The Path to DOJ’s Recommendation

The DOJ’s recommendation follows a series of legal challenges aimed at curbing Google’s market dominance. For example, back in October 2020, the DOJ filed an antitrust lawsuit against Google, alleging that the company had unlawfully maintained monopolies in search and search advertising through exclusionary practices. This lawsuit marked the most significant antitrust action against a tech company in decades.

Fast forward to August this year and a federal judge ruled that Google had violated US antitrust laws by acting illegally to maintain its monopoly in online search. The court found that Google’s agreements to preinstall its search engine on devices and browsers, along with its payments to secure default status, had stifled competition and harmed consumers.

Key Proposals

In response to the court’s ruling, the DOJ has now filed a 23 page document outlining proposed remedies to restore competition in the search market. Central to these proposals is the divestiture of Google’s Chrome browser: Google needs to sell off its Chrome browser. The DOJ argues that selling Chrome would “permanently stop Google’s control of this critical search access point and allow rival search engines the ability to access the browser that for many users is a gateway to the internet.”

Also, the DOJ seeks to impose restrictions on Google’s Android operating system to prevent it from favouring Google’s search engine. The filing also calls for an end to exclusive agreements that make Google the default search engine on devices and browsers, aiming to open the market to greater competition.

Implications for Google and the Search Market

If the court adopts the DOJ’s recommendations, Google would be compelled to sell its Chrome browser, which holds a significant share of the global browser market. Such a divestiture could disrupt Google’s integrated ecosystem, potentially affecting its advertising revenue and user data collection practices.

For the broader search market, and on the positive side, these measures could lower barriers to entry for competitors, fostering innovation and providing consumers with more choices. By reducing Google’s control over key access points to the internet, the DOJ aims to create a more competitive environment that benefits users and advertisers alike.

Competitor Reactions: DuckDuckGo’s Perspective

As expected, competitors have broadly welcomed the DOJ’s proposed measures, seeing them as a necessary step to curtail Google’s overwhelming dominance and level the competitive landscape. DuckDuckGo, for example, known for its privacy focused search engine, has been one of the most outspoken advocates for stronger action against Google.

Kamyl Bazbaz, DuckDuckGo’s Senior Vice President for Public Affairs, emphasised how Google’s practices make it “unduly difficult to use DuckDuckGo by default,” highlighting a significant barrier that smaller competitors face when trying to compete in the search market. Bazbaz pointed out that despite regulatory measures such as the EU’s Digital Markets Act (DMA), Google has continued to design its services in ways that limit consumer choice and discourage users from exploring alternatives.

DuckDuckGo has also called for intensified scrutiny, specifically urging fresh EU investigations into Google’s adherence to the DMA. The company has accused Google of failing to make it straightforward for users to switch their default search engine or browser. DuckDuckGo insists that, while the DOJ’s actions are a step forward, formal and consistent investigations are crucial to ensure that Google’s anti competitive behaviours are addressed and rectified.

Also, DuckDuckGo has called for stronger enforcement mechanisms and more robust penalties for non compliance. The company argues that without substantial deterrents, Google will continue to leverage its market position to marginalise smaller players, ultimately stifling innovation and consumer choice. DuckDuckGo has highlighted the need for global collaboration between regulators to address what it sees as Google’s systematic efforts to bypass local laws and undermine fair competition worldwide.

Google’s Response and Potential Impact

Google has criticised the DOJ’s proposals, describing them as excessively harmful to consumers and detrimental to technological innovation. The company argues that divesting Chrome and imposing restrictions on Android would undermine the security and integration of its products, leading to a fragmented user experience.

In a statement, Google said, “The proposed remedies would force us to sell or shut down essential parts of our business, harming consumers and stifling innovation.” Not surprisingly, Google has indicated its intention to appeal any ruling that mandates such divestitures.

Will Android Be Next?

While the DOJ’s filing focuses on Chrome, it also raises concerns about Android’s role in maintaining Google’s search dominance. The DOJ has proposed restrictions to prevent Android from favouring Google’s search engine, but it stops short of recommending a full divestiture.

However, some industry experts believe that Android could be the next target in antitrust actions. Given Android’s widespread use and its integration with Google’s services, regulators may consider further measures to ensure fair competition in the mobile operating system market.

The Evolving Search Landscape

The search market as a whole is undergoing significant changes anyway, with AI playing an increasingly prominent role. For example, AI powered search engines aim to provide more personalised and context aware results, challenging traditional search paradigms.

