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On August 5, 2024, District of Columbia court judge Amit Mehta ruled that Google (GOOG) is operating a monopoly that's engaging in unfair business practices, particularly within its dominant search business. In the next step of the process, last night the Department of Justice (DOJ) released a court filing outlining possible remedies for Judge Mehta to consider in undoing GOOG's alleged anticompetitive position and behaviors. The headline from that report is that the DOJ may recommend breaking up GOOG so that its search business is separated from its other businesses, including YouTube, Cloud, Android, and Chrome.

• Typically, these antitrust news stories don't carry too much weight because the market just presumes that tech giants like GOOG, Microsoft (MSFT), Apple (AAPL), and Amazon (AMZN) will just pay a fine and move on. This case, though, clearly has more teeth to it and GOOG is likely facing some significant changes to its business model in the coming years, although a sweeping breakup probably isn't the most likely scenario.
• If the Court rules that GOOG must split off its search business, which constitutes about 60% of its total revenue, it would be a given that GOOG would appeal that decision. That would not only drag this case out for a very long time -- possibly years -- but it also might not have the desired effect that prosecutors are seeking. Without new guardrails in place, an independent Google Search would have little incentive to change its practices.
• Therefore, we believe that the most likely outcome is that GOOG will have to scrap or significantly alter the search distribution deals and contracts it has long had in place with its partners. Most notably, this could include the deal it has with AAPL in which it pays AAPL billions of dollars to be the default search engine on iPhones, iPads, and the Safari browser. 
• Although splitting off the search business altogether may not be in the cards, the DOJ did state that it's considering "structural remedies" that would prevent GOOG from using products like Android, Play, and Chrome from giving it an unfair advantage. Stunting GOOG's ability to funnel users to its search platforms through these products could prove to be effective, but it's still hard to imagine a competitor coming in and putting a major dent in GOOG's market share, which is estimated at approximately 90%.
• From GOOG's perspective, the company believes that the government is overstepping its boundaries and that its decision could have unintended consequences for a number of other industries. The company is likely to appeal the final ruling, although any decision that doesn't require a breakup will likely have a quicker resolution.

The main takeaway is that GOOG is facing a viable threat to its business model but given the company's already well-established dominant position in search, we don't foresee a major drop-off coming any time soon, regardless of what the court decides next year. From a longer-term perspective, though, a more competitive landscape and the emergence of Gen AI could weaken GOOG's dominance.