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For decades, the government has struggled with how to police monopolies in the tech industry.
And this week a landmark ruling in a case against Google marked the most aggressive attempt in the modern era to level the playing field.
Today my colleague David McCabe, on who won, who lost and what this means for the race to dominate artificial intelligence.
It's Thursday, September 4th.
So David, a year ago a federal judge decided that Google had broken the law to maintain its dominance over search, that basically, it had legally maintained its monopoly.
And since then, everyone has been waiting to see what the punishment could be, because the punishment in this case could have enormous implications for the tech industry.
And here we are this week.
The decision comes out.
The punishment is clear.
And it seems like a slap on the wrist.
Yeah, so on Tuesday a little bit after 4 pm I get a message from someone we work with that just said it's dropped.
And I knew immediately what they were talking about.
Basically that your day was going to be completely scrambled.
Yeah, we had been preparing for this for a long time, and now it was go time.
And we start making our way through this ruling.
It's 223 pages long.
But it becomes clear within minutes that this is really a win for Google and a blow to the government's efforts over now, two different presidents to rein in the power of Silicon Valley.
Google had avoided the harshest penalties in this case.
It had not been broken up, as the government had asked, so it was not forced to sell Chrome, its popular web browser.
It was forced to share some of its data and its search results with its rivals, but on terms that did not require it to hand over all of its secret sauce.
And it was telling that, despite the fact that Google was being mandated to do some of these things, its stock price actually jumped after the ruling.
Well, I mean, earlier I mentioned this felt like a slap on the wrist.
And I think that I felt that way because, as a non-tech person, I guess the idea that you would have to share data with your rivals like that doesn't seem like the worst fate that could befall a company as big as Google, which is worth trillions of dollars, something like that.
Yeah.
And especially after just a year ago, he issued a ruling that declared in no uncertain terms that they were a monopolist and they had acted illegally.
Right.
That was a big ruling and a loss for Google.
Right.
So how does this judge go from declaring that Google is illegally protecting its monopoly to basically delivering a penalty that is so lenient or benign, however you want to call it, that the stock price actually jumps?
The answer to that question has a lot to do with artificial intelligence, which has, for the first time in decades, called into question whether Google will own the future of how people look for information online.
So tell me a little bit more about that.
Like, where does the story start?
It starts in 2020.
So the first Trump administration had decided that they were going to investigate concerns about the power of the biggest tech companies.
Right.
I remember that.
Yeah.
Not just Google, but Amazon and Apple.
And they said that Google had amassed and maintained a monopoly over the search business.
They said that its behavior had crushed its competition, made it hard for even big companies like Microsoft to build a search engine that could match Google's dominance.
They said that it had led Google to make an inferior product.
And they said that ultimately, this had hurt consumers.
Because they were getting access to an inferior product?
Or what was the harm exactly?
The harm was that Google, now outside of a competitive marketplace, was able to make an inferior product.
And ultimately, the consumers had less choice, right?
That if they didn't like how Google was say, collecting their personal data, that they couldn't go somewhere else that was as effective at giving them the answers that they needed from the internet.
That's actually really interesting because I think when we think of antitrust cases, we normally think of like a price harm, like consumers are getting harmed because they're paying more for such and such product.
But here it's that the product that they're not even paying for is inferior, and also that it's about their data and their privacy, which feels a little bit unusual.
Yeah, you're right.
Antitrust law often in the last many decades has looked at, is there a price increase for consumers?
And Google ultimately has a cost of zero dollars.
So what were the arguments on both sides of this case?
What was the government saying and what was Google saying in its defense?
So at the heart of the government's case were payments that Google has made for many years to companies like Apple and Mozilla that make web browsers and to companies like Samsung that make smartphones, to basically make its search engine the automatically selected search engine that comes up when you open your phone or you enter a query into the top of your web browser.
And these payments amounted ultimately in some cases to billions of dollars.
In 2021, Google paid $26.3 billion as part of these deals.
So it's not funny money, right?
It's real money.
And the government said that that set in motion a pernicious flywheel effect.
Google paid for the prime placement, which meant more people searched on Google.
Which meant Google had more data about what people are searching for, which they used to make their product better which, in turn, made it more likely that Google would get the prime placement.
And that effectively, this pernicious flywheel spun and spun and spun and blocked out even big companies who were trying to compete in search.
Google is so dominant.
It's using its dominance to crush competition, make its product better and therefore you're more likely to choose it anyway as a consumer.
Exactly.
This basically just entrenched their power over and over again.
This feels like an argument that actually serves both sides of this lawsuit.
Well, exactly.
Google said, people choose us because we are better.
They argued that they have invested again and again in making search the best product it can be.
And that people chose not because Google was making these payments, not because it was the automatically selected search engine in their web browser, but because it had simply won on the merits.
