Following a historic ruling in August, another monopoly case against Google began in the USA on September 9. In this guest article, first published on netzpolitik.org, we explain what could be in store for Google – and why Europe should also dare to break up.
On September 9, a major trial began in the USA regarding Google’s abuse of power in online advertising. The allegation: Google is said to have gained unfair advantages over competitors and disadvantaged business partners through its monopoly-like position. Back in August, a US court ruled that Google’s monopoly strategy in internet search is illegal. This brings closer a possibility that many have long been waiting for: the unbundling of what is currently the fourth most valuable company in the world.
The fact that Google has to sell parts of its business is the right solution in view of its extensive monopoly position and the ongoing abuse by the company. Fines and behavioral requirements have proven to be ineffective.
Google is a monopolist and has deliberately built up its entrepreneurial power. The fact that this is illegal has been clear since the groundbreaking ruling in early August 2024. It was a historic victory for the US Department of Justice and the American antitrust movement. For many years, the US competition law was not applied sufficiently. The wind has now changed. The US authorities are increasingly taking action against the concentration of power and monopolization, they are providing new insights into the monopoly strategies of large tech companies and they are increasingly seeking so-called structural measures. This could also affect other US tech companies in the future.
What are structural measures?
In competition law, a distinction is made between two types of remedies against market power and abuse of power: on the one hand, behavioral obligations, i.e. small-scale requirements that companies must comply with; on the other hand, the big stick: structural measures, such as the spin-off of parts of the company.
There are historical examples of such splits – known as “demergers” in technical jargon. For example, Rockefeller’s oil company Standard Oil was split up in 1911 and the telecommunications group AT&T in 1982. Empirical analyses show that the split-up of AT&T promoted innovation in the telecommunications industry. However,in the 1980s , the neoliberal Chicago School gained influencein competition policy . It argued that market concentration was justifiable as long as larger companies were more efficient. Structural measures therefore became less common.
Structural interventions have two major advantages over behavioral constraints. Firstly, they tackle the concentration of power at the root and secondly, they require less ongoing monitoring afterwards.
Structural separation is a particularly useful tool for large tech companies to break up the power and self-advantage of networked platforms. Google is a prime example of this. The US ruling and numerous proceedings by competition authorities worldwide paint a clear picture of Google’s monopolization strategy and its effects.
How Google became a monopolist
At the center of Google’s business model and strategy is its own search engine. Google has a clear monopoly here with a market share of around 90 percent. Google also operates YouTube and Google Maps, other services that are central to online advertising. Advertising revenue is the most important source of income for Google: Last year, the Group recorded a total turnover of just under 306 billion US dollars. It generated238 billion dollars from advertising, i.e. just under 78 percent. Google’s advertising revenues account for almost the entire turnover of its parent company Alphabet (307 billion), which includes the life sciences company Calico and Waymo for autonomous driving.
Google has built an entire empire around its search engine monopoly. On the one hand, Google controls the so-called adtech sector, i.e. the infrastructure through which online advertising is traded and processed. On the other hand, Google controls essential access channels such as the Android operating system and the Chrome browser.
Google has built up this bulwark with the help of numerous company takeovers. For example, it has bought several ad tech companies such as DoubleClick. Android, YouTube and Google Maps also stem from acquisitions or were strengthened by them.
The company has also used licensing models for Android and cooperation agreements to ensure that Google services are pre-installed on smartphones across the board. Apple receives billions of dollars a year from Google to ensure that its search engine is set as the default setting on iPhones. According to the US court proceedings, Google spent around 26.3 billion dollars in 2021 alone on “traffic acquisition costs”, i.e. on contracts that ensure that data traffic is directed to Google services. This was four times more than the other expenses for Google Search. The majority of Google search costs are therefore used to steal the thunder from other providers.
As is often the case with digital services, there are network and economies of scale in internet searches: The more search queries there are, the better the search algorithms can be optimized, which in turn leads to more users. There is often talk of supposed winner-takes-all markets. But the network effects are not unlimited. In fact, it is the combination of Google’s anti-competitive corporate strategy and network effects that secures the company’s monopoly position.
Not only the advertising industry suffers from Google’s monopoly position
The US ruling from August states that Google can enforce excessive prices for text ads on Google Search thanks to its monopoly power. Advertisers must either spend more money on advertising and recoup the costs from consumers. Or they reduce their advertising expenditure on other online channels, which harms the media in particular. The media are also directly disadvantaged by Google’s adtech dominance, which allows Google to use various tricks to increase its revenues at the expense of publishers.
This unfair distribution of added value is not just a financial problem. It damages the public debate by increasing staff cuts in the media and promoting the trend towards click-oriented journalism. This is a major problem for democracy.