Companies like Microsoft have integrated AI into their search platforms, offering features such as natural language processing and predictive search capabilities. These advancements have the potential to disrupt Google’s dominance by providing users with alternative search experiences that are more tailored to their needs.

Also, it’s important to note that AI companies and their chatbots, such as OpenAI’s ChatGPT, are emerging as competitors in the search landscape. These chatbots, now capable of operating in real time, provide users with a conversational interface for asking questions they might traditionally pose to search engines, further disrupting the market.

What Does This Mean for Users?

For users, the DOJ’s actions and the evolving search landscape could lead to a more diverse and competitive market. Increased competition may result in better privacy protections, more innovative features, and a wider array of choices for consumers.

However, there are also concerns about potential disruptions. If Google is compelled to divest key products like Chrome, users may experience changes in how they access and use Google’s services. Also, the integration between Google’s products, which many users find convenient, could be affected.

As the legal proceedings unfold, users will need to stay informed about potential changes and consider how they may impact their online experiences.

What Next?

The next steps for Google include filing its formal response to the DOJ’s proposals in the coming months, with the trial phase to decide on remedies, including potential divestitures, starting in 2025. This will mark the beginning of what’s likely to be an extended legal process, with additional regulatory scrutiny from global authorities likely to add further challenges.

What Does This Mean For Your Business?

Although this has been threatened for a while, actually seeing the document from the US DOJ calling for tech giant Google to divest or sell off Chrome really seems like a pivotal moment in the ongoing debate about the role of antitrust enforcement in shaping the digital marketplace. At its core, the case shows the tension between fostering competition and preserving the innovation and convenience that large, integrated tech companies like Google can provide.

On one side, the DOJ and smaller competitors like DuckDuckGo argue that Google’s dominance in search and its control over key distribution channels like Chrome and Android stifle competition, innovation, and consumer choice. By divesting Chrome and imposing restrictions on Android, the DOJ is seeking to dismantle the structures that have allowed Google to maintain its monopoly for over a decade. For users, this could lead to a more competitive market with better privacy options, improved features, and greater freedom to choose their preferred search engines.

On the other side, Google contends that such remedies are excessively punitive and risk fragmenting the ecosystem it has built, potentially diminishing the security, quality, and integration of its products, which many businesses value and use. Critics of the DOJ’s approach, including some in the tech industry, caution that breaking up Google could inadvertently harm consumers and small businesses that benefit from its cohesive tools and services. They also argue that heavy handed antitrust measures could stifle innovation in the broader tech sector at a time when global competition in areas like AI is intensifying.

The evolving search landscape adds yet another layer of complexity to the whole situation. With AI powered search engines and real time conversational chatbots like OpenAI’s ChatGPT emerging as viable alternatives, the dominance of traditional search engines may face organic disruption anyway. This highlights the importance of balancing regulatory interventions with the natural evolution of technology driven competition.

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Following an antitrust investigation and the threat of a fine, Apple had agreed to open up these systems to third party developers for their own apps, which would work independently from the Apple ones. This would make it easier for rivals to develop other payment options for iOS based devices and compete with Apple Pay and Wallet apps.

Rivals and customers have one month to come back with their feedback. Apple has assured them and the regulators that it would stick to its agreed concessions saying: “We have offered commitments to provide third party developers in the European Economic Area with an option that will enable their users to make NFC contactless payments from within their iOS apps, separate from Apple Pay and Apple Wallet.” 

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What Happened? 

A recent boardroom battle at OpenAI, ChatGPT’s creator and working partner of Microsoft, led to the rapid ousting of OpenAI’s boss Sam Altman and resignation of OpenAI’s co-founder Greg Brockman. Both men were reported to have been immediately hired by Microsoft to launch a new advanced AI research team with Altman as CEO. Then, just days later after the board was completely replaced apart from Adam D’Angelo, by a new initial version, Sam Altman returned and was reinstated as OpenAI’s CEO.

What’s The Issue? 

