Instant Reaction: Google Doesn't Have to Sell Chrome in Antitrust Ruling

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Google doesn't have to sell its popular Chrome web browser,
a federal judge ruled Tuesday in the Justice Department's landmark
anti trust case against the search engine. The ruling allows
Google to avoid one of the most severe remedy requests
from the US government after the court found that the
company had an illegal monopoly in the search market. The
judge did bar Google from entering into exclusive contracts for
Internet search.
All Right, we knew we wanted to talk with our
man deep seeing of our Bloomberg intelligence team. He's here
in studio. Google shares are up. I mean, was this expected?
First of all?
No.
I think that's why you see such an instance stock reaction,
because the judge was quite vocal about how Google had
created a monopoly because of all the assets, and Chrome
was one of the most prominent assets that you know,
they the judge focused on so.
Clearly in this case.
The fact that the ruling says that they don't have
to divest Chrome, it's positive news. And look, all the
exclusive arrangements with Apple and for their operating system.
I think that was.
Expected remedy really, I mean it kind of allows Apple
to pick the partner they want. There won't be an
exclusive arrangement. But look, from an Apple perspective, they can
still say Google has the best LLM and you know
they want to do business. So from that perspective, that's
why Apple is up too. So you know, this sort
of clears all the uncertainty for both the companies.
Look, I'm going to ask you crazy question here. Do
we care about search the way that we used to
care about search in the sense of typing something into Google,
or increasingly do we care more about which LLM people choose.
Well, so the search market has definitely expanded because of
generative AI. So think of how Google had a ninety
percent plus share. I'm sure if this lawsuit came to
the scene and the hearing was happening now, the jet
would say Google doesn't have ninety percent plus share because
CHATGPT has got one billion monthly active users, it's got
the query volume not comparable to Google, but almost you know,
one third of Google, And so that search market is
not the same as it was. You know, probably three
years back before the launch of Chat GPT, and from
that perspective, I mean, look, the search pile has grown.
The fact that Google owns Chrome is a big advantage.
So when I look at generative AI deployments, browser is
a critical aspect of how AI agents will be deployed.
That's why you're seeing such a stock reaction because everyone
knows if you take out Chrome from Google, even if
Google has their own chips and they have got their
own LLM, without a browser, the advantage just goes away.
So divesting Chrome would have been a big, big blow.
And you know that's why the combined entity owning Chrome
and owning all the other assets that Google has is
such a big advantage when it comes to generative way.
Why are we getting through this ruling?
And I guess I'm just bringing up in a world
where we have a White House that I think it's
fair to say it's transactional, and we have seen various
tech executives make their way to the White House. Is
there something that was going on behind the scenes of
I don't know that caught the attention. I don't know
what are you hearing?
And I mean there are obviously lobbies for these companies,
it's not a surprise regardless of the administration.
But look in this case, clearly, as you said.
The administration is transactional, and this was the best outcome
for Alphabet, you know, not having to divest anything. There
is another pending lawsuit, the ad Tech lawsuit, but even
if they have to divest something there, it's not that
big of for DLAZ Chrome. Chrome is like the prized
asset when it comes to Alphabet. When you think about
YouTube and you know all the other things, Chrome is
right up there. Without a browser, generative AI deployments get
hard and that's where owning the distribution through Chrome is
paramount for a company like Alphabet.
We just want to point out shares of Alphabet are
up more than six percent here in the aftermarket, and
then Deep mentioned that Apple shares are also higher, and
Tim they're up about four percent here.
I want to bring in Tom Giles, he senior executive
editor for Global Technology. He joins us from our San
Francisco bureau. Tom, this ruling obviously coming as a surprise
to investors. Look no further than shares of Alphabet higher
by six point four percent in the after hours. Why
do you think that we got this ruling today.
I mean, this is a huge sigh of relief, right.
This is, as men Deep said, they avoided the most
harsh penalty here, which would have been selling Chrome Home,
which you know Google has woven into its products and
is really an integral part of of their value proposition
to many customers. So major side of relief there. They're
really allowed to continue to do a lot of the
things that they have been doing. They're going to have
to change certain uh certain terms. But something else that
they are can they will continue to be allowed to
do is is paying for browser placement. They can still
make these big cash payments that give their browser, you know,
a special uh placement on an on a smartphone for example.
They just need to change they can't have the kinds
of exclusivity that they have used in the past. That's
really what it came down to, and is you know,
we're still parsing the decision, so let me be clear
about that. But what they what they said was that
if we if we go too far and for example,
say no to these payments, that would be onerous to
the larger ecosystem, that would hurt some of the small players,
some of the manufacturers, some of the other players in here,
and I don't think that the DJ clearly does not
want to do that at this stage. Remember that some
of these decisions are going to be revisited. This is
a six year decision. We just had some headlines on that,
so you know, Google's going to have to continue to
mind its p's and q's in the coming years to
ensure that it doesn't run a foul of this ruling.
But on its face, the headline here is this is
great news for Google. This is great news for Apple,
and you're seeing it in those shares rallying as we speak.
Yeah, as you said, we've got Alphabet up six and
quarter percent Tom and then you've got Apple shares up
three point six percent to Mendy Pooh. Beyond Apple and
Alphabet are kind of watching this decision and maybe a
little upset about it.
I mean, remember the news and Perplexity wanted to buy
Chrome and they put a value I think it's thirty
four billion.
Yeah, we're talking about this earlier. Yeah, put Perplexity on
the map. Everyone was like, wait, you don't even have
that cash.
Even if Google had to divest Chrome, thirty four billion
is too low. Off a price tag for an asset
you know that has got over three billion monthly active users.