New providers with alternative business models, such as the privacy-friendly search engine Neeva, are unable to assert themselves. Google, on the other hand, can use its monopoly profits to expand further, for example into the AI sector. This also increases the company’s political power. Google is now one of the biggest lobbying players in the EU and the USA and can use its investments politically. Together with other tech companies, the company is trying to prevent unpopular data protection laws in the USA, for example.
Breaking Google’s control over different spheres
Google’s position of power is an unresolved social problem. There are now more than one hundred competition proceedings against Google and Alphabet worldwide. And the EU Commission has also imposed record penalties. But these penalties have little effect in view of Google’s huge monopoly profits.
The realization is therefore growing that it will not work without structural measures. Google should not be split into smaller search engines. Rather, the aim is to break up Google’s control over various spheres and access points in order to stop monopolization and self-promotion.
The focus is on two areas in particular: the placement of online advertising (adtech) and the control of access routes to the (mobile) Internet, especially Android and the Google Chrome browser.
Competition authorities want to spin off the advertising business
The case is clearest with Adtech. It is important to understand what happens with online advertising on websites and search engines. When a website is accessed, auctions take place in the background in fractions of a second to determine which ads will be shown on the advertising space on this page. Google provides the largest server through which publishers process the auctions. It also dominates the market for services that advertisers use to manage their online advertising campaigns. Google also operates AdExchange, the largest auctioneer on the market.
According to investigations by American and European competition authorities, Google has abused this control over the various sides of the market in its favor for years. In the court proceedings beginning today regarding Google’s monopoly position in the ad tech sector, the US Department of Justice and several states are calling for at least the Google service for publishers and the Google AdExchange to be spun off. The EU Commission also came to the preliminary conclusion in 2023 that Google had abused its ad tech market power and that structural measures were needed.
Illustrative graphic on a possible split-up of Google Adtech from the EU Commission’s statement on the abuse proceedings, June 2023
Overall, the procedures in the advertising sector suggest that Google needs to separate at least part of its adtech services break up. It would make sense to separate the entire adtech sector. This would prevent Google from further favoring itself or comprehensively obstructing other providers. Google should therefore only retain the services for managing its own advertising space. The parts for publishers and advertisers should be sold to different providers in order to prevent renewed market concentration.
Android and Chrome could also be spun off
Android and Chrome could also be sold off. At least there are voices in the USA calling for this as a consequence of the ruling on the search engine monopoly. As a first measure, the agreements between Google and Apple as well as other cell phone manufacturers that favor Google search could be stopped. However, the court could impose further measures to prevent Google from coming up with new strategies to abuse Android and Chrome in its favor again.
There could also be requirements in the adtech proceedings in this area, particularly for Chrome. Otherwise, Google could try to shift advertising auctions more strongly into the browser and regain control in this way. A spin-off could prevent such circumvention strategies.
It is questionable whether non-discrimination obligations for competitors would be sufficient at this point. A middle way would be conditions and an organizational separation within Alphabet, without a sale to third parties. This could also be a warning signal to Google that a spin-off would be easy if these conditions were breached.
Daring to unbundle more
It is quite likely that Google will have to sell off parts of its staggered internet empire in the next few years. This would be the right step to stop the abuse of power and the damage to the public, democracy and consumers. It is clear that, in addition to spin-offs, clear rules are needed for data protection, for example. However, regulation alone will not break up the digital world. The combination of different instruments is crucial. We need a mix of disaggregation, effectively enforced regulation and the promotion of public infrastructure and standards.
The EU Commission has conducted several major competition proceedings against Google in recent years. These have caused quite a stir due to the fines in the billions. However, they were not really effective. This is because Google has cleverly implemented the behavioral requirements for itself, so that its monopoly position has essentially remained unchallenged. The competition authorities must finally draw conclusions from this experience. In order to break Google’s monopoly power, the company must be split up.
The EU and The EU and the USA should pull together pull togetheras it recently indicated at Adtech. But it remains to be seen whether the n The next US administration shouldact just as decisively against monopoly power as the current Biden administrationis doing .The EU should therefore be prepared to act independently. The threat of spin-offs in the adtech proceedings is a sign of hope. The EU Commission should not fall behind in its final decision.
As a civil society must we must make a strong casethat structural measures are being used to a greater extent again. The concentration of power in the digital world is too bigtoo serious and it harms democracy. It requires bold action. Google should be broken up.
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Two additions to the guest article:
- At the Netzpolitik conference on September 13, Aline Blankertz from Wikimedia, Felix Duffy from LobbyControl and I gave a presentation on the splitting up and social control of tech monopolies. The presentation and the discussion can be found in the recording on YouTube from about 1:02 h. (The photo above is from the presentation.)
- Reuters reported on September 18 that Google had offered to sell its advertising marketplace AdX to the EU Commission. However, the European publishers as complainants rejected the offer as insufficient.
