Google has found itself at the center of a major antitrust action by the U.S. Department of Justice (DOJ).
On Tuesday, the DOJ indicated its concerns about Alphabet’s (GOOG) monopoly status… and recommended breaking up the tech giant as an “antitrust remedy.”
This isn’t Google’s first brush with the DOJ…
The company has faced various antitrust investigations and lawsuits over the years, including a notable case in 2020 focusing on Google’s search and advertising practices. And in August of this year, a judge ruled that Google does indeed hold a monopoly in search engines.
But it is the first time we’ve seen the suggestion of breaking up the company.
What exactly would this mean for Google… and for investors?
Let’s take a closer look.
Is Google a monopoly?
In its filing, the DOJ wrote it was “considering behavioral and structural remedies that would prevent Google from using products such as Chrome, Play, and Android to advantage Google search and Google search-related products and features—including emerging search access points and features, such as artificial intelligence—over rivals or new entrants.”
In layman’s terms, the DOJ is concerned that Google is forcing its products and services on consumers—potentially stifling competition in the tech industry.
A ruling on the recommendation is expected by August 2025 (although if the court decides against the tech giant, Google will likely appeal, which would draw out the case, possibly for years).
What would a “breakup” mean for the company—and shareholders?
If the court rules that Google must be broken up, it would likely involve Google spinning off various subsidiaries or business units. This could include separating its search engine, AI capabilities, and hardware divisions into separate entities.
While that may sound alarming, Google shareholders shouldn’t panic…
History tells us that DOJ antitrust actions and “breakup” recommendations often don’t have long-term impacts on the stock.
For instance, Microsoft faced an antitrust case back in 1998 for monopolizing the personal computing market. The court ultimately ruled that Microsoft did indeed have an illegal monopoly. In 2000, the judge ordered a breakup of the company.
While some of the judgment was overturned on appeal—including the breakup order—Microsoft ultimately entered a settlement where it agreed to change some of its business practices to reduce its monopoly.
In the end, the lawsuit didn’t create any long-term harm to Microsoft’s growth. Since 2000, Microsoft is up 1,000%, and remains one of the undisputed leaders of the market.
The upside of a Google breakup
It’s worth noting that Google has deep connections and influence across the government, so we’ll likely see the company negotiate a resolution in its favor.
But even if Google were forced to break up, it could create long-term value for investors. Google’s diverse portfolio contains many leading products and services that would continue to have a competitive advantage even if they were spun off. Plus, it would allow for more focused, streamlined management of individual business units.
Put simply, a restructuring could create multiple investment opportunities out of what’s currently a single stock.
The bottom line: While the DOJ’s actions against Google might seem alarming, investors should not run for the hills. It’s more likely than not that Google will continue to be the reigning tech king for the foreseeable future. And even if a breakup were to occur, the situation could create more long-term opportunities for shareholders.
Get more insights into the latest market-moving headlines with WSU Premium.
