Investors and the street were bullish on the outcome.
Alphabet (NASDAQ:GOOG) stock was on the move Wednesday, rising roughly 9% after it got a favorable ruling in the government’s antitrust case against its Google search engine.
Last year, a federal judge ruled that Google had an illegal monopoly with its search engine. Among the concerns, the courts said that Google paid billions to browsers to lock up distribution agreements for those browsers to default to Google search. Notably, Google paid Apple $20 billion per year to allow it to be the default search engine on Apple’s Safari browser.
Among the potential remedies, the court said that Google may have to sell off Google Chrome, stop making payments to browsers, and forbid Google from using proprietary assets, like YouTube, to prioritize Google search, among others.
Google’s proposed solutions were far less restrictive, like saying it can’t bundle Google apps in their OEM agreements, stating that browsers like Safari can change default search setting annually, and saying that the AI search products like Gemini can’t have exclusive distribution on Android devices.
This week, on September 2, the judge ruled on the remedies for the antitrust violations. The most drastic measure, making Alphabet sell off Google Chrome, is a “poor fit for this case,” according to the ruling of Judge Amit Mehta.
There would be nothing “natural” about a Chrome divesture. It would be incredibly messy and highly risky,” the judge wrote … “Put simply, Plaintiffs have not met their heavy burden to warrant the “radical structural” remedy of a forced divestiture of Chrome and the Chromium open-source project.”
Apple breathes a sigh of relief
The other major remedy that the judge struck down was the ban on payments to the browsers. The judge wrote:
Though the bases for a payment ban are sound, the court declines to impose such a remedy at this time. Two main reasons counsel against it. First, if adopted, the remedy would pose a substantial risk of harm to OEMs, carriers, and browser developers … Distributors would be put to an untenable choice: either (1) continue to place Google in default and preferred positions without receiving any revenue or (2) enter distribution agreements with lesser-quality GSEs to ensure that some payments continue.”
The judge also noted that Google’s profits would increase if it didn’t pay billions in revenue share.
“Not paying Apple alone would result in a windfall worth tens of billions of dollars,” Mehta wrote. Apple stock was up about 3% on Wednesday.
Ultimately, the judge accepted Google’s proposed remedies for the antitrust violations and part of the plaintiffs remedies – but not the two that would be most damaging to Google.
It was about as good a ruling that Google could have hoped for, and analysts agreed as Alphabet stock got several upgrades. With this potentially damaging matter resolved, Alphabet stock looks like an excellent buy, as the cheapest stock among the Magnificent 7.
