Alphabet (google): The hypothesis of a dismantling of Google concerns Wall Street

(BFM Bourse) – The US Department of Justice indicated in a document that it was considering requesting Google to spin off some of its activities. Even if the road to this radical solution remains long, such a decision would be historic for a “big tech”.

A true modern technological conglomerate, will Google and its parent company Alphabet soon be fractured into several pieces? This idea has been floating around for a few years, but it had never been taken very seriously.

However, the situation has changed a little since August. A judge in a court in the District of Columbia in the United States then ruled in favor of the US Department of Justice (DoJ) against the tech giant in the so-called “US vs Google” case. Since 2020, the American authorities have accused Google of having violated American legislation on monopoly (the Sherman antitrust act of 1890.

On August 8, Judge Amit Mehta of the Columbia Court agreed with the findings of the US Department of Justice, ruling that the American company exercised “monopoly power” in online search and online advertising. Which also made it possible to note that Google had paid astronomical sums (26.3 billion dollars in 2021 including 20 billion paid to Apple) to companies so that Chrome was the default browser on their devices (computers, telephones ).

Following this decision, “remedies”, that is to say concessions, must be found so that this monopoly situation is disrupted.

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Google sous pression

However, in a document of around thirty pages sent to Judge Amit Mehta, the DoJ mentioned preliminary avenues for these “remedies”. Including a radical solution: force Google to abandon (and therefore sell) certain services, such as its Chrome browser or its Android operating system.

“Plaintiffs are considering behavioral and structural remedies that would prevent Google from using products such as Chrome, Play, and Android to benefit Google Search and Google Search-related products and features – including new access points to search and new features, such as artificial intelligence – compared to its rivals or new entrants”, we can read in this document posted online by The Verge.

On Wall Street, the market is worried without panicking. Alphabet shares dropped 1.4% in pre-opening this Wednesday. Still, Google is under pressure as the DoJ said last night that the company could be forced to be broken up in the ongoing antitrust case surrounding its search monopoly. line”, judges Deutsche Bank.

The road to such a radical solution, however, turns out to be long, and other “remedies” are being considered by the DoJ such as measures limiting or prohibiting the default installation of Chrome.

The DoJ is, in fact, particularly concerned about the control that Google has over online search distribution channels, via these pre-installation agreements. Another solution would be to force Google to “support education and awareness campaigns aimed at improving users’ ability to choose the general search engine that suits them best,” explains the DoJ.

In a response published on the Google blog, Lee-Anne Mulholland, in charge of regulatory affairs at the company, writes that the remedies mentioned “go well beyond the legal questions specific to this case”.

The previous Microsoft case

“This case concerns a set of research distribution contracts. Rather than focusing on this, the government appears to be pursuing a broad agenda that will impact many sectors and products, with significant unintended consequences for consumers, businesses and American competitiveness,” she explains.

In particular, the lawyer asserts that separating Chrome and/or Android from Google “would break them – and many other things”. “Make no mistake: separating them would change their business models, increase the cost of devices and weaken Android and Google Play in their fierce competition with the iPhone and Apple’s App Store.” , says the manager.

In August, Dan Ives, an analyst at Wedbush, judged that an Alphabet split remained a possibility. But not the most likely. “We think this would be overkill and Google would obviously appeal these decisions, which would remain in the court system for years,” he explained.

“We continue to believe that a disruption of Big Tech’s business models is very unlikely in the future, although adjustments to business models and greater scrutiny of mergers and acquisitions will be at the forefront,” he added.

A split would constitute a historic decision in American history, since no current tech giant has suffered a dismantling. Unlike one of the most famous examples in History, that of John Rockefeller’s Standard Oil, dissolved in 1911 (which gave birth to Chevron and Exxon).

In 2000, the United States attempted to split Microsoft, at a time when Windows was ultra-dominant. But this offensive launched under Bill Clinton was abandoned in 2001 by the Bush administration.

Julien Marion – ©2024 BFM Bourse