Monopoly and Antitrust
The Department of Justice has concluded that Google is a monopoly in the search business and is suggesting changes to its corporate structure. It is also recommending some of their business practices be altered to allow for more competition.
Antitrust legislation has been in the headlines in the technology space for years. While this certainly is a newsworthy headline, we don’t believe it’s necessarily a negative for Google.
Frankly, if Google was broken up, I think the sum of parts would be less than all of the individual parts if valued separately by the market. I think it’s entirely possible that breaking up Google could be a positive for shareholders.
We do consider antitrust considerations when we make investments. We monitor conditions such as this week’s headlines. We do not see the need for any changes at this point as to our perspective about the tech space; we still see it as a growth trade going forward.
A recent CNBC article highlighted this DOJ announcement. Excerpt below.
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"The Department of Justice late Tuesday made recommendations for Google’s search engine business practices, indicating that it was considering a possible breakup of the tech giant as an antitrust remedy.
The remedies necessary to “prevent and restrain monopoly maintenance could include contract requirements and prohibitions; non-discrimination product requirements; data and interoperability requirements; and structural requirements,” the department said in a filing.
The DOJ also said 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.”
Additionally, the DOJ suggested limiting or prohibiting default agreements and “other revenue-sharing arrangements related to search and search-related products.” That would include Google’s search position agreements with Apple’s iPhone and Samsung devices — deals that cost the company billions of dollars a year in payouts. The agency suggested one way to do this is requiring a “choice screen,” which could allow users to pick from other search engines.
Such remedies would end “Google’s control of distribution today” and ensure “Google cannot control the distribution of tomorrow.”
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