The factors that appear to have attracted US and UK regulators over antitrust concerns are:

• Microsoft has long been a significant supporter and backer of OpenAI, investing in the company and also integrating OpenAI’s technologies within Microsoft’s own products and cloud services. This collaboration has helped in scaling OpenAI’s research and the implementation of AI technologies, particularly in areas like large language models, cloud computing, and AI ethics and safety. It could also, however, be a kind of background evidence of a close relationship between the two companies.
• As mentioned earlier, when Sam Altman was ousted, Microsoft reportedly immediately hired him as CEO of a new research team there, further evidence of a very close relationship.
• Microsoft has been granted a non-voting, observer position at OpenAI by a new three member initial board. This means that Microsoft’s representative can attend OpenAI’s board meetings and access confidential information, but can’t vote on matters including electing or choosing directors. However, it’s not yet been reported who from Microsoft will take the non-voting position and what a final, rather than the initial, OpenAI board would look like.
• More specifically, the main concern of regulators appears to be whether the partnership between OpenAI and Microsoft has resulted in an “acquisition of control”. This is whether one party has material influence, de facto control, or more than 50 per cent of the voting rights over another entity. Such control, for example, could negatively impact market competition. The UK’s Competition and Markets Authority (CMA) is particularly looking into whether there have been changes in the governance of OpenAI and the nature of Microsoft’s influence over its affairs.
• The CMA recently stated that it’s considering whether it is or may be the case that Microsoft’s partnership with OpenAI has resulted in the creation of a relevant merger situation under the merger provisions of the Enterprise Act 2002. Also, if so, the CMA has stated that it’s interested in whether the creation of that situation may be expected to result in a substantial lessening of competition within any market or markets in the United Kingdom for goods or services. The CMA has opened an investigation of the partnership between Microsoft and OpenAI which is currently at the comments and information gathering stage which closes on 3rd January 2024.
• Although OpenAI’s parent is a non profit company, a type of entity that is rarely subject to antitrust scrutiny, in 2019 it set up a for profit subsidiary, in which Microsoft is reported to own a 49 per cent stake. It’s also been reported that Microsoft is prepared to invest more than $10 billion into the start up.

In The US

Although the above points relate to the UK, the US Federal Trade Commission (FTC) is also reported to be examining the nature of Microsoft’s investment in ChatGPT maker OpenAI in relation to whether it may violate antitrust laws but hasn’t yet opened a formal investigation.

What Does Microsoft Say? 

Microsoft has stated publicly that it doesn’t own any part of OpenAI. Company spokesman, Frank Shaw, said: “While details of our agreement remain confidential, it is important to note that Microsoft does not own any portion of OpenAI and is simply entitled to share of profit distributions”. 

Meaning? 

Microsoft’s statement that it doesn’t own any part of OpenAI and is merely entitled to a share of profit distributions addresses only one facet of potential antitrust concerns, i.e. mainly the question of ownership. However, antitrust issues often encompass more than just ownership stakes. They can involve questions of influence, control, or exclusive agreements that might affect market competition.

Regulators may still be interested in the broader implications of the Microsoft-OpenAI relationship. This could include the extent of influence that Microsoft might have over OpenAI’s decisions, the potential for their partnership to impact market dynamics in the AI sector, or any exclusive benefits Microsoft might gain. The focus of antitrust authorities, therefore, often extends to how such partnerships influence market fairness, innovation, and consumer choice.

What Does This Mean For Your Business?

In the aftermath of the boardroom changes at OpenAI, including the dramatic sacking and reinstatement of CEO Sam Altman, the antitrust spotlight has turned to the intricate relationship between Microsoft and OpenAI. This scrutiny, in both the US and UK, may go beyond just speculation of a merger and is likely to look at broader concerns of influence and control within the fast evolving AI sector. The investigations are, therefore, part of a regulatory interest in ensuring competitive fairness in the fast growing and evolving AI industry.

For businesses, this could translate into an era of increased oversight on AI collaborations and investments and regulators’ concerns over the concentration of power in the AI industry signals a need for businesses to be cautious. The focus is not just on maintaining competitive markets but also on preventing any monopolistic control over emerging and critical technologies like AI. This evolving regulatory landscape indicates that businesses need to consider the broader implications of their strategic partnerships beyond mere ownership stakes.

Microsoft’s assertion that it doesn’t own any part of OpenAI and is only entitled to profit distributions addresses direct ownership concerns but doesn’t fully alleviate all antitrust concerns. The nature of their collaboration, potential influence on business decisions, and any exclusive benefits or access could still be under scrutiny.

The parallel inquiries by the FTC in the US and the CMA in the UK also appear to suggest a harmonised approach towards regulating major AI partnerships and means that companies operating transnationally in the AI space must be aware of regulatory developments in multiple jurisdictions. The CMA’s investigation into whether the Microsoft-OpenAI partnership has created a “relevant merger situation” under the Enterprise Act 2002, and its potential impact on market competition, could also set precedents affecting future tech collaborations.

