Will Alphabet Antitrust Even Matter, By the Time is is Finally Resolved?

Potential antitrust action against Alphabet could include asset divestitures, though some believe  more-likely outcomes are behavioral measures that might temporarily slow Alphabet growth, but could  have fewer longer-term negative consequences--with one glaring exception.

If Alphabet leaders are consumed with defending themselves against antitrust, it is possible they will be constrained from moving forward in some key new area (possibly related to artificial intelligence), much as some believe Microsoft fell behind in mobility because of its antitrust efforts. 

The precedent there is the Microsoft antitrust action of 2001, which caused some initial changes in business practices intended to benefit competitors, but which arguably did not slow down Microsoft growth in other areas, with the notable exception of mobility and smartphones. 

Indeed, some might argue that Microsoft sought growth in other areas precisely because of the behavioral remedies. In other cases, even asset divestitures have had complex outcomes. 

The breakup of the AT&T system in the early 1980s was intended to promote competition, and did so. But consolidation followed and AT&T essentially was reassembled. Competition--the intended outcome of the breakup--did increase. 

But AT&T arguably was more affected by the emergence of the internet and the mobile communications revolution than by the antitrust actions. AT&T’s legacy businesses are a much-smaller part of overall revenue compared to mobility, which generates more than half of total revenue. 

Indeed, the long-term impacts on industry structure and dominant firm performance are complex. Standard Oil was broken up into 34 different competing firms. But consolidation followed and the surviving firms arguably were not harmed. 

Exxon; Mobil (eventually combined to form ExxonMobil; Chevron; Amoco (later acquired by BP) and Marathon Oil were formed by state-level Standard Oil divisions, for example. 

IBM’s antitrust suit eventually was dropped, but that firm’s fortunes were arguably shaped more by the emergence first of the minicomputer and then by personal computing than regulatory action. 

In fact, one possible outcome is that the case drags on long enough that market dynamics already have shifted, lessening the importance of any proposed remedies. It is possible that Google’s search dominance already will have declined because of generative AI alternatives, long before the antitrust action is applied. 

Much product search and other forms of discovery already have shifted to Amazon or social media, while AI-powered “answers” are poised to disrupt other forms of search as well. In other words, the Department of Justice antitrust action might be coming just at the point where it becomes almost irrelevant, by the time it is settled, if any action occurs at all. 

The Microsoft antitrust action lasted a decade before being resolved, and some might argue that shifted the playing field to mobility and phones, making the original reasons for antitrust actions around personal computers and browsers somewhat moot. 

Also, Alphabet also faces antitrust action in other countries, which could lead Alphabet to take voluntary actions that alleviate those concerns in ways that lessen Alphabet’s market dominance, but without huge structural changes such as breaking Alphabet up into smaller “bets.” 

Some have suggested Android and Chrome, or perhaps YouTube wind up becoming products owned by separate companies. What remains unclear are possible changes--or continuity--of consumer behavior. Users might not switch from using Google for search, Android for the operating system of their mobile devices or Chrome for their preferred browser, anymore than they’d switch from using YouTube to some other app. 

Rapid technology change can upend even well-intentioned reform. The Telecommunications Act of 1996, for example, aimed to increase competition in the communications market largely around voice services. 

Though arguably succeeding in that sense, the Act missed the arrival of the internet, and exempted mobile services, both of which had an even more profound impact on connectivity, content and communications than the effort to promote competition in fixed-network voice services. 

To some genuine extent, the Telecom Act focused on the wrong problem, or perhaps on an unnecessary problem, given the disruptive changes the internet and mobility were unleashing. 

One might have a disquieting--and similar--feeling about the antitrust action against Google. By the time it is resolved, it might not matter so much.