Google Not Required to Sell Chrome in Court Antitrust Ruling

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1:02Bloomberg Audio Studios, podcasts, radio, news. This is Bloomberg Business Week Daily, reporting from the magazine that helps global leaders stay ahead with insight on the people, companies, and trends shaping today's complex economy. Plus, global business, finance, and tech news as it happens. The Bloomberg Business Week Daily podcast with Carol Masser and Tim Stenevich. on Bloomberg Radio. Hey, I want to take a look at what's going on with Google shares in the after hours right now. We were talking about the surge higher as a result of this ruling that emerged. Shares still up 5.6%. I feel like we woke up, like something was happening.

1:47Oh, well, absolutely. Google doesn't have to sell its popular Chrome web browser. A federal judge ruled Tuesday in the Justice Department's landmark antitrust case against the search engine. The ruling allows Google to avoid one of the most severe remedy requests from the U.S. 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 Mandeep Singh of our Bloomberg intelligence team. He's here in studio. Google shares are up. I mean, was this expected, first of all?

2:21No, I think that's why you see such an instant 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, 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. Uh, really, I mean, uh, 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.

3:11So from that perspective, that's why Apple is up too. So, you know, this sort of, uh, clears, uh, all the uncertainty for both the companies. Look, I'm going to ask a 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 90 % plus share. I'm sure if this lawsuit came to the scene and the hearing was happening now, the judge would say Google doesn't have 90 % plus share because ChatGPT has got 1 billion monthly active users.

3:55It's got the query volume, not comparable to Google, but almost one third of Google. And so that search market is not the same as it was probably three years back before the launch of ChatGPT. And from that perspective, I mean, look, the search pie 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 stark 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.

4:39So 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. Why are we getting 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 is 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? I mean, there are obviously lobbies for these companies.

5:13It'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 a deal as 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.

5:50We just want to point out shares of Alphabet are up more than 6 % here in the aftermarket. And Mandeep mentioned that Apple shares are also higher. And Tim, they're up about 4 % here. I want to bring in Tom Giles. He's senior executive editor for Global Technology. He 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 6.4 % 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 Mandeep said, they avoided the most harsh penalty here, which would have been selling Chrome, which Google has woven into its products and is really an integral part of their value proposition to many customers.

6:39So major sigh 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 terms. but something else that they will continue to be allowed to do is paying for browser placement. They can still make these big cash payments that give their browser a special placement 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 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.

7:36That 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 DOJ 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 afoul 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.

8:14Yeah, as you said, we've got Alphabet up 6.25%, Tom, and then you've got Apple shares up 3.6%. So Mandipu, beyond Apple and Alphabet, are kind of watching this decision and maybe a little upset about it. I mean, remember the news when Perplexity wanted to buy Chrome and they put a value, I think, at$34 billion or something? Yeah, I was talking about this earlier. Put Perplexity on the map. Everyone was like, wait, you don't even have that cash, but that's okay. And even if Google had to divest Chrome,$34 billion is too low of a price tag for an asset, you know, that has got over 3 billion monthly active users that is at the core of deploying generative AI.

8:55I 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$50 billion plus even higher. I mean, I wouldn't be surprised if it's close to$100 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?

9:29Well, 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 Mandeep 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 onerous to them that they feel is going to tie their hands in the future. Again, it's a six-year decision. DOJ is giving itself leeway to kind of revisit at least part of this. And so are there clauses, are there things that they want to change?

10:08And do they want to send the signal that we don't think we're monopolists here, which is, of course, what they've been saying all along. Do you want to hit that home with sending this into an appeals process? Same question to you, Mandeep. So you're sitting down with these execs over at Alphabet and 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$20 billion tax 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.

10:50I mean, their users are used to, you know, the Google experience. And so it sort of saves the$20 billion that Google is paying Apple, and that helps their gross margin. 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 have to 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 decisions.

11:29I 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 Mandeep, 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 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?

12:19What about ChatGPT? 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, off on that. You're right. So, I mean, Google search 90 % plus share is driven by these exclusive arrangements. So you're right. But I look at it this way. I mean, some of the rulings 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 ChatGPT better in terms of solving for all the use cases that we use Google for. So from that perspective, it is a risk.

12:59At 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 overhauling the search experience and, you know, bring in a cloud or a chat GPT for the native browser search. I would be very surprised if they did that. But 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 Sisco, who's got the right 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.