It seems worth noting here that Google obviously one of the biggest tech companies in the world, one of the most profitable tech companies in the world, a company that has come to define how we use the Internet.
This case seems to be existential for it in some ways.
And it feels like that is a lot of power to put in the hands of this one judge who basically has like, the future of Google in his hands and his hands alone.
That's right.
And once he ruled in 2024 that Google had abused its power, had illegally maintained a monopoly, that pressure only increased because he had to figure out what to do about it.
And that's a question that didn't just have implications for Google.
It had implications for the entire industry, for the entire internet and everybody who used the internet.
And it seemed as though he might be poised to do something that would radically disrupt the technology industry.
And that was really crystallized for me in the closing arguments of the second phase of the trial, the remedies phase.
Okay, and why did that crystallize for you then?
So the judge in this case, Amit Mehta of the district court in Washington.
He holds his cards close to the vest.
He's very careful.
And he's had three weeks of testimony, almost like a second trial.
He's had three weeks of testimony from witnesses.
He's heard evidence.
And then he does closing arguments.
Mm-hmm.
For a full day.
He just drilled into these lawyers about the big picture issues in the case, but also about really small questions.
And it just, in some ways, deciding that Google had broken the law was the simple part, right?
It was a clear legal question.
It was about basically these contracts.
And now the questions before him had multiplied significantly.
Basically, it's like it was much easier and simpler to decide that they had broken the law than it was to figure out what to do about it.
That's right.
And fundamentally, there's a reason for that.
The first phase of this trial was about the past.
The second stage was about the future.
And the future of finding information on the Internet is murkier than ever.
While this battle was playing out in the courtroom, there was a different battle playing out in Silicon Valley between titans like Google and smaller startups to dominate what had become an AI boom.
And ultimately, the fight outside of the courtroom made its way into the courtroom.
And the judge in this case had to adjust to this new reality.
And ultimately, it changed the course of the case.
We'll be right back.
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So David, how is it that AI became so central to the outcome of this case?
Yeah.
So when this case was filed in 2020, people probably had a general understanding that the data that Google had was valuable, not just for search, but for the development of artificial intelligence.
Then that theoretical idea turned into reality.
In November of 2022, as this case is barreling towards trial, OpenAI releases ChatGPT.
And I need people to know what happened next.
This explosion of AI chatbots.
These products where you can ask it a question and it responds as though it's a human.
They can spit out and generate images.
And money starts pouring into this space.
Companies start investing in the construction of data centers and other infrastructure that's required for this technology.
Venture capitalists start funding more and more of these startups.
Mm-hmm.
And it is exactly at this moment that this case, which is about how, for a decade, information had worked online, goes to trial.
Can you just explain a little bit more?
What does the data that you're talking about have to do with Google's efforts with AI and what the remedy should be for whether it's legally enforcing a monopoly?
So Google Search is built on reams and reams of data and information, basically a map of the Internet.
Generative artificial intelligence models are also built on data and information, right?
These large language models ingest a ton of information, a ton of text, so that they can then generate these responses to your questions.
And so suddenly there is a question about whether or not the advantage that Google has had and maintained in search can basically transmute into an advantage and dominance in artificial intelligence.
But of course, that hasn't really happened yet.
Google really is under challenge from companies like OpenAI and Perplexity.
They have their own chatbot, Gemini, but it is not the dominant chatbot.
Right.
There are a million AI companies, or at least what feel like a million AI companies that have sprung up that people are asking questions to.
Yeah, I was just in San Francisco and all the billboards and ads in the airport are about AI.
And we know these products.
There's Claude, there's Grok, there's ChatGPT.
And we should just note here that The New York Times has sued ChatGPT's parent company OpenAI, and one of its investors Microsoft, claiming copyright infringement of news content related to these AI systems.
And the two companies have denied the suit's claims.
But please continue.
That's right.
And consumers have started to change their behavior because of these chatbots.
They're now using them like they might have used a search engine.
They're asking it questions that they might have previously asked Google.
Yes, I feel like I'm very frequently going to Gemini or ChatGPT and asking a question I might have normally asked Google.
Right.
And this transformation is starting to play out as this case gets underway, but it doesn't come up in the first phase of the trial.
The first phase being when the judge says, yes, I've determined that you're acting illegally.
That's right.
But as soon as he triggered the second phase of the trial, the how do I fix this phase of the trial?
Suddenly, he has to face this transformation of the tech industry head on.
How so?
Because now Google could come into the courtroom and say look, the rise of these AI products proves that the market is working, that you do not need to make some radical intervention.
And on the flip side, the government came into his courtroom And said if you do not act aggressively, Google will use the tactics it used to illegally protect its monopoly in search and use them to monopolize and dominate artificial intelligence.
Basically, they will use one monopoly to create another monopoly.
Precisely.
What is the judge's actual remedy here?
I would think of this in two different buckets.