That is at the core of deploying generative AI. I
mean that's why you know, when you look at individual
assets for Google, everyone looks at how much money does
this make? Chrome doesn't make any money on a standalone basis,
But when it comes to the value of Chrome, we're
talking fifty billion plus even higher. I mean, I wouldn't
be surprised if it's close to one hundred billion as
just a standalone product, given how important it is when
it comes to deploying AI.
So Tom Giles, come on back in here.
So if you were sitting down or I don't know
if Alphabet's going to do any kind of call or
what have you, what would you want to be asking
them right now?
Well, first of all, is there a plan to appeal?
And what does that look like? What are the grounds?
I hate to put it this bluntly, but you guys
got off really easy here. You avoided the worst possible scenarios.
As we've said, as man Deep and I have been
talking about, are you going to appeal? What are the
grounds for that? They may see something in here that
is owners to them that they feel is going to
tie their hands in the future. Again, it's a six
year decision. DJ is giving itself leeway to kind of
revisit at least part of this, and so is are
there are there clauses? Are the things that they want
to change? And do they you know, do they do
they want to send the signal that we don't think
we're monopolist here, which is of course what they've been
saying all along. Do you want to hit that home
with with with sending this into an appeals process?
Same question to you, man, Deep So you're sitting down
with these execs ever at Alphabet and what you what
you would want to know?
I mean, it sounds like they don't want Google to
be making any exclusive payments to Apple, like the twenty
billion dollar tack payment going forward, which again I view
it as a positive because on the one hand, it
opens up you know, other search companies to bid for Apple.
But Apple has no choice but to go with Google.
I mean, their users are used to, you know, the
Google experience, and so it sort of saves the twenty
billion dollars that Google is paying Apple and that helps
their growth. Martin, So I don't think there's anything bad
here in terms of, you know, the judge restricting Google
from having an exclusive arrangement with Apple.
Is there anything Tom that we'd be worried though about
the EU and their view on this.
We always need to worry if you're Google, if you're
one of the major US tech platforms, you always need
to worry about what the EU is doing, what they're thinking,
where they might land on some of these decision. So
I do think it's a slightly different paradigm across the pond,
as it were. But I do want to come back
to and I'm curious I want to hear from man
Deep too about you know, does the removal of the
exclusive agreements, what kind of opening does that give to
the other platforms? How might they try to gain an
advantage here? It does make a huge difference when you
buy your new iPhone or you buy a new smartphone.
It makes a huge difference that that there's going to
be some kind of institutional or you know, existing support
for Google to be the default if you cannot. If
you yes, it's okay to make these payments, but if
you can't have exclusive agreements, what about what about Claude?
What about chat GPT. Can some of these other tools
start to present themselves as alternatives and do it more readily? Mandy,
please tell me if i'm you know, yeah, no.
You're all right.
So I mean Google search ninety percent plus share is
driven by these exclusive arrangements, So you're right. But I
look at it this way. I mean, some of the
ruling says Google may have to share their search index
with you know, other providers. I have to read the
fine print, but that again could make chatchpt better in
terms of solving for all the use cases that we
use Google for. So from that perspective, it is a risk.
At the same time, I mean, on Android, they own
the operating system, so I don't think anything will change
from a search experience perspective. And for Apple, again, they
want their users to get the best experience, so I
don't think they're going to take a chance by completely
completely overhauling the search experience and you know, bring in
a clot or a chat GPT for the native browser search.
I would be very.
Surprised if they did that. But the I guess the
finer point here is if Google were forced to share
some of their search index, then that could draw in
more competition, and that is a risk.
I just want to point out that our Josh Cisco,
who's got the write through on the Bloomberg terminal, says
the order is one of the most monumental court decisions
affecting the tech sector in more than a quarter century
and could offer a blueprint for other judges who may
end up weighing similar choices in cases against Meta, Amazon,
and Apple. So, I mean, Mandy, first to you, what
are those like, what do we need to know about
those cases and what that could mean for those companies.
I mean, there is nothing as serious as there is,
you know when it comes to Alphabet losing one of
their core assets. I think for others, even in the
case of Meta, I would have expected more fines than
you know, a divestiture. I don't think anybody is forcing
Meta to divest in Instagram or you know, whats not
the same. It's not the same. In the case of Google,
the monopoly lawsuits said they had ninety percent plus share.
That was the basis for the lawsuit.
So the fact that the judge is not saying, you know,
they have to divest Chrome and it is a testament
to where the market is right now. The search market
has changed completely over the course of the last three
years so quickly. Yes, right, and so that's why I
do think it's a fair ruling from that perspective.
Tom Giles saving forty five seconds.
Final thoughts, I am curious about what kind of precedent
this does set. There had been a lot of fear
about a breakup of Meta. If you're telling Google that
it doesn't have to sell Chrome and look, as Matt
Deep said, Google's a very different animal from the Meta situation.
Google is making these huge there's these huge payments that
are being made right in favor of you know, getting
that browser on. You're not seeing those kinds of same
payments as big, multi billion dollar payments heading to or
from Meta. So that's another reason why to think that
you're not. You don't you even have less reason to
worry about a judge coming in or one of these
regulators coming in and saying Meta, you need to divest
WhatsApp or you need to divest Instagram.
Well, certainly caught our attention, some big news and got
some stocks moving. Hey guys, thank you so much. Bloomberg
Intelligence Global head of Technology Research mandeep Seeing in our
new York Studio and senior executive editor for Global Technology
out there on the West Coast, Tom Giles, Thanks so
much to both of you.