Antitrust officials want to sell Google for parts
Summary
The Justice Department lawsuit may snuff out vital competition.
The Justice Department wants to turn America’s most successful search engine into a public utility. As part of its proposed remedies in its antitrust case against Google, the department would force the company to share its technology, data and models with competitors at marginal cost. This is the same strategy it used against the incumbent telephone companies in the 1990s. It discouraged investment and competition. The strategy would have similarly deleterious effects today, undermining consumer welfare, innovation and U.S. leadership in artificial intelligence at the worst possible moment.
The scope of the requirements is staggering: Google would be required to share its search index, its user data, and the fruits of its research and development with rivals, all without making a real profit. Any company could resell Google’s search results rather than develop its own technology. This regulatory market manipulation is a sharp departure from the consumer-welfare standard that is meant to guide antitrust policy.
History demonstrates how difficult it is to implement sharing requirements in industries with high fixed costs and low marginal costs. When the government tried to do the same thing to the phone companies in the ’90s, disputes over cost allocation proved endless. Like a single phone call, the cost of a single search query may be close to zero, but the equipment, research-and-development and network costs that allow for it are substantial. The Federal Communications Commission spent years adjudicating disputes over cost allocation, producing complex methodologies that were immediately challenged in court. The Justice Department would face similar problems with its proposed Google breakup.
The company may also have to divest from Chrome and Android, as well as abandon the contract that makes Google the default search engine on Apple devices. But most concerning is that the remedies could reduce competition in the emerging artificial-intelligence market. Google could be prohibited from holding interests in AI companies such as Anthropic, while its competitors would gain access to its search and AI technology through sharing requirements.
These provisions would destroy investment incentives. Competitors would have less reason to invest in their own technologies when they could take advantage of Google’s at marginal cost. If Google is forced to share the fruits of investment, its incentives to innovate will diminish. The telecommunications breakup experience confirms these concerns. Mandatory network sharing significantly reduced investment by incumbents and competitors, and European countries with more stringent sharing rules saw slower broadband deployment.
The Justice Department misunderstands competition policy. Creating space for competitors by degrading Google’s position might allow rivals to gain market share, but it isn’t a recipe for innovation or consumer benefit. Making a market leader worse doesn’t make the market better. True competition comes from innovation and investment, not from regulatory handicapping that forces successful companies to subsidize their rivals.
As the judge considers these remedies, he would do well to remember what similar efforts did to the telecommunications industry. The Justice Department accuses Google of snuffing out competition, but its own remedies may snuff out innovation and consumer benefits.
Mr. Lenard is a senior fellow and president emeritus and Mr. Wallsten is president of the Technology Policy Institute, which has accepted donations from Google and its competitors.
