The decision is a significant win for the Justice Department, which had sued the search engine giant over its control of about 90% of the online search market, and 95% on smartphones.
"The court reaches the following conclusion: Google is a monopolist, and it has acted as one to maintain its monopoly," U.S. District Judge Amit Mehta wrote.
His ruling paves the way for a second trial to determine potential fixes, such as breaking up the company or requiring the company to stop paying smartphone makers billions of dollars annually to set Google as the default search engine on new phones.
The “remedy” phase could be lengthy, followed by potential appeals to the D.C. Circuit and U.S. Supreme Court. The legal wrangling could play out into next year, or even 2026.
Shares of Google parent Alphabet (GOOGL.O) fell 4.3% on Monday as part of a broad tech share decline.
Alphabet said it plans to appeal Judge Mehta's ruling.
Mehta noted that Google had paid $26.3 billion in 2021 alone to ensure that its search engine is the default on smartphones and browsers, and to keep its dominant market share.
"The default is extremely valuable real estate... Even if a new entrant were positioned from a quality standpoint to bid for the default when an agreement expires, such a firm could compete only if it were prepared to pay partners upwards of billions of dollars in revenue share and make them whole for any revenue shortfalls resulting from the change," Mehta wrote.
He noted “Google, of course, recognizes that losing defaults would dramatically impact its bottom line. For instance, Google has projected that losing the Safari default would result in a significant drop in queries and billions of dollars in lost revenues.”
The ruling is the first major decision in a series of cases taking on alleged monopolies in Big Tech. This case, filed by the Trump administration, went before a judge from September to November.
"A forced divestiture of the search business would sever Alphabet from its largest source of revenue. But even losing its capacity to strike exclusive default agreements could be detrimental for Google," said Emarketer senior analyst Evelyn Mitchell-Wolf, who noted a drawn out legal process will delay any immediate effects for consumers.
In the past four years, federal antitrust regulators have also sued Meta Platforms (META.O), Amazon.com (AMZN.O), and Apple Inc (AAPL.O), claiming the companies have illegally maintained monopolies. Another case against Google over its advertising technology is scheduled to go to trial in September.
Speaking before the ruling, William Kovacic, a professor at George Washington University Law School, said a DOJ victory is likely to boost the morale of antitrust enforcers in other cases.
"It's very good for their larger campaign to apply the law effectively in this sector," he said.
When it was filed in 2020, the Google search case was the first time in a generation that the U.S. government accused a major corporation of an illegal monopoly. Microsoft settled with the Justice Department in 2004 over claims that it forced its Internet Explorer web browser on Windows users.
