The DOJ Is Doing Its Best To Make Google Unprofitable
Google has lost its second major antitrust case against the Department of Justice, threatening the tech giant's free-to-consumer business model.
The Department of Justice (DOJ) won its second major antitrust case against Google on Thursday. The U.S. District Court for the Eastern District of Virginia will now consider remedies for Google's conduct, including divestiture from Google Ad Manager.
Judge Leonie M. Brinkema, who issued the opinion for the District Court in U.S. v. Google, found Google guilty of "willfully acquiring and maintaining monopoly power in the open-web display publisher ad server market and the open-web display ad exchange market." Brinkema also found that Google violated the Sherman Antitrust Act by illegally bundling DoubleClick for Publishers (DFP), which publishers use to sell ad space on their websites, and Google Ad Exchange (AdX), where advertisers bid for said ad space, into Google Ad Manager.
The U.S. District Court for the District of Columbia is currently considering what remedies to impose in an antitrust case against Google's monopolization of the search engine market, which the company lost to the DOJ in August 2024. In this case, the DOJ proposed that Google divest from Android and Chrome, make its advertisement data available to competitors at zero cost, and allow publishers to deny Google access to their domains to train its generative AI models.
The proposed remedies in both cases threaten the company's main source of revenue: Google Services, including Google Ads and products like Gmail, Google Drive, and YouTube, which Google's present business model offers to users for free. Declaring this model and its associated practices illegal could have unintended consequences for consumers.
Jennifer Huddleston, senior fellow in technology policy at the Cato Institute, tells Reason that the proposed remedies could detrimentally impact consumers in several ways. Consumers may "encounter more friction to select default browsers or search options to reach the products they want." The remedies may also create fewer options and "higher cost or less successful advertising reach particularly for small businesses."
"Adding extra middlemen in the ad stack may well increase costs for advertisers, which would seem to disproportionally harm smaller ad buyers," Josh Withrow, technology and innovation policy fellow at the R Street Institute, tells Reason.
Patrick Hedger, director of policy at NetChoice, a trade association that represents Google and other Big Tech firms, says "Google's business model…is data driven" and that "limiting Google's ability to collect and process data will inherently weaken its services." Withrow agrees with Hedger, telling Reason that "the biggest likely risk to Google is that these rulings could cripple their ability to keep up with their competitors' innovation, particularly in AI, both because of the financial blow they'll take but also due to losing direct access to large quantities of data."
Hedger also warns that "price increases are always the risk of overregulation of free-to-consumer tech services," which most of Google's services currently are. Hedger cites the European Union's Digital Markets Act pushing companies like Meta to offer paid versions of their products. Withrow says "there is a risk that Google might be forced to seek ways to monetize services it currently offers for free."
Geoffrey Manne, president of the International Center for Law and Economics, disagrees. Manne tells Reason he suspects "Google would be loath to change [the free-to-user model] if it can at all be avoided." Manne thinks charging handset manufacturers for Android, which Google currently finances through search revenues, is a much more likely scenario. Still, Manne predicts the "remedies will either be fruitless (because people will continue to prefer and use Google) or affirmatively harmful (because Google will have reduced incentive and/or ability to compete)."
Google Services accounted for 87 percent ($84 billion) of Alphabet's (Google's parent company) revenue in the fourth quarter of 2024. Google includes revenue from advertising, Android, and Chrome under "Google Services" in its financial statements, making it difficult to calculate the impact of the DOJ's search engine remedies.
Max Gulker, senior policy analyst at Reason Foundation, the nonprofit that publishes this magazine, writes that DFP and AdX alone generated 12 percent ($42 billion) of Alphabet's revenue last year. Compulsory divestiture from these ad tech products could be a dramatic hit to Google's bottom line.
Google is not a charity; it's a business. If it cannot generate revenue to make a profit through the combination of its advertising products, user data, and contracts with device manufacturers, it may have to raise prices on products that are presently enjoyed for free by consumers.
