Google faces massive legal setback for hurting AI with traffic that Sundar Pichai said helps search grow

Educational technology company Chegg has filed a lawsuit in federal district court against tech giant Google, claiming that artificial intelligence summaries of search results have hurt the company's traffic and revenue. The legal move comes nearly two years after former CEO Dan Rosensweig said students engaging with OpenAI’s ChatGPT assistant were cutting into Chegg’s new customer growth, according to news agency Reuters.

The internet search engine is eroding demand for original content and undermining publishers' ability to compete with its artificial intelligence-generated overviews, a US educational technology company said in a lawsuit filed on Monday. The Reuters report said Chegg, an online education company that offers textbook rentals, homework help, and tutoring, said in the lawsuit filed in Washington, D.C., that Google is co-opting publishers' content to keep users on its own site, erasing financial incentives to publish. It argues that Google's actions will ultimately lead to a “hollowed-out information ecosystem of little use and unworthy of trust.”

“Our lawsuit is about more than Chegg – it's about the digital publishing industry, the future of internet search, and about students losing access to quality, step-by-step learning in favor of low-quality, unverified AI summaries,” Schultz stated. He further accused Google of profiting from Chegg's content without compensation.


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What has Chegg said in its lawsuit?

The Santa Clara, California-based company has said Google's AI overviews have caused a drop in visitors and subscribers. The company is now considering a sale or take-private transaction as a result, the company's CEO Nathan Schultz said on Monday.

Google forces companies like Chegg to “supply our proprietary content in order to be included in Google’s search function,” said Schultz, adding that the search company uses its monopoly power, “reaping the financial benefits of Chegg’s content without having to spend a dime.”

Google spokesperson Jose Castaneda called the claims meritless. "With AI Overviews, people find Search more helpful and use it more, creating new opportunities for content to be discovered. Every day, Google sends billions of clicks to sites across the web, and AI Overviews send traffic to a greater diversity of sites," Castaneda said.

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Chegg's stock closed at $1.57 on Monday, marking a decline of over 98% from its peak in 2021. In November, the company announced plans to lay off 21% of its workforce.

Chegg CEO Dan Rosensweig accused Google of profiting from the company's content without compensation.

"Our lawsuit goes beyond Chegg—it concerns the entire digital publishing industry, the future of internet search, and the risk of students losing access to high-quality, step-by-step learning in favor of low-quality, unverified AI summaries," he stated.

Typically, publishers allow Google to index their websites for search results, which Google monetizes through ads. In return, publishers receive traffic when users click on their links. However, Chegg claims that Google is now pressuring publishers to let it use their content for AI overviews and other features, resulting in reduced website visits.

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Chegg argues that Google's actions violate antitrust laws by tying access to one product to the provision of another. This lawsuit is believed to be the first in which a company accuses Google of breaching antitrust laws through AI-generated content.

A similar case was filed in 2023 by an Arkansas newspaper as part of a class action representing the news industry. Both cases are being overseen by U.S. District Judge Amit Mehta, who previously ruled that Google holds an illegal monopoly in online search.

(With inputs from Reuters)