U.S. Weighs a Breakup of Google

The filing said the government is considering a “full range of tools” to restore competition, including “structural” changes to Google’s business that would prevent it from using products such as its Chrome browser or Android operating system to advantage Google’s engine search.

Google responded in a blog post that the Justice Department’s initial proposal for reforming the search engine market is “radical and sweeping” and could have “negative unintended consequences for American innovation and America’s consumers.”

U.S. District Judge Amit Mehta in August found that Google ingrained its monopoly by paying billions of dollars to operators of web browsers and phone manufacturers to be their default search engine. Mehta will now spend the better part of a year deciding what to do about it.

Google also faces the threat of breakup in a separate government lawsuit targeting its online-advertising business. And Ticketmaster-owner Live Nation LYV 0.69%increase; green up pointing triangle and Meta Platforms META 1.39%increase; green up pointing triangle are defendants in antitrust cases that could lead the Justice Department and Federal Trade Commission to ask courts to unwind the megamergers that helped forge their corporate empires.

The agencies alone can’t order a breakup; that power lies with courts. But there is little modern precedent to guide judges on when such a forceful remedy is appropriate. The last major ruling came in 2001, when a federal appeals court in Washington, D.C., found a trial judge overstepped in ordering the breakup of Microsoft.

“If there is liability and a judge agrees that breakup is appropriate, that will become the new precedent that brings greater legitimacy to the notion of a breakup remedy,” said Gene Kimmelman, a senior policy fellow at Yale’s Tobin Center for Economic Policy and a former Justice Department official.

Most of the nation’s prominent breakups came in the trustbusting era of the early 20th century, when Standard Oil, American Tobacco and a railroad trust known as Northern Securities were split up. 

The last major one came with the 1984 breakup of AT&T, which then controlled long-distance and local phone service and had the telephone equipment market locked up. The telecommunications company negotiated the split with the Justice Department instead of waiting for a judge’s ruling on whether it had violated antitrust laws.

Jonathan Kanter, the head of the Justice Department’s antitrust division, said last month that earlier breakups were necessary to end and repair the harm from longstanding monopolies.

Kanter, speaking at an event sponsored by Semafor, a news site, said his office has “some of those” kinds of cases now, without disclosing which lawsuits could land in the breakup category. Others, he said, might not need to go that far. 

In some cases, the government’s intentions are clear. 

Kanter’s lawsuit against entertainment company Live Nation, filed in May, explicitly seeks the spinoff of Ticketmaster, which the company previously was allowed to buy in 2010. The case alleges that time has shown the combination to be anticompetitive, including by allowing Live Nation to push venues to long-term agreements that lock in Ticketmaster as the exclusive ticketing service.

The FTC meanwhile sued Facebook and called for forcing the sale of Instagram and WhatsApp, which were acquired a decade or more ago. The FTC alleges that Facebook bought the smaller companies to blunt the threat of any disruption of its social-media monopoly. Meta says that it doesn’t have a monopoly in social media and that its acquisitions of Instagram and WhatsApp were good for consumers.

To secure a breakup, government lawyers would need to convince courts that lesser remedies won’t work.

“The justification for a breakup has to be based on the particular findings of the illegal behavior and the specifics of the market,” Kimmelman said. “It’s not a philosophical question.”

As an alternative to a breakup, Mehta could order Google to scrap the exclusive agreements that make Google the default search engine on iPhones and other devices. Or he could cap how much ad revenue Google is allowed to share through those agreements.

Judges view breakups as an extreme remedy that could have unintended consequences, such as creating a new stand-alone company that later fails, said Cornell University law professor Erik Hovenkamp.

“Breakups are surprisingly hard from a practical standpoint,” Hovenkamp said, citing the challenge of divining how precisely to split a company apart.

Tim Wu, a Columbia University law professor who advised President Biden on antitrust policy, argued in a 2018 book that breakups aren’t that different from the spinoffs that Wall Street sometimes engineers to inject new life into sluggish companies. Merging firms also sometimes agree to divest assets or parts of their businesses to avoid the government challenging their deal.

The Justice Department has until Nov. 20 to decide the specific fix it will propose in the Google search case. Mehta’s August ruling found that Google “has no true competitor” in mobile search. While its search engine is the best, he wrote, Google foreclosed competition by cutting off rivals from accessing the mobile devices where competing search engines could develop and grow.

In the second Google case, Kanter’s antitrust division called for a breakup of Google’s ad-tech business when it filed that case in January 2023. The department argued that Google bought startups that threatened its advertising dominance, then locked customers into its products by “tying” them together—conditioning access to one tool on customers paying for another.

A trial in that matter took place last month in Alexandria, Va. It could be months before U.S. District Judge Leonie Brinkema rules on whether Google engaged in illegal conduct to entrench a dominant market position. If the company loses, the judge would then move to consider what type of remedy is appropriate.

Write to Dave Michaels at dave.michaels@wsj.com and Jan Wolfe at jan.wolfe@wsj.com

Appeared in the October 9, 2024, print edition as 'U.S. Weighs a Breakup of Google'.