Chegg, the education technology company, has filed a lawsuit against Google and its parent company, Alphabet Inc., alleging that Google’s AI-powered “AI Overviews” have significantly harmed its business by reducing web traffic and revenue. The company claims that Google’s use of AI-generated summaries, which often rely on content from third-party sites like Chegg, keeps users within Google’s ecosystem and prevents them from visiting external platforms. Chegg’s CEO, Nathan Schultz, argued that this practice constitutes unfair competition and has forced the company to explore “strategic alternatives,” including a potential sale or going private.
Chegg’s lawsuit alleges three primary grievances:
- Reciprocal Dealing: Google allegedly forces companies to supply proprietary content to be included in search results.
- Monopoly Maintenance: Google is accused of leveraging its dominant position in search to suppress competitors.
- Unjust Enrichment: Chegg claims Google profits from its content without incurring costs.
The impact on Chegg’s business has been severe. Non-subscriber traffic dropped by 49% in January 2025 compared to a modest 8% decline in mid-2024. This decline coincides with the rise of Google’s AI Overviews and broader adoption of generative AI tools like OpenAI’s ChatGPT, which have disrupted Chegg’s customer acquisition and revenue streams. Chegg’s Q4 2024 revenue fell 24% year-over-year to $143.5 million, and its stock has lost about 95% of its value since 2022. Following the announcement of the lawsuit and disappointing financial results, Chegg’s shares dropped over 20% in after-hours trading.
In response to these challenges, Chegg has retained Goldman Sachs to explore strategic options, including potential acquisition or privatization. The company is also pursuing its own AI initiatives by integrating models from Meta, Anthropic, Mistral, and OpenAI into its platform to enhance educational offerings.
This lawsuit comes amid broader scrutiny of Google’s dominance in search and AI markets. A federal court recently ruled that Google maintains an illegal monopoly in search, adding weight to antitrust concerns raised by companies like Chegg and Yelp.