Microsoft, the EU reached a preliminary decision in the case in 2003 and ordered the company to offer both a version of Windows without Windows Media Player and the information necessary for competing networking software to interact fully with Windows desktops and servers.

What was the outcome of the Microsoft antitrust case? ›

The Microsoft antitrust case is also the lone example of the government's embarking on — and winning — a sweeping suit against a tech giant for illegally protecting its monopoly. Microsoft combined old-style practices, like bullying industry partners to stifle competition, with newer ideas in economics.

How did Microsoft turn into a monopoly? ›

The legal and technical restrictions that Microsoft had imposed on its operating system had helped to support Microsoft's monopoly position in the PC market. Such restrictions made it significantly more difficult for users to uninstall Internet Explorer and use other software applications, including Netscape and Java.

Why was Microsoft convicted of being a monopoly? ›

When a company controls a market so dominantly, it can cease innovation and force people to pay exorbitant prices for its products. In 1994, the government accused Microsoft of using its 70+% market share in the personal computer operating systems market to prevent competition and unlawfully maintain its monopoly.

What was the outcome of the Microsoft trial? ›

The waiting is over, and we have a decision on the recent trial between the Federal Trade Commission (FTC) and Microsoft. Judge Jacqueline Scott Corley has ruled in favor of Microsoft, denying the FTC's preliminary injunction request.

What were the results of the antitrust Act? ›

The Sherman Antitrust Act

This law prohibits conspiracies that unreasonably restrain trade. Under the Sherman Act, agreements among competitors to fix prices or wages, rig bids, or allocate customers, workers, or markets, are criminal violations.

What was the end result of Microsoft v United States? ›

Case Summary and Outcome

The United States District Court for the Southern District of New York denied Microsoft's motion to quash the warrant, holding Microsoft in civil contempt of court for failure to comply with the warrant.

Top Articles
Latest Posts
Recommended Articles
Article information

Author: Dan Stracke

Last Updated:

Views: 6311

Rating: 4.2 / 5 (63 voted)

Reviews: 94% of readers found this page helpful

Author information

Name: Dan Stracke

Birthday: 1992-08-25

Address: 2253 Brown Springs, East Alla, OH 38634-0309

Phone: +398735162064

Job: Investor Government Associate

Hobby: Shopping, LARPing, Scrapbooking, Surfing, Slacklining, Dance, Glassblowing

Introduction: My name is Dan Stracke, I am a homely, gleaming, glamorous, inquisitive, homely, gorgeous, light person who loves writing and wants to share my knowledge and understanding with you.