Google Dodges Worst Penalties in U.S. Antitrust Case

Google avoided harsh antitrust penalties for its conduct in the U.S. search market, with a judge barring the company from entering into exclusive deals but rejecting a forced spinoff of its Chrome browser and other sweeping remedies sought by the Justice Department.

U.S. District Judge Amit P. Mehta in a Tuesday ruling said Google can’t pay to be the exclusive search engine on devices and browsers, but he allowed the company to continue making payments for distribution of its products, saying a prohibition on those agreements would harm recipients such as Apple .

Mehta’s order follows his ruling last year that Google illegally monopolized the search market for more than a decade. That opinion said Google used illegal distribution agreements with companies such as Apple to build and maintain a 90% market share and prevent rivals from developing competitive alternatives.

While Mehta’s earlier ruling was a blow to Google, Tuesday’s decision adopted much of the company’s position on what should happen now. Mehta said a judge’s job was to approach remedies with humility, and he said the competitive dynamics of the marketplace were changing already, largely because of AI technology.

»There are strong reasons not to jolt the system and to allow market forces to do the work,« Mehta wrote.

Wall Street analysts scored the ruling a huge win for Google and Apple since it allowed an existing arrangement to continue in which Google pays Apple more than $20 billion a year to be the default search provider on the Safari browser.

The ruling paves the way for the two companies to partner further on AI-related services on Apple devices, analysts said. Apple currently has a deal with OpenAI to integrate ChatGPT into various iPhone services. Apple and Google have had talks about striking a similar deal for Google’s AI system called Gemini.

In premarket trading Wednesday, shares in Google parent Alphabet were up more than 6%, and Apple shares rose by about 3%.

Google in a statement said the decision »recognizes how much the industry has changed through the advent of AI« and underscores its position that »competition is intense and people can easily choose the services they want.« The company said it had concerns about data-sharing requirements imposed by the judge and was »reviewing the decision closely.«

Assistant Attorney General Gail Slater, head of the Justice Department’s antitrust division, said the government was studying whether Mehta’s decision goes far enough to restore competition. »We proved in court that competition had been frozen in place for two decades in internet search,« Slater wrote on X.

Apple didn’t respond to requests for comment.

The judge’s most significant limit on Google barred it from striking deals with browser companies and device makers that require them to exclusively use its search engine, Chrome browser or AI products. The ruling further bars Google from tying the licensing of its app store on Android devices to the use of those products.

Google will also have to share some search data to give competitors a shot at building the scale they need to offer better search results. Mehta said data-sharing was necessary to dilute the advantages Google gets from paying to be the default search engine. He didn’t require the company to share advertising data.

The ruling caps a five-year battle in Mehta’s court that began when the Justice Department sued Google in the waning months of the first Trump administration, the government’s first major lawsuit challenging an alleged monopoly in a generation. After the judge ruled that Google engaged in illegal practices to preserve its search engine monopoly, he held another trial phase earlier this year to decide what should be done to address the company’s violations and improve future competition.

Mehta said the Justice Department’s proposals went too far, including its request that Google be required to sell its Chrome browser.

»Plaintiffs overreached in seeking forced divesture of these key assets, which Google did not use to effect any illegal restraints,« Mehta wrote.

Advances in AI have happened quickly, Mehta wrote, and weigh against the court putting a heavy hand on the scale of search competition.

Generative AI has become a threat to Google’s legacy search business as users flock to chatbots to answer the questions they used to ask Google.

»These companies already are in a better position, both financially and technologically, to compete with Google than any traditional search company has been in decades (except perhaps Microsoft ),« the judge wrote.

The Justice Department’s case against Google marked the government’s first major lawsuit challenging an alleged monopoly since antitrust enforcers went after Microsoft during the 1990s.

Mehta appears to have been guided partly by testimony that the Justice Department’s proposals would produce collateral damage. Google gives a cut of advertising revenue to Apple and others in exchange for keeping its search engine and other apps at the center of devices.

In deciding to permit those payments, Mehta wrote that barring them would likely lead to »fewer products and less product innovation from Apple.«

Google has made payments to Apple related to default search placement in the Safari browser for about two decades. Users are able to change the default, but most never do. The advantage from being the default search engine is particularly strong on mobile devices, whose users tend to avoid exploring the settings required to make a change, Mehta found.

The Justice Department had asked Mehta to require Apple and others to give users »choice screens« so they would have to affirmatively select if they preferred Google. But Mehta said that remedy went too far because it intruded into product design, a red line that courts shouldn’t cross.

Some progressive groups that backed the Justice Department’s case said they were dismayed by Mehta’s decision, saying he pulled his punches after earlier finding that Google had acted illegally to preserve its monopoly.

»This feckless remedy to the most storied case of monopolization of the past quarter-century is a complete failure of his duty and must be appealed,« said Nidhi Hegde, executive director of the American Economic Liberties Project.

Write to Dave Michaels at dave.michaels@wsj.com and Katherine Blunt at katherine.blunt@wsj.com