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Antitrust Investigation 

Following a complaint by Slack three years ago, in July 2020 the European Commission opened an antitrust investigation into Microsoft’s bundling of its Teams app with its Office suite, over concerns that it could be in breach of the EU’s competition rules.

Slack Complaint 

In the July 2020 complaint that led to the EC investigation, Slack said on its website: “Microsoft has illegally tied its Teams product into its market dominant Office productivity suite, force installing it for millions, blocking its removal, and hiding the true cost to enterprise customers”.  

David Schellhase, General Counsel at Slack said: “Slack simply wants fair competition and a level playing field. Healthy competition drives innovation and creates the best products and the most choice for customers. Competition and antitrust laws are designed to ensure that dominant companies are not allowed to foreclose competition illegally. We’re asking the EU to be a neutral referee, examine the facts, and enforce the law.”   

The Investigation: Concerns 

The EC’s investigation centred on concerns that Microsoft’s bundling of Teams with its other software could put rival online meetings and communications software, like Slack and others, at a disadvantage. The EC said that Microsoft’s practices “may constitute anticompetitive tying or bundling and prevent suppliers of other communication and collaboration tools from competing, to the detriment of customers in the European Economic Area”, and that, “The commission is concerned that Microsoft may be abusing and defending its market position in productivity software by restricting competition in the EEA for communication and collaboration products.” 

Will Unbundle It, Starting In October 

Microsoft’s response to the concerns outlined in the investigation has been for Nanna-Louise Linde, Vice President, Microsoft European Government Affairs to announce, “proactive changes that we hope will start to address these concerns in a meaningful way, even while the European Commission’s investigation continues and we cooperate with it.”

The ‘proactive changes’ or unbundling that Microsoft has promised will impact Microsoft 365 and Office 365 suites for business customers in the European Economic Area and Switzerland. Microsoft says that, in the coming months, it will take the following steps:

• Beginning 1st October 2023, Teams will be unbundled from Microsoft 365 and Office 365 suites in the EEA and Switzerland. Microsoft says that instead it will simply sell these offerings without Teams at a lower price (€2 less per month or €24 per year).
• It will enhance its existing resources on interoperability with Microsoft 365 and Office 365 to allow companies like Zoom and Salesforce to create tailored and integrated experiences across Exchange, Outlook and even Teams.
• It will create new ways to enable third party solutions to host Office web applications. For example, Microsoft says it will develop a new method for hosting the Office web applications within competing apps and services, much like it already does in Teams.

Investigated Before 

As some commentators have pointed out, Microsoft has been investigated before by the EU for similar bundling practices. For example, in the early 2000s, the EU ordered Microsoft to unbundle its media player from its Windows operating system, arguing that the bundling practice was anticompetitive. In fact, Microsoft has incurred £1.9 billion in EU antitrust fines over the last decade for practices that breach EU competition rules, for example by bundling products together.

That said, Microsoft certainly doesn’t have the ‘monopoly’ on triggering antitrust investigations. For example, back in 2018, Google was fined £3.8 billion for pre-installing its search engine and browser on Android devices, which was seen as an abuse of its dominant position.

What Does This Mean For Your Business? 

Having already incurred almost £2 billion in fines from the EU over antitrust related issues in the last decade, it seems that Microsoft would now rather comply than have to offer more self limiting remedies and risk a mega fine of potentially up to 10 per cent of its total annual turnover. The dominant position of its suite of products means that any bundling is jumped on quickly by competitors, some of whom, specifically Slack and Zoom, have grown dramatically and gained in power, share, and influence since the pandemic restrictions skyrocketed their user numbers.

In its defence, Microsoft says that including modern communication and collaboration capabilities in its business suites was simply in response to what customers expect from a modern work solution. Unfortunately, Microsoft’s market dominance and history make it difficult for Microsoft to do anything other than hold its hand up and politely agree to unbundling.

For competitors like Slack, this may seem like a victory and something that’s long overdue. For customers in Europe, the positive spin is that Microsoft’s suite of products without Teams bundled will cost a little less, but then there’s still the added inconvenience of having to add Teams and then presumably pay the bit of extra money on top for it. As mentioned above, Microsoft is certainly not the only big tech company to have run into problems over antitrust rules and since the tech world is still dominated by just a few major players, it’s unlikely to be the last time we see this sort of thing.

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