In a 277-page opinion, a federal court judge ruled that Google is a monopolist and that the company has violated Section 2 of the Sherman Antitrust Act.

The New York Times reported that this "was the first antitrust decision of the modern internet era in a case against a technology giant."

As the decision notes,

General search engines make money by selling digital advertisements. Type the words "running shoes" into a general search engine, and sellers of running shoes will compete with one another in a split-second auction to place an advertisement on the results page, which, if clicked, takes the user directly to the seller's website. This is a highly effective way of reaching consumers. It is also an incredibly lucrative business. In 2021, advertisers spent more than $150 billion to reach users of general search engines.

For more than 15 years, said the court, Google has been the world's dominant search engine:

In 2009, 80% of all search queries in the United States already went through Google. That number has only grown. By 2020, it was nearly 90%, and even higher on mobile devices at almost 95%. The second-place search engine, Microsoft's Bing, sees roughly 6% of all search queries -- 84% fewer than Google.

(Google disputed the 90% figure.)

Although Google "hired thousands of highly skilled engineers, innovated consistently, and made shrewd business decisions, resulting in "the industry's highest quality search engine," Google also (according to the court) had a "largely unseen advantage over its rivals: default distribution."

As the court explained,

Most users access a general search engine through a browser (like Apple's Safari) or a search widget that comes preloaded on a mobile device. Those search access points are preset with a "default" search engine. The default is extremely valuable real estate. Because many users simply stick to searching with the default, Google receives billions of queries every day through those access points. Google derives extraordinary volumes of user data from such searches. It then uses that information to improve search quality. Google values such data so that, absent a user-initiated change, it stores 18 months' worth of a user's search history and activity.

For years, said the court,

Google has secured default placements through distribution contracts. It has entered into such agreements with browser developers, mobile device manufacturers, and wireless carriers. These partners agree to install Google as the search engine that is delivered to the user right out of the box at key search access points.

Google pays companies like Apple and Samsung for the preloaded defaults, usually as a percentage of its advertising revenue. In 2021, it paid more than $26 billion.

This included about $18 billion that Google paid Apple for being the default search engine on its products in 2021, The New York Times has reported.

Google also pays to ensure that rival search engines will not be pre-loaded on consumer devices.

In 2020, the U.S. Department of Justice and nearly every state's Attorney General filed lawsuits alleging that these Google agreements and certain other conduct violate Section 2 of the Sherman Act. According to the complaints,

Google has unlawfully used distribution agreements to thwart competition and maintain its monopoly in the market for general search services and in various online advertising markets.

The court also found that Google exercised its monopoly power by charging supra-competitive prices for general search text ads and, as a result, earned monopoly profits.

The court noted that

The possession of monopoly power may be proven through direct or indirect evidence. Direct evidence of monopoly power is rare. "Where evidence indicates that a firm has, in fact, profitably" raised prices substantially above the competitive level, "the existence of monopoly power is clear." ... More often, courts "examine market structure in search of circumstantial evidence of monopoly power.... Under this indirect, structural approach, "monopoly power may be inferred from a firm's possession of a dominant share of a relevant market that is protected by entry barriers."

The court pointed out that

A barrier to entry is "[a]ny market condition that makes entry more costly or time-consuming and thus reduces the effectiveness of potential competition as a constraint on the pricing behavior of the dominant firm . . . regardless of who is responsible for the existence of that condition."

For example, said the court,

Common entry barriers include: patents or other legal licenses, control of essential or superior resources, entrenched buyer preferences, high capital entry costs[,] and economies of scale.

(A patent, by the way, is a form of legal monopoly granted and defended by a government. i.e., not all monopolies are illegal.)

In this case, the court agreed with the plaintiffs that the following barriers to entry in the general search services market exist:

The Times noted that

The decision is a major blow to Google, which was built on its search engine and has become so closely associated with online search that its name has become a verb. The ruling could have major ramifications for Google's success, especially as the company spends heavily to compete in the race over artificial intelligence. Google faces another federal antitrust case over ad technology that is scheduled to go to trial next month.

The judge now needs to decide what penalties or remedies to impose on Google. These could include forcing it to change how it does business or selling off parts of its business.

According to the Times, the decision