Big Tech Under Fire

For over two decades, Google has been the dominant force in digital search and advertising, leveraging its unparalleled control of online data to expand into multiple markets. Now, amid an intense wave of regulatory scrutiny, Google faces several major antitrust cases that question whether it has become too powerful. Drawing on the historic breakups of AT&T and Microsoft, both of which set lasting precedents for antitrust regulation, Google’s situation raises the question: could a breakup be the solution to curbing Big Tech’s influence and restoring competition?

Google’s Digital Monopoly

Google’s search engine holds an 88% market share in the U.S., a dominance reinforced by exclusive contracts with Apple, Samsung, and other device manufacturers. Its ad network, meanwhile, controls about 20 cents of every dollar spent on digital ads, giving Google overwhelming control over the online advertising landscape. This has significant implications for competitors and consumers alike, as Google’s influence limits competition, raises prices, and restricts alternatives in both search and advertising.

One of Google’s key strategies has been exclusive agreements with other major companies, including a $20 billion contract with Apple that makes Google the default search engine on all Apple devices. These agreements make it nearly impossible for smaller competitors like DuckDuckGo to gain visibility, as Google maintains control of default settings and user data on these devices. This practice is now a core focus of federal antitrust cases, which allege that Google’s contractual dominance creates a “walled garden” that undermines market competition.

Advertising Monopoly and Vertical Integration

The ad tech ecosystem is another area where Google’s vertical integration has raised concerns. With its ownership of DoubleClick, Google controls the full advertising pipeline from publishers to advertisers, setting terms and prices across multiple stages of ad placement. This high degree of control, regulators argue, has inflated prices, as Google allegedly charges higher-than-market rates by using its dominant position in the ad market.

To address these issues, the DOJ and state attorneys general have proposed several remedies, including divestitures to separate Google’s ad technology from its search and mobile operations. Regulators argue that breaking up these businesses could restore market fairness, allowing other ad networks to compete without Google’s interference.

AT&T’s Historic Breakup

AT&T’s monopoly on telephone services in the U.S. is a parallel example of how concentrated market power can stifle competition and innovation. AT&T controlled 98% of long-distance lines and 83% of U.S. phones by the mid-20th century, dominating all stages of the telephone business, from manufacturing through its subsidiary, Western Electric, to service delivery. This total control was a classic case of a “vertical monopoly,” with AT&T handling every aspect of the supply chain, creating barriers for new entrants and cementing its dominance.

In 1982, after decades of regulatory scrutiny and failed attempts at oversight, the Department of Justice mandated that AT&T break up its operations. AT&T agreed to divest its local operating companies, creating seven regional Bell operating companies or “Baby Bells.” This restructuring opened the telecommunications market to competition, leading to innovation and ultimately the digital age. Over time, competition increased as companies like Verizon and Sprint entered the market, fueled by this structural remedy.

Structural vs. Conduct Remedies: Why AT&T’s Model Could Apply to Google

The AT&T breakup serves as a model of how breaking up a monopoly can restore competition. Regulators argue that Google’s influence across search, advertising, and mobile technology could warrant a similar intervention. Separating its ad tech business from search and requiring transparency in exclusive agreements would break Google’s hold on the market and offer a more competitive landscape for advertisers and users.

Yet, the implementation challenges are significant. Like AT&T’s subsidiaries, which required years of oversight and monitoring, Google’s search, advertising, and mobile services are deeply interconnected. Breaking them apart would involve regulatory monitoring to prevent collaboration between the spun-off entities, ensuring each operates independently and competes fairly.

Microsoft’s Antitrust Battle

Another relevant precedent is Microsoft’s landmark antitrust case in the late 1990s, which revolved around its monopoly in operating systems. Microsoft’s Internet Explorer, bundled with Windows OS, stifled competition from Netscape Navigator, making it nearly impossible for alternative browsers to gain traction. In 2000, the U.S. courts ordered Microsoft to split its operating system and applications businesses—a decision that was later overturned, resulting in conduct remedies rather than a full breakup.

As part of the conduct remedies, Microsoft was required to unbundle Internet Explorer from Windows and allow alternative browsers to operate on its OS. These changes led to a more competitive browser market, allowing Google Chrome, Mozilla Firefox, and others to flourish. This partial remedy demonstrates how antitrust action can foster innovation and choice even without a complete breakup.

A similar approach could apply to Google. Conduct remedies might involve requiring transparency in ad tech pricing, prohibiting exclusive contracts that restrict user choice, or enforcing interoperability with other ad platforms. These measures would allow smaller competitors to participate without dismantling Google’s integrated ecosystem entirely.

Why Google’s Case Is More Complex than Microsoft’s

However, Google’s dominance in multiple markets and the nature of the data-driven digital economy makes it more complex than Microsoft’s single-product monopoly in operating systems. While Microsoft could comply with the unbundling requirement without significant operational changes, Google’s businesses are interdependent across multiple data-driven ecosystems. Google’s advertising revenue relies on data from search, YouTube, and Android, creating layers of dependency that a partial unbundling might fail to address.

This tight integration of services has fueled concerns among regulators that conduct remedies might not be sufficient to prevent anti-competitive practices. Hence, structural remedies—like separating the ad tech and Android units from Google’s core search business—remain under consideration despite the practical and financial challenges involved.

Modernising Antitrust Law for Big Tech

AT&T and Microsoft cases illustrate how antitrust law has adapted to industry-specific challenges, yet both were implemented under regulations designed for the 20th-century economy. Current U.S. antitrust law primarily governs tangible assets, which limits its applicability in data-driven tech markets. The unique nature of digital monopolies—where power is rooted in data control rather than physical infrastructure—calls for new legal frameworks.

Digital monopolies like Google’s leverage data as an asset, necessitating privacy and transparency-focused regulations. Modernizing antitrust laws to address data monopolies is a bipartisan focus, with several proposals to introduce sector-specific regulations and data-sharing requirements for big tech. Google’s potential breakup could mark a turning point for these regulatory frameworks, influencing how future cases against Apple, Amazon, and Meta are handled.

Investment Implications of a Google Breakup

From an investor’s perspective, a Google breakup could unlock value by creating specialized, independently run units. Alphabet’s portfolio includes more than 200 acquisitions such as YouTube, Android, and Waymo, each with high standalone growth potential. Analysts argue that separating these units could streamline operations, increase transparency, and enable market-driven growth in core areas like AI and cloud computing.

However, a breakup would bring short-term challenges, with Alphabet’s stock likely experiencing volatility as investors adjust to the risks and rewards of a fragmented company. Furthermore, Google’s expansion into AI and cloud computing could be hindered by regulatory constraints, reducing its competitive edge in fast-evolving markets like generative AI.

Conclusion

The parallels between Google, AT&T, and Microsoft underscore the impact of monopolies on competition and innovation. Whether regulators pursue conduct remedies, divestitures, or a full breakup, the outcome of Google’s antitrust cases will set a precedent for big tech regulation. As the digital economy becomes increasingly central to daily life, ensuring fair market competition is essential to consumer welfare and innovation.

Just as AT&T’s breakup laid the groundwork for competition in telecommunications and Microsoft’s antitrust case opened the browser market, addressing Google’s dominance could reshape the digital landscape, providing consumers with more choices and fostering a new wave of innovation.