Google’s Breakup Needs an International Tag Team

(Bloomberg Opinion/Parmy Olson) -- Here's a bit of antitrust trivia for you. How long does it take for Europe’s antitrust enforcers to punish a company once they’ve pointed out its misbehavior? The answer: about a year. When the European Commission officially complained about Apple Inc.’s streaming rules in February 2023, it followed that up with a €1.8 billion ($2 billion) fine in March 2024. 

But Europe’s regulators have done something odd recently. After putting their spotlight on Google’s anticompetitive practices in online advertising in June 2023, they still haven’t said what the penalty will be — the thing everybody cares about.

Why the wait? Perhaps because the commission’s complaint had an eye-catching threat: “structural remedies,” a.k.a. a possible breakup of Google. It would be politically foolhardy for Europe to act alone in pushing to split up one of the biggest companies to come out of the US. Consider the number of times Donald Trump has accused European regulators of hating on America. Even Barack Obama has thrown shade at the continent’s trust busters for being anti-American. This would just amp up the rhetoric. 

The commission is probably waiting for its counterparts in Washington to make a move. Earlier this month, the Department of Justice told a judge it was also considering structural remedies for Google. The DOJ will release its fine-tuned proposals in November, and Judge Amit Mehta — who has already ruled that Google is a monopolist — will decide on those suggestions in August 2025. Google has said the DOJ’s proposals “go far beyond” the legal issues in its case and represent “government overreach.”

Related:Google Faces Painful Reckoning as Antitrust Crackdown Revs Up

Some Wall Street analysts don't expect a breakup to happen, pointing out that Google will keep the DOJ’s efforts tied up in court for years. But that will be harder to pull off if European regulators get behind their American counterparts. An order from both the US and European Union would create overwhelming pressure on Google, including a prolonged legal battle on two fronts and a hit to public opinion and investor confidence. 

Historically, officials on opposite sides of the Atlantic have clashed. In 2001, after the DOJ approved a merger between General Electric Co. and Honeywell International Inc., the European Commission blocked it. So began an era of tension over the reach of EU competition law and antitrust philosophy itself. 

US regulators for decades had been aligned with so-called Chicago School antitrust principles that narrowly define consumer harm in terms of price increases. Monopolies were bad because they price gouged, essentially. But as large technology companies have come to dominate a number of markets, Europe has expanded the definition of harm to include things like the erosion of privacy and consumer autonomy. 

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Today, regulators on both sides are starting to agree on that. In 2021, President Joe Biden signed an Executive Order on Promoting Competition in the American Economy and said that America had chosen the “wrong path” 40 years prior, “following the misguided philosophy of people like Robert Bork.” Bork was a legal scholar who in the 1970s popularized the Chicago School's reshaping of US competition policy.  

That credo, now becoming passé in antitrust circles in Washington as well as Europe, had caused much of the regulatory inertia that protected Big Tech’s corporate interests until now. Consumer harm was simply hard to prove. What regulators might call a monopoly, tech companies called an “ecosystem” that provided unparalleled convenience and delight for consumers. 

Take your smartphone, for instance. When Google becomes the default search option on iPhones and Android phones, you can search the web seamlessly from your home screen. And now, when Google bakes its newest artificial intelligence model, Gemini, into its Android operating system, a powerful digital assistant can go into your Gmail and summarize the three most recent messages from your child’s school.

Related:Tech, E-Commerce, and Social Media Hit With Highest Data Privacy Penalties

In both instances, “harm” is hardly obvious, but it’s there if you look closely. Baking Google search into millions of phones also kills any chance for competing search engines to gain market share. And newfangled AI threatens to erode the agency of consumers, giving a single company like Google unprecedented influence on our communication channels, on top of all the personal details it already holds on us and the behavioral nudges we get from its addictive designs.

It’s clear that regulatory penalties have barely dented this growing power and influence. Fines hurt just about as much as a speeding ticket. When the Federal Trade Commission fined Meta Platforms Inc. $5 billion in 2019, the company’s stock went up. Ordering companies to change behavior has limits, too, as regulators have to make sure a company is toeing the line. 

To have a real impact, regulators need to pursue the structural remedies they’ve hinted at. Though this would be unprecedented for the tech industry, history suggests that doing so can benefit the market. Carving up AT&T in the 1980s led to a wave of innovation, while Microsoft Corp.’s agreement in 2001 to share information about its systems helped create new opportunities for its competitors and startups.

But regulators in the US and EU will need to combine their brainpower to avoid botching the job. The DOJ’s filing this month had the feel of throwing spaghetti on the wall to see what would stick and included stopping Google from using products “like Chrome, Play, and Android to advantage Google search.”

There are other approaches the agency could take, like forcing Google to split its ad tech business, to crimp the company’s ability to leverage its dominance. A more far-reaching idea posed by Richard Kramer, head of Arete Research in London, is to spin off Google's entire advertising network infrastructure as a public benefit B corporation with capped margins. That could address some of the broader problems in the online ad market like its opacity, eye-wateringly high costs and near-total domination by Google. (Some 80% of the company’s revenue comes from online advertising.)  

“We want to see the European Commission coordinate closely with their US counterparts to design a breakup that will really work,” says Cori Crider, a senior fellow at the Open Markets Institute, which this week joined several other civil society groups calling on the EU to break up Google.  

Rumor has it that the European Commission will decide on Google’s ad tech dominance by the end of 2024. Another rumor, reported by Reuters in September, is that the commission won’t call for a breakup. Let’s hope that’s not the case, and instead, Europe waits politely for Washington to bolster its proposal in November, then makes its own call for a cleaving. For European Competition Commission head Margrethe Vestager, who ends her term next month, it would be a laudable swan song.