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Breaking up Google isn't the answer

Daniel Howley
Technology Editor

Big Tech has a big target on its back. Politicians across the ideological spectrum are lining up with varying proposals to cut down on the influence and power wielded by Silicon Valley's titans including Facebook (FB), Amazon (AMZN), and Apple (AAPL). Among those facing the most scrutiny is the company that likely produces the browser or smartphone operating system you're using to read this article: Google.

While Facebook and Amazon might also be tantalizing targets for antitrust enforcement because of their own size and power, Google (GOOGGOOGL) is likely among the easiest targets thanks to its dominant position in online advertising, search, mobile operating systems, and social media via YouTube.

As the U.S. Department of Justice reportedly prepares an antitrust investigation into the search-engine giant, Google has also faced calls for some kind of a government-mandated breakup.

Perhaps the loudest cries for a breakup come from presidential candidate and U.S. Senator Elizabeth Warren, who has laid out a plan to dismantle Google, Amazon, and Facebook. That plan has also drawn some criticism. Still, fellow 2020 presidential contender Bernie Sanders (I-VT) has also jumped on board that breakup train, while Kamala Harris (D-CA) and former vice president Joe Biden have said it's something to consider.

But according to some antitrust experts, breaking up Google is the last thing the government should do. Not only is proving that the company is participating in anticompetitive behavior difficult, but dismantling Google could actually hurt consumers in the long run, some experts say.

"This remedy has received attention in the political arena, but proving that Google should be broken up as an antitrust matter is different," explained Rutgers Law School professor Michael Carrier. "This is an extreme remedy, and I don’t believe the antitrust agencies will pursue it."

Why Google is such an easy target

One of the most valuable and powerful companies in the world, Google boasts the first and second most popular websites on Earth in Google.com and YouTube.com.

Google's name often comes up in discussions about anticompetitive practices, because of its size. It's got the most used search engine in the world, accounting for 74% of global desktop searches and more than 83% of mobile searches, according to NetMarketShare. Google also captures more than 37% of digital ad sales market share, and its Android operating system runs on 86.7% of all smartphones worldwide.

It's also already been the target of antitrust measures by the European Union, which has hit it with three different multi-billion dollar fines over allegations that included unfairly boosting its own services in search results. Google's contemporaries including Amazon, Apple, and Facebook have also been investigated by the E.U., but Google’s dominance in search, digital advertising, and mobile operating systems has put a particularly large bullseye on its back.

Google CEO Sundar Pichai speaks during the Google keynote address at the Gaming Developers Conference in San Francisco, California, U.S., March 19, 2019. REUTERS/Stephen Lam

“We know Google is dominant in search, and we know that they've done certain things to keep their search engine [on top] and with search results, so we know there’s smoke there,” George Hay, a professor of law and economics at Cornell Law School, previously told Yahoo Finance’s JP Mangalindan.

Warren has also raised concerns that Google is able to favor its own services over competing offerings. Under her breakup proposal, Google would have to remove its apps from the Play Store, split Google Search from its Google AdSense service, and, finally, the company would have to divest itself of the Waze navigation app, Nest home automation business, and DoubleClick, which Google pulled into its ad platforms.

Under her plan, Warren wrote in a Medium post, “Google couldn’t smother competitors by demoting their products on Google Search.”

Breaking up is hard to do

Throwing around the idea of breaking up a company, and actually moving forward with the process, are two entirely different things. When Microsoft was investigated for anticompetitive practices for its push to crush Netscape in favor of its own Internet Explorer in the 1990s, the company was initially told to break up.

But in 2001 an appellate court found that there wasn't enough evidence to warrant a breakup, and instead Microsoft agreed to give third-party developers access to fundamental tools needed to make their own programs work with Windows.

There's also the argument that breaking up Google could do more harm than good.

According to Penn State University Law professor John Lopatka, that's exactly the kind of defense Google will put forward.

"They would say it would damage the business to break it up, which of course would translate into damaging consumers," Lopatka said, adding that Google would claim its business model allows it to provide the best possible service to its consumers.

How can the government address Google's dominance?

If an antitrust investigation into Google finds that the company is involved in anticompetitive practices, the government will likely seek some form of conduct remedy to make the company change such illegal business methods.

According to Carrier, the government may require that Google put rival apps on Android straight out of the box. Google could also be forced to follow similar rules laid out by the E.U.'s complaints against the company, including ending the practice of requiring companies to install Chrome and Google Search on their devices to get access to the Play Store.

Mountain View, California, USA - March 29, 2018: Google sign on the building at Google's headquarters in Silicon Valley . Google is an American technology company in Internet-related services and products.

Similarly, Lopatka explained, the government might claim that Google is being biased to its own products, by pushing consumers to purchase Google apps over competing apps in the app store. If the company is found to be using such practices, it could be legally forced to stop in order to give competing apps a fair shot.

Getting Google to change might not even require a remedy action. Attorney Gary Reback, who spearheaded the antitrust lawsuit against Microsoft, pointed out in an interview with Yahoo Finance's Akiko Fujita that dragging companies into some form of antitrust trial is likely enough to scare them into changing their business practices.

“The damage to the monopolist comes primarily from the airing out, the public scrutiny and what it’s done,” Reback said in the interview.

So while the threat of breaking up a company might make for splashy headlines, it's not the ultimate solution to taming Big Tech.

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Email Daniel Howley at dhowley@yahoofinance.com; follow him on Twitter at @DanielHowley.

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