13:52So, 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 an Instagram or, you know, WhatsApp. It's not the same. In the case of Google, the monopoly lawsuit said they had 90 % 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.

14:35And 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. Very quickly. Yes. Right. And so that's why I do think it's a fair ruling from that perspective. Tom Giles, saving 45 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 Mandeep 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.

15:18You're not seeing those kinds of same payments, those big multi-billion dollar payments heading to or from meta. So that's another reason 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, it 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 Singh in our New York studio and Senior Executive Editor for Global Technology out there on the West Coast, Tom Giles.

15:50Thanks so much to both of you. Again, the story Alphabet. Google does not have to sell its popular Chrome web browser. A federal judge ruling that just moments ago in the Justice Department's landmark antitrust case against the search engine. Shares of Alphabet, they're up 3 percent. And you've got actually, forgive me, up 6.8 percent. So up almost 7 percent. And then shares of Apple are up more than 3 percent. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

16:22What if data didn't sit still? What if intelligence moved with us? Not buried in reports, but activated in real time. Where lives are being shaped. Where decisions are being made. It all starts with a question. Where is the potential? Coatality turns data into clarity. Intelligence into insight. Insight into action. Because when intelligence moves, we all move forward. Coatality. Intelligence beyond bounds. The Bloomberg This Weekend Podcast. News, politics, and the lighter side of Bloomberg. Forget healthspan. Midlife men face pressure to extend hotspan. Hotspan. Hotspan, yes. So, millennial men, you have to stay hot for like several more decades, David.

17:09Okay? So you need to work on this. I got to work on that. This is like a journey. This is a really not so subtle way of telling me that. The Bloomberg This Weekend Podcast. Subscribe today on Apple, Spotify, or wherever you listen. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube. Just some of the issues. Tim, coming at investors this month. Yeah, we're going to stay on that and how that may be, should be, could be impacting those and how investors sum up the environment and make decisions or put off those decisions, Carol.

17:50He's the author of The Confidence Map, Charting a Path from Chaos to Clarity, a book that digs deep when it comes to decision making. So delighted to have back with us a friend of the program, Peter Atwater, president of Financial Insights and adjunct lecturer of economics at the College of William & Mary, joining us from just outside Philadelphia. Peter, great to have you back on the first trading day of September. A lot coming at us. Summer's over. September's here. We always feel kind of a mood shift. Any reason to think that this month will also potentially be problematic for investors? Is it maybe a different September this time around?

18:23Carol, thanks for letting me be here today. Yes, I do think it's going to be a very challenging September. Several things on my radar screen. I'm watching European sovereign yields. And already today, we've seen a clear linkage between higher yields and lower equity markets. And if that narrative continues, that could be quite a moment for the stock market because politically, France, Germany, England is a real melting pot today of populism. So that's very much front and center in my mind. How bad or how problematic might it get then for investors? How do you see it potentially playing out? And do you also anticipate, we mentioned your book, The Confidence Map, going into this.

19:19And we do think about what's on top of mind for investors right now when it comes to making decisions whether or not to deploy assets, to pull back, what to do in this environment once again. And then we just talked about the trade, ruling on trade, whether or not all of that we've been living the last, what, five or six months comes undone. Yeah, when I look at the population today, particularly on the investment side, there is a sense of invulnerability like I've not seen, certainly makes what we saw in 2021 look timid. You know, investors, particularly retail investors, believe this market is unsinkable.

19:59I saw somebody analogize it to Rasputin. You know, this is an unkillable market. Both of those really trouble me because they suggest that investors think that they can continue to ignore the geopolitics around them. And I don't think that will ultimately prove to be the case. At the same time, though, I see despondence, particularly among the low-end consumer. And I used to talk about the arms and legs of the K-shaped economy. Now I have to talk about fingers and toes because the clustering has become so extreme at the very top and at the very bottom. And that gap now appears to be uncrossable.

20:48And as we see over and over in history, you know, shared powerlessness is something that unites those at the bottom. And so I think policymakers on both sides of the aisle need to be attuned to that. Hey, Peter, we're getting some headlines from President Trump right now. He's speaking on Scott Jennings radio show. He says he's going to appeal the tariff ruling. He said that he repeats he repeats that global tariffs are an economic emergency. And he said we'll see a reverberation if we don't win on tariffs. How, in your view, should investors be thinking about this? Because you know, you talk a lot about chaos and clarity.

