Breaking up Google would be misguided

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Break-ups are never easy. But one could be on the cards for Google’s $2tn empire. On Tuesday, the US Department of Justice recommended splitting up the company — spanning its Chrome browser, Play app store and Android operating system — as one of several options to remediate the Big Tech group’s “anti-competitive conduct”. The suggestion follows a landmark court decision in August when a federal judge, Amit Mehta, branded Google a “monopolist”. He said deals it had made with wireless carriers, browser developers and device manufacturers, including Apple, had helped to tighten its hold over the online search market.

Google is under fire on other fronts, too. On Monday another federal judge said the business must open up its Play shopfront for apps to competition. A separate lawsuit argues that the company uses unfair practices to dominate the market for online advertising technology. The cases all feed into the belief that Google’s size is a problem for the tech sector. But it makes more sense to target the company’s ability to entrench its power than to break it up.

Google’s strength in online search — where it handles over 90 per cent of queries — has been underpinned by a network effect. As it has grown, it has collected more user data, allowing it to sharpen its search tools and, in effect, drive more traffic to its site. That has been a boon for its ad-driven revenue model, which has helped it to deliver innovative products from which Google’s users and marketers all benefit. The problem, then, is less about how big it has become, and more about its ability to raise barriers to entry.

Forcing Google to strip away Chrome or Android — which help to promote its search tool — risks being ineffective and too retrospective. A break-up will have little impact if it can still make deals to be the default search engine. Even when users have the choice they still tend to opt for Google’s search tool over the likes of Microsoft’s Bing. A misguided focus on size is also not the best message to send to other rapidly scaling tech businesses.

Time is another factor. A final decision on how to sanction Google may not come until August 2025. An appeal could add years. By the time any remedy even hits the business, technology and market dynamics could have shifted. As it is, users have been complaining over recent years about apparently declining quality in Google’s search results. New generative AI search tools are also gaining market share. Microsoft, which was ordered to be split up in 2000 for squeezing competition, is a good example. That case was overturned, but the software firm’s dominance fell anyway as it failed to innovate and mobile technology grew.

So what should be done? The DoJ is better off focusing on other, forward-looking remedies it proposed on Tuesday. That includes curtailing Google’s ability to strike contracts with other tech companies to set its search tool as default. These deals prevent other search businesses from scaling up.

Encouraging tech firms to provide a choice of possible search engines, including AI-driven ones might help too. Asking Google to share a portion of its data trove could also support new entrants and help level the playing field for companies trying to build up generative AI search tools. But data privacy concerns abound.

Investors do not appear to be too concerned about the threat of a split for now. The looming presidential election also adds to the uncertainties surrounding the eventual outcome of the case. Either way, talk of breaking up Google is an oversimplified answer to a complex problem.