The end of Google’s antitrust trial has put Silicon Valley on the brink

Google has a lot at stake as a federal judge considers whether the tech giant’s search empire should be broken up.

So does the rest of Silicon Valley.

The landmark antitrust case pitting Google (GOOG, GOOGL) against the Department of Justice entered its final phase last week, with plaintiffs from the federal government and 14 states saying in their closing arguments that Google illegally monopolized the online search and advertising markets.

Google’s lawyer, John Schmidtlin, hit back with a claim the company has made from the beginning: “Google wins because it’s the best,” he said.

A government victory would certainly threaten a huge part of Google $237.8 billion Profit engine. But the outcome will be decided by him US District Judge Amit Mehta In the coming weeks or months, it will also have major implications for some other big names in the tech world.

WASHINGTON, DC - OCTOBER 30: Sundar Pichai, CEO of Google and Alphabet, leaves federal court on October 30, 2023 in Washington, DC.  Pichai testified Monday to defend his company in the largest antitrust case since the 1990s.  The US government is seeking to prove that Alphabet's subsidiary, Google, maintains an illegal monopoly on online searches.  The trial is expected to continue until November.  (Photo by Drew Angerer/Getty Images)

Alphabet CEO Sundar Pichai leaves federal court on October 30, in Washington, D.C., after testifying in the antitrust case against his company. (Drew Angerer/Getty Images) (Drew Angerer via Getty Images)

That’s because Apple (AAPL), Amazon (AMZN), and Meta (META) are defending themselves against a series of other federal and state antitrust lawsuits, some of which make similar claims, and because all three companies stand to lose or win depending on the outcome.

In the Apple case, US lawyers claimed that the iPhone maker prevented competitors from entering the smartphone market using a “web of contractual restrictions.”

The government made a similar claim in the Google case, which hinges on several types of contracts that Google allegedly used to enhance its dominance in search.

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“The general lessons here are a long way off, but clearly this is a really important time when the first of these technical cases will be decided,” said Douglas Ross, an antitrust professor at the University of Washington.

“I think they’ll be interested in how narrow or wide it is [the judge] “He identifies the markets here, and if there is any learning in what he writes it may have application elsewhere,” Ross added.

The government says Google is violating Section 2 of the Sherman Act by blocking competitors from entering three different markets: general online search, search advertising, and text search ads.

Ross said prosecutors generally tend to craft narrower definitions of the market to make it easier to prove a defendant’s monopoly.

He added that the courts’ reaction to these arguments will be important.

The impact of the Google case also depends on whether the judge accepts or rejects one of the government’s antitrust theories — which Google class actions qualify as anticompetitive, said Harry First, a law professor at New York University.

This strategy has not worked for the Department of Justice so far, including its landmark case in the 1990s that eventually forced Microsoft (MSFT) to reach a settlement to open its operating system to competitors in the early 2000s.

Lawyers for Dominique Strauss-Kahn, Amit Mehta (left), William Taylor (center) and Hugh Campbell present their case in Strauss-Kahn v. Nafissatou Diallo in the New York State Supreme Court in the Bronx on March 28, 2012 in New York.  Dominique Strauss-Kahn's lawyer asked a US judge on Wednesday to dismiss a civil suit brought by a New York hotel maid, saying the ill-fated French politician had diplomatic immunity when he allegedly assaulted her.  the suit Lawyers for Dominique Strauss-Kahn, Amit Mehta (left), William Taylor (center) and Hugh Campbell present their case in Strauss-Kahn v. Nafissatou Diallo in the New York State Supreme Court in the Bronx on March 28, 2012 in New York.  Dominique Strauss-Kahn's lawyer asked a US judge on Wednesday to dismiss a civil suit brought by a New York hotel maid, saying the ill-fated French politician had diplomatic immunity when he allegedly assaulted her.  the suit

Amit Mehta, left, is the judge overseeing the Google antitrust case. This photo shows him in 2012 when he was an attorney before the New York State Supreme Court. (Don Emmert/AFP via Getty Images) (Don Emmert via Getty Images)

But if the judge in the Google case is convinced that the theory has some merit, as First explained, it could change the way antitrust cases are evaluated in the future.

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“I’m curious to see the extent to which the government is trying to come back to this topic and maybe move it in a direction that might be helpful in other cases,” First said.

Many companies could be affected by what a judge decides, even outside the world of technology.

A government victory would jeopardize billions of dollars in lucrative contracts between Google and Apple, as well as deals with other device manufacturers and telecommunications companies.

In its case, the government alleged that Google pays billions of dollars every year to LG, Motorola (MSI), and Samsung; Major US wireless carriers such as AT&T (T), T-Mobile (TMUS), and Verizon (VZ); and browser developers such as Mozilla, Opera, and UCWeb.

Government prosecutors alleged that Google was paying Apple an estimated $8 billion to $12 billion annually — a portion of its search advertising revenue — in exchange for granting default placement for Google Search on Apple devices.

In 2022, according to prosecutors, those payments totaled about $20 billion. The Justice Department said its figure represents 15% to 20% of Apple’s worldwide net income.

Apple CEO Tim Cook is seen speaking to reporters after his meeting with Indonesian President Joko Widodo at the presidential palace in Jakarta, Indonesia, April 17, 2024. REUTERS/Willi KurniawanApple CEO Tim Cook is seen speaking to reporters after his meeting with Indonesian President Joko Widodo at the presidential palace in Jakarta, Indonesia, April 17, 2024. REUTERS/Willi Kurniawan

Apple CEO Tim Cook in April. (Reuters/Willi Kurniawan) (Reuters/Reuters)

However, some technology companies stand to benefit if the government ultimately wins.

The unraveling of Google’s contractual arrangements could boost rival search engines such as Microsoft’s Bing and DuckDuckGo.

It could also open the door to new search engines and mobile phone manufacturers.

For its part, Amazon exited the mobile phone market after claiming that Google contracts prevented it from attracting manufacturers to its alternative operating system. Fire operating systemcompetitor”forkFor Android operating system from Google.

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Prosecutors said the manufacturers were concerned that Amazon’s partnership with Bing for mobile search services might risk lucrative deals with Google.

The government has not yet determined what precise treatment it wants if it wins over Google. If the government wins any of its claims, a separate phase of the trial will be held.

The outcome of the presidential election scheduled for November could also affect the case, which was brought during the administration of former President Donald Trump.

If Biden is defeated, the new administration may decide to pursue different remedies or drop the case altogether.

The judge in that case, Mehta, may or may not have raised his hand in his final questions to the lawyers during closing arguments last week.

He backed away from the arguments made by both sides.

“You can talk about competition, but the competitor bears some responsibility for the competition,” Mehta said, while also wondering why new competitors aren’t seeking to enter Google’s market — and whether that’s even possible.

“This seems highly unlikely, if not impossible, under current market conditions,” Mehta said.

Alexis Keenan is a legal correspondent for Yahoo Finance. Follow Alexis on Twitter @alexiskweed.

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