The Contradictions in the DOJ’s Google Breakup Idea
Who says investors don’t care about Google’s antitrust woes? The stock dropped as much as 3.9% on Wednesday in the wake of reports that the government might seek “a breakup” of the company as the penalty for last week’s antitrust verdict, most likely through the forced divestiture of Android or Chrome.
Those reports shouldn’t have been surprising: in a report last Friday, we cited antitrust lawyers predicting that the government would almost certainly ask the court to impose what are called “structural remedies” against Google, such as selling Android, rather than just “behavioral” changes affecting Google’s partnerships with Apple. Here’s a question, though: Are the folks at the Justice Department working on the Google case talking to their colleagues who are working on the antitrust lawsuit against Apple?
In the Apple case, the government claims the iPhone maker has used various tactics to make it harder for people to switch away from its hugely popular phone. But Apple’s rival in the mobile market is Android, which powers phones from Samsung, Motorola and many others—including Google’s own Pixel. So if the government wants to rein in Apple, shouldn’t it be doing everything it can to support Android?
In that context, it's worth remembering that Google is responsible for making Android a powerful rival to Apple. The latest example came on Tuesday, when Google unveiled a range of artificial intelligence–driven updates for Android phones, such as an overhauled AI assistant. Those changes should keep Android on a par with Apple, which plans to roll out its own set of AI features soon. For more details, see our AI Agenda commentary today.
Forcing Google to sell Android, then, risks weakening the software platform, making it even less of a robust competitor to Apple. That’s not necessarily a pre-ordained outcome, of course. We don’t know enough about how a spinoff of Android would work to be sure what would happen. Plenty of government-instigated breakups have led to the growth of successful companies (think AT&T and the creation of the Baby Bells in the 1980s). Maybe freedom from Google’s bureaucracy would allow Android to work more nimbly.
Still, there’s no guarantee Android would prosper as a stand-alone company. And if it didn’t, the winner would be Apple. (And if you don’t believe me, Ben Thompson makes a cogent argument in Stratechery today that Google’s value to Android argues against separating the two.)
Of course, in the Google case what really matters is what Judge Amit Mehta, who heard the case, decides (in addition to whatever an appeals court rules in years to come). On that front, we shouldn’t rule out the possibility that the court will agree with the government.
In his decision, Mehta approvingly quoted former Google executive Sridhar Ramaswamy as saying the existing search ad ecosystem is “exceptionally resistant to change.” That implies the judge might decide a drastic change is required. Let’s hope the government has thought through what it is asking for.
Schmidt’s Work-Life Balance
Former Google CEO Eric Schmidt made waves this week when he suggested at a talk at Stanford University that Google had fallen behind in the AI race because it cared too much about “work-life balance,” allowing its workers to go home early or to work from home. “The reason startups work is because the people work like hell,” Schmidt reportedly said. (He later retreated from the remarks, the Wall Street Journal reported tonight).
Eric Schmidt certainly knows the pitfalls of a poor work-life balance. As The Information has chronicled in two exposés—here and here—he likes to mix romance with business investments in ways that have caused quite a few complications. Whether that makes him a good spokesperson on this issue, though, is debatable.