The U.S. Department of Justice is expected to file a lawsuit in federal district court Tuesday charging Google and its parent, Alphabet Inc. (NASDAQ: GOOGL), with anticompetitive practices meant to preserve the company’s monopoly position in search and search advertising.
Citing unnamed senior Justice Department officials, the Wall Street Journal, in an exclusive report, reported that the department maintains its position as a “gatekeeper to the internet through an unlawful web of exclusionary and interlocking business agreements that shut out competitors.”
The lawsuit also alleges that Google uses the billions it collects from search advertising to pay mobile device makers, internet providers and browser companies to establish Google as their “preset, default search engine.” The result is that Google effectively leaves little room for a competitor to gain any traction.
According to the Wall Street Journal report, Google Search, which comes preloaded on devices running Alphabet’s Android operating system and can’t be deleted, is alleged to unlawfully prohibit competitors’ search applications from being preloaded on phones due to revenue sharing agreements.
After an investigation that took almost a year and a half and covered what it said were the monopoly practices of the four U.S. tech giants with market caps of more than $1 trillion, the House Judiciary subcommittee on antitrust last week released the details of its work and its recommendations. Alphabet, in particular, has several large operations that might be spun out if the government presses for a breakup of the company. The three most likely candidates to be spun out are search engine Google, the Android OS business and the massive YouTube video site.
Google dominates search with 92% of the U.S. market. The Android operating system, which runs on hundreds of millions of cellphones and smartphones around the world, competes only with iOS from Apple, although that runs only on Apple hardware. YouTube holds about 75% of the video platform market in America. This includes video sharing sites but not streaming video businesses like Netflix. YouTube’s dominance is based on its video ad revenue share, which is driven, in part, by Google’s video search results.
The Justice Department has been investigating Google and some other tech companies for the past year. Google has not commented on the Wall Street Journal report.
Investors don’t appear to be too shaken by the report. Alphabet stock traded up by about 0.8% early Tuesday, at $1,541.80 in a 52-week range of $1,008.87 to $1,726.10. The consensus price target on the shares is $1,758.61. Alphabet does not pay a dividend, but the share price has risen by about 15% so far in 2020.
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