Google Stock Surges After Judge Sides With Company in Chrome Antitrust Suit

Shares of Alphabet (GOOGL) surged 8% in after-hours trading as investors reacted favorably to the remedies imposed following last year’s landmark antitrust ruling. The market’s positive sentiment suggests a perception that the imposed measures are less severe than initially feared, mitigating potential long-term damage to Google’s core business operations.

The antitrust case, initiated by the Department of Justice (DOJ), centered around Google’s alleged monopolization of the internet search market. While the court affirmed Google’s dominance, the prescribed corrective actions stopped short of requiring a drastic restructuring of the company.

Key among the DOJ’s proposals was the forced divestiture of Google Chrome, a browser integral to the company’s advertising strategy by providing valuable user data for targeted ad delivery. Judge Amit Mehta, however, rejected this measure.

“Google will not be required to divest Chrome; nor will the court include a contingent divestiture of the Android operating system in the final judgment,” the court stated. This decision is viewed as a significant win for Google, as retaining Chrome and Android allows the company to maintain its data collection infrastructure and competitive edge in the advertising space.

Google acknowledged the court’s ruling in a statement, noting, “Now the Court has imposed limits on how we distribute Google services, and will require us to share Search data with rivals. We have concerns about how these requirements will impact our users and their privacy, and we’re reviewing the decision closely. The Court did recognize that divesting Chrome and Android would have gone beyond the case’s focus on search distribution, and would have harmed consumers and our partners.”

A central point of contention in the case involved Google’s distribution contracts, particularly exclusive agreements that guaranteed its search engine’s default status across various platforms.

Judge Mehta’s ruling permits Google to continue offering financial incentives for product preloading but prohibits exclusive contracts that restrict competition. The DOJ had specifically targeted “compelled syndication,” the practice of securing default search engine placement on browsers and smartphones through strategic partnerships.

In a press release, the DOJ stated, “The court’s ruling today recognizes the need for remedies that will pry open the market for general search services, which has been frozen in place for over a decade. The ruling also recognizes the need to prevent Google from using the same anticompetitive tactics for its GenAI products as it used to monopolize the search market, and the remedies will reach GenAI technologies and companies.” This suggests that the regulatory scrutiny will extend to Google’s emerging generative AI ventures, potentially influencing its innovation and market entry strategies.

Google’s multi-billion dollar annual payments to Apple for being the default search engine on iPhones remains a key factor. This arrangement is mutually beneficial, providing Apple with significant revenue and enabling Google to capture substantial search volume.

Apple (AAPL) shares also saw a boost, rising 4% in after-hours trading, indicating investor confidence in the continued financial benefits derived from this partnership.

The ruling explicitly allows Google to continue these payments, stating, “Google will not be barred from making payments or offering other consideration to distribution partners for preloading or placement of Google Search, Chrome, or its GenAI products. Cutting off payments from Google almost certainly will impose substantial—in some cases, crippling—downstream harms to distribution partners, related markets, and consumers, which counsels against a broad payment ban.”

Another significant aspect of the ruling pertains to the sharing of search data. The DOJ had sought to compel Google to disclose the data used for generating search results, including user click data.

The court ordered Google to provide access to certain search index data and user interaction data but specifically excluded “ads data.” This compromise aims to foster competition while protecting Google’s proprietary advertising algorithms.

The mandated data sharing will occur on “ordinary commercial terms that are consistent with Google’s current syndication services.” This caveat indicates that Google retains significant control over the data’s accessibility and commercialization.