Okay.
Remember the deals that Google did with Apple and Mozilla and Samsung to be that automatic search engine that comes up in your browser or your smartphone.
Yes, I do.
So this is at the heart of the case.
Okay.
And I think it's something that a lot of people thought the judge would ban outright, because it was so central to the government's case, to the monopoly that he had found that Google had illegally maintained.
But he takes a slightly different tactic.
He bars Google from entering into those deals in some cases, most notably when they are exclusive.
But he does not ban them from paying for that great real estate entirely.
So what does that mean?
That Apple could just be like OK sure, we'll take your 20 billion and you can be the main search engine when somebody opens up their browser.
But we're also going to have DuckDuckGo?
Yeah.
This is a big question.
What is a non-exclusive default?
It would seem that by the nature of a default, there is only one, right?
Mm-hmm.
But it was, for example, discussed during the trial that Apple could offer a different default in the normal browsing mode and in the private browsing mode.
You could imagine that they would install a privacy-focused search engine as the default in incognito mode.
So perhaps that is an example of a non-exclusive default.
But where the rubber will hit the road on this part of the remedies is exactly how these two things that seem like they might be in conflict resolve.
Okay, so you mentioned there were two buckets.
Sounds like that's one bucket.
Mm-hmm.
The second bucket is requiring Google to share some of the data that makes it powerful.
Okay.
They will be required to syndicate their search results to quote-unquote qualified competitors.
Essentially that a qualified competitor to Google could display Google's search results, which are seen as very high quality, rather than their own, maybe inferior, search results, right?
Erasing that quality advantage.
Now the government didn't get everything they wanted there because Google is going to be able to do so.
Basically, on the terms of commercial agreements that they already have to do this.
So it's not a huge change for them because they already offer deals like this.
But of course, now they're being required by a court to offer them.
The second part of sharing what makes Google Google is they are required to give those qualified competitors the sort of top level of what is called the search index.
I have no idea what that is.
Yeah, it's a kind of wonky term, but it basically means the corpus of web pages and information that make up Google results.
And so they have to hand that over to rivals who have said that it's very hard to build your own search index.
And so this was this kind of insurmountable advantage that only Google had.
But there's a catch.
The judge said that Google doesn't have to share a lot of the data it uses to rank the popularity of those pages, the kind of one layer down that they use to make really quality results.
Wait, that would seem like it's sort of the secret sauce, as you mentioned, to Google, right?
Like, the whole point of using Google is that you get the search results you want immediately, like on the top page.
Yeah.
And the government wanted them to share all of the secret sauce.
And ultimately the judge did mandate sharing of some data like that, but not all of what the government asked for.
But, as you mentioned earlier, all this to say he's not actually breaking up Google, which was one of the things that they were really worried about, right?
Like he's not forcing them to spin off Chrome or Android products or anything like that.
That's right.
And this was like the biggest ask that the government made that Google be forced to spin off Chrome.
It's a wildly popular web browser.
It's used by billions of people around the world.
And potentially, if competition didn't improve after the remedies, that the court be allowed to make them spin off Android, their smartphone operating system.
And the logic behind this was that those are both places where Google is able to absorb search queries right.
People use the Chrome web browser to search for information through Google.
And so the idea was it was a source of web traffic, which was really valuable to Google.
The judge said no go.
He said this was an overreach that the government was asking for something so aggressive.
That wasn't justified under the law set in previous antitrust cases.
You know, as we talked about, it's a really unusual position for a judge to be in, to have to make such a huge decision while this whole technological transformation is underway in the background.
And I'm just curious if he ever addressed that or if that came up for you at all during the reporting.
Yeah, so in many ways, this is the broader framing of this ruling.
He says, I'm not an expert in search engines.
I'm not an expert in artificial intelligence.
He says it's not a judge's forte to look into a crystal ball and tell the future.
And where that ultimately led him was this place.
He said, a court needs to apply remedies like this with humility, and that's what I've done.
And that logic led him to this pretty measured decision.
So it sort of seems like this AI boom that we've been talking about in some ways reverse the thinking on whether Google is a monopoly at all.
Because Google basically argued, hey, look, we're not just competing against DuckDuckGo or Bing.
We're competing against Amazon and Netflix, et cetera.
And that wasn't compelling to the judge at the time.
But now they actually legitimately do have tons of competition in another realm, which is AI.
And so I wonder if that is the reason in part why the judge essentially gave them something that feels like a slap on the wrist, to a lot of people at least.
He said that it was a motivating factor in how he reached his decision.
We talked about how he didn't ban those payments to Apple and Samsung and Mozilla for that great real estate for the search engine.
And he said that one reason he was doing that was he felt that the explosion of these AI chatbots could create companies that could compete with Google on the merits.
Basically that perhaps Google's financial might, when met with a real challenge from an innovative company, would not be enough to ensure their dominance.
