Break up Google? How the search giant might be punished for antitrust ruling

Simone Del Rosario: This week’s antitrust ruling against Google is groundbreaking. By declaring Google is a monopoly, it marked the biggest tech antitrust ruling since Microsoft in the 90s. It’s not that the government never takes up these cases, it’s that the government doesn’t often win. 

And to be fair, they haven’t won yet. Google plans to appeal. And the tech world is closely watching how this one shakes out. 

For what punishments Google could face to how long this case will drag out, we tapped the expertise of Bill Kovacic, a former FTC chair and commissioner. 

What do you make of Google’s assertion that their product is just better?

Bill Kovacic: I mean, this is appealing to a theme that is part of the non -intervention minded jurisprudence that we referred to before. The language and the music of earlier decisions from the Supreme Court has been one that’s very solicitous of the successful firm that achieves prominence through superior performance. So in making that argument, they are appealing directly to a policy position that has appeared in a number of earlier decisions that you can’t take a successful enterprise and punish it for offering a better product. So through the trial and certainly through the appeals, they will say, we may not be the perfect company, but there’s no way to explain our position except for our ability to provide our users a better and better experience and certainly superior to anyone else’s. That’s very important argument, but there are still limits on the steps they can take to reinforce the preeminence. But their overriding theme is going to be, we are successful because we have a good product and not because we use improper business tactics. The very proper tactic we use is offering users a better experience.

Simone Del Rosario: Let’s say that this judgment stands. What’s going to happen to Google? What are the likely punishments that Google will face?

Bill Kovacic: Judge Mehta, who is the trial judge in the Google case, decided to split the proceedings into two parts. The first part was going to be the trial on whether the law had been broken. That part has been concluded with his opinion that finds that yes, indeed, in some respects, the law was broken. The second part was that if there was a finding of liability, we’re going to have a separate proceeding on remedies. He’s going to have a meeting with the parties in early September basically to schedule the hearing or hearings that will take place to address the remedy. We probably will see, I suppose, several days of testimony by experts who lay out their views about what the remedy should be. Should it simply be an injunction that tells Google not to engage in the same behavior? Should it mandate that the company take affirmative steps to correct the effects of the behavior that it’s engaged in so far?

Will the court go further to say a restructuring of the company is important that a divestiture of some kind say for example divesting the Android franchise would be would be an appropriate solution, but the judge is going to have a significant proceeding on the remedy I suspect by the end of this calendar year. He will reach his decision about what that remedy should be We’ll see the final opinion on remedy come out again by the end of 2024 with inevitable appeals to the US Court of Appeals to the District of Columbia, which would be step one. That would take up most of 2025. The Supreme Court is not obliged to review this case. It has complete discretion over its docket with respect to antitrust matters. My intuition is that this will be a compelling case for them to review. This will be a case that they want to review to come in on these basic questions about the application of the antitrust law to big tech, to dominant firms generally. So my own quiet wager is that the Supreme Court would take the case. That takes us through most of 2026. So if all of these appeals come about, we’re a good two years away from a final answer with respect to liability and to remedies. And for a case that began in 2020, In the second half of 2020, I guess all of us can look at that and say, is that a sensible way to make decisions about such fundamental matters of economic policy and operation in a case that lasts the better part of seven years? But that’s what we’re in for going ahead. That’s roughly the timeline that might unfold.

Simone Del Rosario: And just to clarify, the remedies can be prescribed before this appeal process goes through even if they can’t be enforced, is that correct?

Bill Kovacic: Correct. The appeal would take place after the decision on remedies so that the parties would be filing their appeals with respect to decisions about whether the law was broken and with respect to the judge’s decision about what the appropriate remedy will be. it’s proceeding on remedies next, then the parties can appeal any part of what’s taken place before.

Simone Del Rosario: And you mentioned some relatively low-level remedies, an injunction, fines. Would that be enough to stop this behavior that the courts found was monopolistic?

Bill Kovacic: This is a point of enormous and contentious debate. I would say if you go back to the beginning of the US antitrust system, the remedy that generally has been seen to be by many observers, the necessary remedy for illegal monopolization is structural relief, simply put, a breakup. You force the company to make major divestitures.

That is the big visible solution that many observers look for. By contrast, the injunction that you referred to is seen as often being too timid a solution, too difficult to oversee and apply, too easily evaded by companies that will adapt immediately to any control on conduct that you put before them.

Part of what makes up the debate today is a more sympathetic view about these injunctions. And the more sympathetic view basically goes like this. One is that the injunction forces the company to change its decision -making process. It means that more matters are run by the lawyers first. And instead of the business people simply acting immediately and impulsively on ideas they have, it’s got to go through the legal department.

The legal department being somewhat more inherently cautious as a matter of culture applies the brakes a bit to this process so that there’s an internal decision making process that means that the company is less aggressive in the way in which it operates. A second consequence is that

There’s an awareness on the part of other firms they have a bit more room to maneuver. They take advantage of the hesitation and limits on the dominant firm to find crevices in the market in which they can enter to expand their operations over time. Now one theory is that when the government settled its monopolization case against Microsoft, a case brought in the late 90s and settled in the early 2000s, In parallel with a case that was settled by the European Union, also involving claims of illegal conduct against Microsoft, initially the conduct related remedies were heavily criticized as being too weak. A new reinterpretation of that is that those remedies actually gave breathing room for what were then nascent tech competitors named Google, for example and that it opened the path for Google to prosper. So I’d say there’s an important strand of modern commentary that says conduct remedies can be a lot more potent than you might think. They may take longer to unfold. They don’t have the big bang explosion of a giant fireworks display. They’re less visible in that respect but then they can have a powerful impact on the way that the market operates. But I think that even the specialists in the field would say, there’s a lot of uncertainty about what the best solution is. And you make your best judgment. It’s partly an act of faith that you’ve got the right solution in place. But I’d say that there’s a somewhat more sympathetic view of conduct remedies emerging that might incline the judge to say, that would be enough.