Breaking up a Big Tech giant is no longer taboo.
The United States Justice Department raised the prospect of splitting up Google in an antitrust lawsuit targeting its search service earlier this month, nearly 10 years after the European Parliament ruined Thanksgiving for Googlers by calling for the search giant to be broken up.
For the European Commission, this couldn’t have come at a better time: It’s in the final stages of an investigation into Google’s advertising technology businesses where it has been touting a breakup order since last year.
A breakup may have been a pipe dream in 2014, but a shift in tone across the Atlantic could change everything.
“For years it’s been the practical reality that the EU was never going to address a breakup order to an American company when the American agencies themselves were not minded to move in that direction,” said Alec Burnside, a partner at law firm Dechert who’s represented companies that have complained about Google.
EU officials risked “a great war of words, a breakdown of good relations, and possibly even some search for retaliatory measures,” he said.
For the EU, the U.S. regulator putting a divestment option on the table “fairly clearly provides political cover for them if they do choose to pursue a breakup,” said Thomas Vinje, a lawyer at Clifford Chance who has also acted for companies that asked the EU to act against Google.
“Who does Google have to look to for support in Europe or much of the United States anymore? These days it’s one of the only things the Democrats and the Republicans actually agree on,” he said.
The US antitrust revolution
The Justice Department’s antitrust division is currently led by Jonathan Kanter, previously a lawyer who worked on advertising issues and for Google rivals Microsoft, Yelp and News Corp. Google’s lawyers have said this work and previous comments by him were evidence of bias.
Kanter and his colleague at the Federal Trade Commission, Lina Khan, have reinvigorated antitrust enforcement with a slew of cases against Big Tech and big business.
Part of that is the Justice Department lawsuit over the company’s search business where a judge found in August that the company illegally monopolized the online search and advertising markets. The case focuses on Google’s distribution deals with phone makers, including payments it makes to Apple to be the iPhone’s default search option.
The Justice Department’s proposal this month lays out various ways to dismantle Google’s search monopoly, such as splitting off its Android mobile phone software or its Chrome browser. The regulator is expected to flesh this out in a more detailed court filing by Nov. 20. Google can submit its proposed options to the court by Dec. 20.
Powered-up U.S. enforcement has come as a relief to Brussels, where the Commission has frequently come under fire for levying big fines, tax bills and merger vetos that hit some of the world’s biggest companies — many of them American.
Cecilio Madero, a senior counsel at consultancy APCO who worked as an EU antitrust official on the Google cases, said U.S. and EU antitrust agencies are increasingly “all on the same page.”
“Whatever Europe tries to do is not going to be a concern in Washington,” he said.
The Big Tech argument that European regulation is protectionist, anti-American and damages innovative businesses is undermined if U.S. regulators are also considering a breakup to deal with antitrust issues in the U.S. market, said Thomas Höppner, a partner at law firm Hausfeld who represented web browser DuckDuckGo in the U.S. case against Google and acts for Axel Springer’s Idealo which is seeking competition damages from the search firm. Springer is POLITICO’s parent.
“If the [Justice Department] wants to impose that remedy for its own country and sees harm with its own businesses, local consumers, then obviously suggesting that Europe is just thinking of themselves is unfounded,” he said.
Google declined to comment beyond a blog post on the Justice Department move, described by Lee-Anne Holland, its regulatory affairs vice president, as “regulatory overreach in a fast-moving industry.”
“Hampering Google’s AI tools risks holding back American innovation at a critical moment,” she said. “It’s hard to think of a technology more important for America’s technological and economic leadership.
Google also referred to last year’s blog on the EU’s ad tech case where its global ads vice president, Dan Taylor, said the company opposed a divestment “as we don’t believe it is proportionate nor the right solution for our partners.” Integrated ad services are beneficial, he said, by efficiently connecting advertisers and publishers, in what he said was a market where customers use different platforms to sell and buy ads.
Aiming high
Margrethe Vestager, the EU’s top antitrust enforcer, is due to step down this year after racking up more than €8 billion in fines from the search giant. She even defeated the company in court. But her real legacy is the Digital Markets Act (DMA), a set of rules to squeeze Big Tech and act as problems emerge, a lesson the Commission has learned from investigations that failed to trigger big changes.
Google still has a 90 percent market share for its search engine in Europe despite EU efforts to open markets up to smaller rivals.
The company’s control of advertising technology is the EU’s latest target — and it is aiming high. Vestager told a legal conference in Florence, Italy last month that Google’s position in the adtech space betrayed “an inherent conflict of interest that is not likely to be remedied in any other way than some sort of break up, a divestiture.”
“It’s important to show that we’re going to use all when you want to remedy a problem,” she said.
It isn’t clear if Vestager will manage to wrap up one more Google investigation — her fourth — before she hands it over to Spain’s Teresa Ribera. Madero said she’s likely to go out with a bang.
“She has not yet finished surprising the world,” said Madero.
This article has been updated with additional comment from Google on the EU ad tech investigation.