It is undeniable that Google has established itself as the preeminent force in the realm of internet search. However, in its quest to foster competition within this critical sector, the government may be risking a solution that could prove more detrimental than the issue at hand. Should the government succeed in dismantling Google’s operations, historical precedents suggest that consumers and various businesses reliant on our expansive and thriving digital ecosystem might ultimately bear the burden.
Earlier this year, Judge Amit P. Mehta of the D.C. Federal District Court ruled that Google, which the Justice Department alleges controls over 90 percent of the online search market, has unlawfully maintained a monopoly by compensating manufacturers—such as Apple—to designate Google as the default search engine on their devices. Recently, the Justice Department, alongside a coalition of states, submitted a multitude of proposed remedies to the judge. These remedies not only call for Google to cease its practice of paying for default status but also advocate for the divestiture of Chrome, its widely-used web browser. Furthermore, Google would be prohibited from establishing itself as the default search engine on its own products and would be restricted from favoring its services in search results.
The fundamental objective of antitrust legislation is to foster competitive markets. These legal remedies are not intended to serve as punishment for alleged wrongdoing but rather to rectify the consequences of monopolistic practices. The benchmark for an effective remedy lies in its ability to enhance market competition, leading to increased output or a superior experience for consumers.
At this juncture, the Justice Department has yet to provide a compelling rationale for why its proposed measures constitute an appropriate remedy. Some of the suggestions were scarcely addressed in the judge’s opinion regarding the Google trial, while others propose the separation of complementary products. Such fragmentation often results in diminished quality and heightened coordination costs, both of which would ultimately be transferred to consumers. If the government achieves all its demands, we could witness the erosion of some of the very features that have contributed to the success of Google’s products, resulting in a disjointed system that necessitates greater user effort for subpar outcomes.
History indicates that courts typically struggle to effectively restructure entire industries. More often than not, these judicial interventions lead to diminished competitiveness among firms. The track record of success is particularly lacking in cases involving highly innovative companies that, like Google, have primarily grown through internal development rather than through mergers and acquisitions.
- The breakup of Standard Oil in 1911 resulted in smaller firms that lacked the efficiency of their predecessor, coinciding with a rise in gasoline prices largely driven by increased demand.
- The disbanding of United Shoe Machinery in 1968 led to the swift demise of that firm as an independent entity.
