Google’s antitrust battle echoes Microsoft’s 1998 case, but with a twist

In 1998, an antitrust case against Microsoft Corp. inadvertently created room for Google to thrive. A generation later, history has come full circle as Microsoft is among the potential beneficiaries of an Indian-origin judge’s attempt to rein in Google’s search engine monopoly. On September 2, Washington, D.C., judge Amit Mehta found the Cupertino, California-based company guilty of unlawfully maintaining its monopoly in the search engine market. In a 223-page ruling, the court barred the giant from using certain tactics to drive search engine traffic and from making certain search data available to competitors. The federal court just stopped short of what Google and analysts feared the most—a breakup of the company.

By fostering increased competition and opening up new avenues for content discovery and digital advertising, the ruling could potentially reshape how publishers’ content is surfaced, ranked, and monetised. This increased competition in search, in the longer term, could impact visibility, traffic sources, and advertising market dynamics for publishers.

That said, the filing of the antitrust suit by U.S. government agencies and the hearing, especially the judge’s repeated references, evoked memories from the 1998 antitrust lawsuit—the one that dealt a body blow to the then-uncontested leader, Microsoft. 

What was the Microsoft antitrust case?

The world was on the brink of a revolution induced by the World Wide Web in the late 1990s when the ‘OG’ tech giant was cornered by the U.S. Department of Justice (DOJ), 20 state attorneys general, and the District of Columbia for illegally maintaining a monopoly over Intel-compatible PC operating systems. By unlawfully bundling its Internet Explorer browser with Windows, Microsoft was allegedly stifling its competitors, such as Netscape.

In a massive blow to the company, U.S. federal judge Thomas Penfield Jackson, in his “final judgment”, ruled that the company be broken up into separate operating system (OS and applications units. The aggressive penalty was overturned on appeal in 2001 as the tech giant and DOJ arrived at a settlement, requiring Microsoft to share its API with third-party companies. However, the ruling on monopoly remained.

What were the allegations against Microsoft?

Similar to the Google antitrust suit, the primary charges against Microsoft centred around the words monopoly and stifling of competition. It was accused of using its market power to unfairly preserve its Windows monopoly and undermine competition, especially in browsers and middleware. Microsoft distorted competition, it was alleged, and harmed consumers indirectly as they were forced to choose Internet Explorer, which came bundled with Windows, or pay “a substantial price (in the forms of downloading, installation, confusion, degraded system performance, and diminished memory capacity)” if they chose another browser, such as Netscape’s Navigator.

Another key allegation was that Microsoft refused OEMs a version of Windows, its flagship product, without the web browsing software. “...by preventing OEMs from removing Internet Explorer—or even the most obvious means of invoking it—prior to shipment, Microsoft forced OEMs to ignore consumer demand for a browserless version of Windows," the lawsuit read. 

It was also alleged that Microsoft pressured Intel to cut back on its software development efforts, thus depriving consumers of software innovation. "Through its conduct toward Netscape, IBM, Compaq, Intel, and others, Microsoft has demonstrated that it will use its prodigious market power and immense profits to harm any firm that insists on pursuing initiatives that could intensify competition against one of Microsoft's core products. Microsoft's past success in hurting such companies and stifling innovation deters investment in technologies and businesses that exhibit the potential to threaten Microsoft,” the lawsuit read. Rallying against these “dirty tactics” was also Apple co-founder Steve Jobs who urged regulators to take steps to force Microsoft “to play fair.”

And that’s precisely what the U.S. court did. Judge Jackson ordered that Microsoft be split into two. While the order was later overturned, the antitrust case set a precedent for similar cases to date, including the lawsuits challenging the monopoly of Google and Apple. 

How did it change the market?

While Microsoft initially denied the allegations, the lawsuit eventually weakened its ability, or at least its tactics, to lock distribution around applications. The ruling and the remedies distracted Microsoft. It never prioritised the web browser like it did until then. The suit made the exclusionary strategies adopted by giants to restrict competition riskier.

Amid all these developments, Google was launched in 1998. Paradoxically, as federal lawyers argued during the hearing, Google, though not directly, and, to a certain extent, Apple, capitalised on the gap left by Microsoft.

The Google case

Google faces similar charges. The court found that for over a decade, Google secured its position as the default search engine on browsers, smartphones, and other devices by entering into exclusive distribution agreements with device manufacturers, wireless carriers, and browser developers. This provided an unfair advantage that relies on consumer habit rather than choice, the court felt. "By 2020, 95% of all US search queries on mobile devices went through Google," Judge Mehta's order read.

But now, in an attempt to level the playing field, the court has prevented Google from entering into exclusive deals regarding the distribution of Google Search, Chrome, the Google Assistant or Gemini. It also ordered Google to share search data with competitors. But unlike the initial verdict in the Microsoft case, the court did not resort to breaking up the search engine giant. 

But not everything is similar… 

Microsoft shares fell sharply after the initial antitrust order in 1998, reflecting investor concerns about regulatory risk, legal uncertainty, and threats to the company’s dominant position. The stock continued to be volatile until after the case’s settlement years later. Similarly, Alphabet shares also dwindled under the shadow of legal uncertainty as the antitrust case proceeded. But a marked difference between the two antitrust cases is the impact the September ruling had on Alphabet's stock. With the company dodging the structural penalty bullet, the stock surged and Alphabet cruised into the $3 trillion market cap club on September 15.

“I see the ruling to be positive for the tech world. It clears the fog of uncertainty- the regulation has pushed for openness without breaking what works. The rise in Google’s stock tells you that it is a company not weakened, but in fact, freer to focus on what matters,” says Pawan Prabhat, co-founder of Shorthills AI, an end-to-end generative AI and data engineering solution provider.

How Microsoft stands to gain

Judge Mehta's order, seen as a measured approach to restore competition and deter future misconduct, comes at a time when the world is at the cusp of another technological revolution—of generative AI. The ruling marks a major milestone in U.S. tech antitrust enforcement and focusses on creating more competition in search and AI sectors going forward. 

The restrictions slapped on Google are expected to create more space for competition in search and AI, benefiting platforms, including Bing and ChatGPT, both backed by Microsoft. It has better shots at sealing default search deals and enhancing Bing using syndicated Google search data. This could improve its consumer and enterprise reach.

That said, Prabhat says it’s hard to pin down who stands to benefit in this case. “The search and SEO landscape is already evolving: browser capabilities are changing and AI-driven search is rewriting the rules. In that context, ceteris paribus simply doesn’t apply.” The bigger story is less about who is gaining ground and more about how the entire game of discovery and information distribution is being reshaped.