In August 2024, federal district court Judge Amit Mehta ruled that Google violated Section 2 of the Sherman Act, setting the stage for what could be a watershed moment in tech regulation.  The court found that Google unlawfully maintained its monopoly through exclusive distribution agreements with browser and device companies, sharing ad revenues in exchange for default search engine status. As the case moves to the remedies phase, the contrasting proposals from the Department of Justice (DOJ) and Google reveal starkly different visions for addressing anticompetitive conduct in the digital age.

The DOJ advocates for sweeping structural remedies, including the divestiture of Chrome and Android, restricting Google from investing in search or AI rivals, and requiring Google to share its proprietary search index with competitors. Google, conversely, proposes behavioral remedies focused on modifying the distribution agreements, allowing annual changes to default settings without penalty, and prohibiting mandatory preloading of Google products.

When facing such divergent options, economic theory—specifically the concept of option value—offers invaluable guidance. This framework, which evaluates decisions under conditions of uncertainty and irreversibility, suggests that a measured initial approach targeting specific anticompetitive conduct is preferable to immediate structural intervention.

Several factors support this perspective.  First, the causal connection between Google’s distribution agreements and its market dominance remains empirically uncertain.  Judge Mehta acknowledged that Google’s search engine is superior to its competitors and that the company legitimately obtained its market leadership through quality and innovation. When Mozilla temporarily switched from Google to Yahoo as its default search engine, Yahoo gained only 20 percentage points of search share despite its default status. Even more telling, when Mozilla later set Bing as the default for a sample of users, Bing retained only 20-35% of search volume after just two weeks, with 35.5% of users manually changing back to Google.

These findings suggest that while default status provides some advantage, user preference for Google’s superior quality significantly drives its market position.  Judge Mehta concluded that Google’s agreements “reasonably appear capable” of foreclosing markets—a far cry from definitive proof that they did so to a “significant” degree.

Second, the technological landscape is rapidly evolving, particularly with the emergence of AI, which some predict could reduce traditional search engine volume by 25% by 2026. This uncertainty about the future of search markets makes immediate structural remedies particularly risky.

Third, structural remedies like divesting Chrome and Android are effectively irreversible and could have far-reaching unintended consequences.  Chrome and Android are supported by Google’s ad revenues and made available at no charge. It’s unclear whether these products can exist outside Google or how their divestiture would affect the broader ecosystem.  Google is also the primary developer of Chromium, the open-source browser engine underlying nearly all browsers except Safari. Even Microsoft’s Edge browser switched to Chromium to improve quality. Would Chromium development continue with the same quality after Chrome’s divestiture? The potential reduction in browser choice would harm consumers.

Drawing on the Supreme Court’s guidance in United States v. United Shoe Machining Corp., 391 U.S. 244 (1968), courts need not make a “one and done” ruling when fashioning remedies in Section 2 cases.  Instead, a court may “accept a formula for achieving the result by means less drastic than immediate dissolution or divestiture” while continuing to monitor the situation.  If after a reasonable period (the Court suggested a decade) the remedies prove insufficient, then the court can modify the decree “so as to achieve the required result with all appropriate expedition.”

This approach preserves what economists call “option value”—the value of maintaining flexibility when facing irreversible decisions under uncertainty. By first implementing targeted remedies addressing specific anticompetitive elements of distribution agreements, the court can gather information about their actual competitive impact while preserving the option to implement more aggressive measures later if necessary.

The D.C. Circuit recognized this principle in United States v. Microsoft, 253 F.3d 34 (D.C. Cir.), cert. denied, 534 U.S. 52 (2001), noting that “concerns over causation have more purchase in connection with the appropriate remedy issue, i.e., whether the court should impose a structural remedy or merely enjoin the offensive conduct at issue.” The court further clarified that structural relief “requires a clearer indication of a significant causal connection between the conduct and creation or maintenance of the market power”—a standard not clearly met in the Google case.

By targeting the troublesome aspects of Google’s agreements—their length, termination terms, and broad application—Judge Mehta can effectively test whether these agreements significantly contribute to Google’s market dominance. If modified agreements do not alter Google’s market share, this would suggest that user preference for Google’s superior quality, rather than anticompetitive conduct, drives its success. Conversely, if Google loses substantial market share under modified agreements, then this may or may not support stronger intervention depending on how shares shift.

This measured approach to formulating antitrust remedies acknowledges the rapid rate of change in technology markets and the unpredictability of service evolution. AI might fundamentally transform online search in the coming years, or Google might follow once-dominant tech companies like MySpace, AOL, or Blackberry into obsolescence. Premature structural intervention could needlessly disrupt innovation and harm consumer welfare.

For decades, the United States has led global technological innovation, partly due to its relatively unregulated environment. As we stand at the dawn of an AI revolution largely led by U.S. firms, excessive remedies could shift innovation overseas and raise national security concerns.

While anticompetitive conduct must be addressed, the principle of proportionality suggests that remedies should target specific harms without excessive collateral damage. By starting with measured intervention while maintaining the option for stronger action if needed, Judge Mehta can best serve the goals of antitrust enforcement: preserving competition, protecting consumers, and fostering innovation in an uncertain technological future.

Dr. George S. Ford is the Chief Economist of the Phoenix Center for Advanced Legal & Economic Public Policy Studies (www.phoenix-center.org), a non-profit research organization.