21:27And I think there's more chaos than clarity. I I think it's fair to say right now when it comes to at least the policy as a result of legal battles, as a result of, you know, the back and forth with these lawyers, with these rulings, it's not necessarily clear what is happening. No, it's not clear, but this is a continuation of very me here now decision making that we see on the part of the new administration. And I think that for investors, they've presumed that when markets decline, the administration will step back and move pivot in their favor, you know, the taco trade. And I think what's becoming a reality is that those who are running businesses, and we saw this in the manufacturing reports earlier today, that they're really struggling with the uncertainty and powerlessness that they feel.

22:29And the result is, in those situations, as you would expect, they're pulling back on orders. They're making more deliberate employment decisions. And so the real economy, I think, is decoupling from the markets. And the markets believe that they ultimately prevail. And I think the real economy is about to show them that's not the case. What's your take on the president in terms of watching the financial markets and his willingness or unwillingness to back off of policies that upset things? Because we did see kind of a 180 when it came to tariffs way back when or earlier this year. But how do you see that now or how do you factor that in now, Peter?

23:11What I see since then is a growing sense of invulnerability. And I see that politically, financially, economically, that the administration sees itself and sees its decision making as just irrepressible, unopposable. And those suggest to me a level of insularity, isolationist that is increasingly decoupled from what we're seeing on Main Street. You know, it's very interesting to me that we haven't seen the president out doing rallies in this new administration the way he did before. And instead, he's very isolated in the White House and Mar-a-Lago and places where. Why do you think that is? Because the energy of the rallies was something that a year ago we talked a lot about and even up to the election.

24:16And we know he likes to even go on tour to celebrate what he views as wins. Why do you think he's been quiet about this? I my own view would be that he doesn't see it as necessary at this point. He's he's won. And and so there is a sense that, you know, that support is no longer needed for him to be effective in his role. And I think that's a challenge, will become a challenge, because it's one thing to unify a crowd against a common enemy, in this case, former President Biden. The challenge is then maintaining that momentum and cohesion post-victory. And so it surprises me, too, Tim, that we haven't seen him out there trying to sustain the crowd.

25:09So, Peter, you know, in our next segment, we're going to talk a lot about what seems to be kind of the new axis of power, China, India, Russia. And I and I do wonder, as we talk about the U.S. seemingly or accurately or actually turning more inward and the rest of the world kind of moving on in new alliances. What does that mean for the U.S. financial markets? What does that mean for U.S. investors? I think you're seeing not only the United States turn inward, but Europe turn inward. It too is pulling back and not only globally, but among itself. And so it's very interesting to me that we have a Western world that is increasingly isolationist at a time that the Eastern world appears to be coming together.

26:05Now, having said that, we're talking about three very dominant, independent nationalist leaders who today is very convenient for them to create what looks to be cohesion against the West. But I wouldn't underestimate that if confidence drops in those geographies, they too will become very inwardly focused. We're talking with Peter Atwater, President Financial Insights, adjunct lecturer of economics at the College of William and Mary, and of course, the author of The Confidence Map. Do you not buy the images, what we're seeing in all the footage, the handshaking, the laughing between President Putin, President Xi Jinping, and of course, Prime Minister Modi?

26:54Do you not buy it? Is it just for the cameras? No, I do buy it. I buy it particularly symbolically that it behooves them to demonstrate that they are cohesive against the new administration. But it's one of those cases where, you know, my enemy's enemy is my friend. And that is only effective so long as the three of them continue to see the Trump administration as their joint adversary. Peter, before we let you go, just an update from you about a question that we first discussed back in March when you were on the program, when we asked if you believe the U.S. would be uninvestable. This was pre so-called Liberation Day.

27:44I'm curious if you think the U.S. is more or less uninvestable at this point now than it was back in the spring. No pressure, but that response kind of went a little viral. I'm just going to tell you that. Yeah, so I do believe that it is more uninvestable today than it was before in March. And my reason has to do with the substantial diminution of shareholder primacy that we've seen. The new administration has been very aggressive in pursuing nationalist economic policies. And I think that that makes the United States, particularly at these valuations, far less attractive than it had been. All right.

28:31We need to run. Peter, as always, thank you so much. Be well. Peter Atwater, President of Financial Insights, adjunct lecturer of economics over at the College of William & Mary. And as we mentioned, his book, something we've talked about on air with him, The Confidence Map, Charting a Path from Chaos to Clarity. Stay with us. More from Bloomberg Business Week Daily coming up after this.