Justice Officials Will Reportedly Probe the Google-Wiz Deal on Antitrust Grounds
Antitrust enforcers are reportedly pumping the brakes on Google’s proposed $32 billion buy of Wiz, but it’s unclear if it’ll be a single speed bump or an unmovable roadblock.
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Officials in the U.S. Justice Department’s antitrust division are meeting with the two companies as well as competitors and customers to assess if the deal would illegally limit competition in the marketplace, Bloomberg reported Friday. The Justice Department’s review of Google’s plan is in its early stages and could last months more, and will ultimately determine whether U.S. officials let the deal proceed.
Neither Google, Wiz not the Justice Department immediately responded to Information Security Media Group requests for comment. Google provided Wiz with downside protection, according to reports, with the former set to pay the later $3.2 billion if regulators scuttle the deal. The 10% breakup fee is higher than the 5-to-8% typically offered by acquirers, and is more than what Google offered last summer.
The Trump administration has been expected to take more lenient approach to antitrust questions than the Biden administration did under former Federal Trade Commission Chair Lina Khan, which led to many deals getting squashed. But it was Trump’s Department of Justice that sued to block HPE from moving forward with its proposed $14 billion buy of Juniper, alleging the deal would lead to less competition, higher prices and less innovation.
The two situations aren’t analogous though. The Justice Department said eliminating Juniper as a disruptive competitor would consolidate more than 70% of the wireless networking market under HPE and Cisco. In contrast, Wiz has just 11% share in the cloud native application protection platform market – behind both Palo Alto Networks and CrowdStrike – while Google didn’t even make it to the podium (see: Why Google and Wiz Struck a Deal Now After 2024 Talks Caved).
But Google’s size and reach means the Silicon Valley-based search and cloud computing giant always attracts extra scrutiny. In the past year, Google was found by to have illegal monopolies in online search and some advertising technology markets. Following those rulings, it is facing a breakup of large parts of its business, including its Chrome web browser and tools used to place display ads around the web.
Google has fared better across the pond, with the U.K. antitrust regulator in November calling off an investigation into a $2 billion partnership between computing giant Alphabet and artificial intelligence startup Anthropic. The U.K. markets authority examined whether Google’s acquisition of shares could allow the search engine to exert “material influence” on Anthropic’s strategic decision-making abilities.
How Google Stacks Up Against Cloud Competitors
Forrester Principal Analyst Andras Cser told ISMG in March that the Wiz acquisition is intended to make Google more competitive against the likes of Microsoft in the cloud security market. Specifically, Cser said Google’s narrow focus on workload security and network protection and a lack of a cohesive cloud native application protection platform placed it behind Microsoft in cloud security (see: How Google-Wiz Deal Counters Microsoft Defender’s Dominance).
Similarly, Gartner’s Charlie Winckless told ISMG in March that the Wiz deal will cut Google’s dependence on external vendors for multi-cloud security, mirroring Microsoft’s approach with Defender for Cloud. Like Palo Alto Networks’ decision to move its cloud security unit under its security operations business, Winckless said Wiz’s CSPM capabilities will be integrated into Google’s broad security operations stack (see: How Google’s $32B Wiz Acquisition Will Reshape Cloud Defense).
Microsoft historically focused on building security products for its own technology, but did an about-face in early 2022 when it began managing permissions for AWS and GCP in addition to Azure. Microsoft said it recognized the future is multi-cloud, and would adapt its strategy accordingly.
Google’s pivot to multi-cloud security came just 13 months ago with the debut of Security Command Center Enterprise to safeguard GCP, AWS and Azure. Prior to that, Google’s native cloud security protected only GCP, with customers having to tap partnerships with the likes of Palo Alto Networks for multi-cloud security. Given its late start, Security Command Center Enterprise lags Defender for Cloud.
Owning Wiz gives Google a more direct path to the golden egg: becoming the public cloud market share leader. Google grew its IaaS public cloud services business by a quarter in 2023 to $11.45 billion, but that’s still only 8.2% of a $140 billion market. Google significantly lags Amazon and Microsoft in public cloud – who control 39% and 23% of the market, respectively. Perhaps Wiz will help close that gap.
The biggest deal in Google’s quarter-century history was likely to attract regulatory scrutiny given the wide shadow Google parent Alphabet casts. But given how far Google has to go to become a market share leader in either cloud computing or cloud security, regulators are unlikely to find the deal anti-competitive. Google isn’t separating from the pack in either market; it’s merely playing catch-up.