President Trump and his predecessor Joe Biden now largely agree on a major question that has the potential to reshape the tech world: Google should be broken up.
But there is an important difference that emerged in a filing last Friday: Trump’s Justice Department wants to let Google (GOOG, GOOGL) keep its investments in artificial intelligence. It notably has a stake in OpenAI rival Anthropic worth billions.
Backing off the Biden administration’s request to force Google to sell off its AI bets was “significant” and “very justified,” said Mark McCareins, a business law professor at Northwestern University’s Kellogg School of Management.
It “may be an indication that the government worries about deterring AI advances in the global race with China,” added David Olson, associate law professor at Boston College Law School.
The stock of Google’s parent, Alphabet, dropped more than 4% Monday as other tech stocks also sold off on macroeconomic concerns.
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The final decision on what happens to Google’s $2 trillion empire in court will be in the hands of federal judge Amit Mehta, who ruled last August that Google illegally monopolized online markets for “general search” and “general search text.”
No matter what Mehta decides, Google is expected to appeal, and the DOJ can too. Hearings to decide on remedies in this case are slated for April and May.
Final remedy recommendations from the government and Google were due to the judge Friday, giving a Trump-led DOJ one last chance to alter the prior Biden-era suggestion to the judge that Google be broken up with the forced sale of Google’s Chrome browser or contingent sale of its Android operating system.
It didn’t do so, despite being lobbied by the company to reconsider the Chrome proposal on national security concerns.
“Google must divest the Chrome browser — an important search access point,” the DOJ stated in its final proposal on Friday.
It argued that under a different owner, new rivals would have an “opportunity to operate a significant gateway to search the internet, free of Google’s monopoly control.”
They also retained part of a request to leave the door open to a possible divestiture of Google’s Android operating system.
But prosecutors did drop the Biden DOJ’s push for Google to sell off its AI bets, instead suggesting a setup where federal authorities could keep tabs on proposed AI investments that could threaten search competition.
Sundar Pichai, CEO of Google and parent company Alphabet, in 2024. REUTERS/Gonzalo Fuentes ·REUTERS / Reuters
Anthropic has argued to the judge that forcing Google to relinquish its stake would tilt the AI playing field in favor of OpenAI and its backer, Microsoft (MSFT).
“Plaintiffs no longer seek the mandatory divestiture of Google’s AI investments,” the DOJ said Friday in its revised proposal.
Derek Mountford, a shareholder in Gunster’s business litigation practice group who specializes in antitrust litigation, said while the Trump administration’s AI rollback is a concession, it comes with a hook.
“They’re asking for some reporting requirements to be attached to it,” he said.
“I think one of the [antitrust] themes you might see in a second Trump administration is even if they’re walking back some of the proposed sanctions, there’s still that element of control and monitoring and enforcement that’s going on in the background.”
The tension for the Trump administration, Chamber of Progress CEO Adam Kovacevich told Yahoo Finance last week, is that it is engaged in an existential fight with China for the future of AI and Google can still be an important weapon for the US.
“What are we going to do, hobble one of our main US runners in that race by breaking up that company?” asked Kovacevich, who previously led Google’s US policy strategy and external affairs team.
“It seems ill-timed to do that.”
The DOJ did stick with another expected remedy proposal that strikes at a major contention in the case.
It asked the judge to block Google from contracts that secure its search engine as the default across dozens of internet-connected devices, such as mobile phones made by Apple (AAPL), Samsung, and others, and browsers, including Apple’s Safari and Mozilla’s Firefox.
That is not good news for Apple, jeopardizing a major revenue stream. In 2021, Google paid $26 billion for default search placements, and the lion’s share of that went to Apple.
Bernstein analysts have estimated Apple’s revenue from Google Search defaults is somewhere between $18 billion and $20 billion per year.
The Google logo is displayed in front of company headquarters in Mountain View, Calif. (Photo by Justin Sullivan/Getty Images) ·Justin Sullivan via Getty Images
Google countered the DOJ’s request on Friday by asking that it still be free to enter into contracts to make Google search a default — so long as it does not condition search licensing based on device manufacturers also agreeing to distribute, preload, place, display, use, or license its AI Gemini Assistant Application.
McCareins, the law professor at Northwestern, said the DOJ has little to lose at this stage by holding on to Chrome divestment as a negotiating chip, given that both the underlying case and the judge’s decision on remedies are subject to appeal.
“Just from a bargaining negotiating position, at this stage of the proceedings, I am not shocked or stunned that the new sheriffs in town have continued to argue for divestiture of Chrome,” McCareins said.
Alexis Keenan is a legal reporter for Yahoo Finance. Follow Alexis on X @alexiskweed.
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