Market Analysis

Google suffered a major setback when the DOJ won its antitrust lawsuit; the stock fell

Amos Simanungkalit · 06 Aug11.4K Views

A federal judge ruled on Monday that Google (NASDAQ: GOOGL) violated U.S. antitrust laws with its search business, marking a significant legal setback for the tech giant. This case is one of the most significant antitrust actions against technology companies in recent years and could potentially transform how millions of Americans access online information, challenging Google’s long-standing dominance.

In his opinion, U.S. District Judge Amit Mehta stated, “After thoroughly reviewing the witness testimony and evidence, the court concludes that Google is a monopolist and has acted to maintain its monopoly.” He added, “It has violated Section 2 of the Sherman Act.”

The court found that Google’s exclusive agreements have significantly restricted market competition, enabling the company to charge excessively high prices for text advertisements while limiting competitors' advertising revenues.

Although the court did not rule that Google has a monopoly on search ads, the broader implications of the ruling could significantly impact ongoing U.S. government antitrust actions against major tech companies.

Mizuho analysts commented, “We are awaiting the judge’s remedies. If the judge invalidates Google’s exclusive search agreements, it could pave the way for OEMs like Apple and Samsung to offer their own search solutions by letting users select their default search engine in their phone settings.”

Despite this major setback for Google, the company’s shares remained relatively stable in Tuesday’s premarket trading, buoyed by a broader recovery in technology stocks following a sharp decline the previous day. Both Google stock and S&P 500 futures saw a 0.4% rise.

KeyBanc Capital Markets analysts highlighted that Google’s loss in the trial introduces additional uncertainty regarding the future of the search market and its economic implications. “While Judge Mehta acknowledged Google’s superior product, his ruling indicates that the default search engine position on mobile devices might be at risk,” they noted.

“With remedies still unknown and an appeal process likely to extend, this situation may continue to be a significant headline until a final decision is made. We do not anticipate a fundamental impact until the remedies are determined, as there have been no immediate changes for advertisers or consumers.”