Which makes me just sort of wonder about where consumers fit into all of this and how consumers are likely, if at all, going to feel the results of this ruling or the remedy that the judge is recommending.
Yeah, and I don't know that consumers will see an impact from this immediately.
Hmm.
Google is almost certain to appeal this underlying liability decision.
Which would take potentially years.
Potentially years.
The government could appeal this remedies decision.
So this will probably be mired in the courts for a long time, which could very well lead to the remedy's being paused while that is being hashed out.
And then the remedies themselves are not immediately about the consumer experience.
They don't mandate, for example, a choice screen, which is a wonky term for basically a screen that pops up on your smartphone and says which search engine do you want?
That's something consumers would see immediately.
That's not the direction the judge went.
And so instead the question will be does this sort of basket of changes shift the arc of the technology industry enough that maybe, several years from now, consumers maybe do see more innovative products that compete with Google, that offer them that experience of finding information online in new and different ways and ultimately allow companies that produce those products to really thrive, despite Google's size and might?
So basically, like, it's not immediately clear how consumers are going to feel this, if at all.
But it sounds like there could be downstream effects of this case that are unpredictable, that consumers could feel.
There could be.
And to understand how, it's helpful to look to the past.
Yeah.
More than two decades ago, the federal government sued Microsoft.
This was the last big tech antitrust case to get this far over allegations that Microsoft had hurt competition when it came to personal computers and internet browsers.
They were battling with, I don't know if you remember Netscape.
Yes, of course.
Yeah.
And ultimately, the remedies in that case were not dissimilar from the remedies in this Google case.
But there has been a persistent argument that the fact of that scrutiny was enough to make Microsoft afraid of its own shadow, precisely at a time when the internet was enabling a new generation of startups.
Such as Google, perhaps?
Such as Google.
And that, as a result, Microsoft was not as aggressive in competing against Google, and that that case opened the door just enough for Google to become the company it is today.
It's kind of interesting actually to note that Google took advantage of a cultural shift at a company that was scared because of a government lawsuit.
And now the question is could there be a cultural shift at Google that would then maybe change the future landscape of tech in ways that are unpredictable now, but that consumers certainly may feel down the line?
That is one of the big questions.
It was clear throughout this trial that Google has learned from the Microsoft experience.
There were documents that came out that showed that they looked at the way that Microsoft had put itself at risk during its trial in order to guide their own policies around retaining documents and what people should say.
A number of their lawyers, in different ways, had worked on the Microsoft case.
One of their lawyers worked for Netscape.
So it is clear that they have learned from that history before.
And I think the question is can they successfully avoid the trap that Microsoft may have fallen into?
So in the Microsoft case, the biggest effect of that was not necessarily the actual outcome, but the fear of God that the government put into this company.
That then made it behave differently with its competitors.
That led to the rise of this behemoth that is Google.
And I just sort of wonder how you're thinking about the government's attempts to regulate an industry it has struggled to get its arms around throughout multiple administrations, Democrat and Republican.
I mean, this decision is a blow to those efforts.
And it's striking to me because the Justice Department undertook a monumental effort to bring this case to trial.
These rulings are landmark decisions.
And still, when people looked at the ruling yesterday, their reaction was that it paled in comparison to the speed and scale at which the technology industry is barreling ahead.
And I just read an interesting analysis by my colleague, Steve Lohr, who covered the Microsoft case.
And he basically said that this decision is a new set of rules for the Czech giants to play by.
But the game's still going.
And so the question is has the judge in this case changed the rules of the game enough to give one of the rookie players enough space on the field to compete with Google?
Or have the rules changed too little and Google will just play the game again and win again?
Dave McCabe, pleasure speaking with you.
Thank you for having me.
We'll be right back.
As the U.S.
Centers for Disease Control and Prevention deals with an exodus of top scientists.
A number of states have decided to go their own contradictory ways on vaccines.
California, Oregon and Washington said they would work together to review scientific data saying that the CDC could no longer be trusted.
Florida, in contrast, said it would get rid of all vaccine requirements.
The moves come at a moment of unparalleled turmoil at the CDC, where Health Secretary Robert F Kennedy Jr, a vaccine skeptic, has taken control of the agency's vaccine decisions.
And Harvard University won a crucial legal victory in its clash with the Trump administration on Wednesday, when a federal judge said the government had broken the law by freezing billions of dollars in research funds in the name of stamping out anti-Semitism.
The ruling may give Harvard more leverage in its ongoing settlement talks with the Trump administration, which Harvard had sued over the funding cuts.
Today's episode was produced by Diana Nguyen and Caitlin O'Keefe.
It was edited by Liz O'Balin and Paige Cowett and was engineered by Chris Wood.
That's it for The Daily.
I'm Rachel Abrams.
See you tomorrow.
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