Today, DC-based US District Court Judge Amit Mehta will hear opening arguments in a 10-week monopoly trial that could disrupt Google's search business and redefine how the US enforces antitrust law in the tech industry.
The trial comes three years after the Department of Justice began investigating whether Googlecurrently valued at $1.7 trillionpotentially abused its dominance in online search to make it nearly impossible for rival search engines to compete. Today, Google controls more than 90 percent of the search engine market within the US and globally, and this has harmed competitors and consumers, the DOJ argued, by depriving the world of better ways to search the web.
"Googles anticompetitive conduct harms consumerseven those who prefer its search enginebecause Google has not innovated as it would have with competitive pressure," the DOJ wrote in a pre-trial brief filed on Friday.
This trial will be "the federal governments first monopoly trial of the modern Internet era," The New York Times reported. For officials, the trial marks a shift away from opposing anti-competitive tech mergers and acquisitionswhich attempt to stop tech giants from getting even bigger in desirable markets. Starting with this trial, officials will now begin scrutinizing more closely than ever before how tech giants got so big in the first place.
No one's sure yet if today's antitrust laws can even answer some of the latest emerging questions about tech competition. Last year, Congress recommended changes to strengthen antitrust laws, including by directly prohibiting abuse of dominance. But rather than wait for lawmakers to update laws, the DOJ is treading aggressively into new territory and might even become emboldened to break up some of the biggest tech companiesespecially if the DOJ proves that tech giants have carefully built their businesses to shut out competition, as it's accused Google of doing.
"Google has entered into a series of exclusionary agreements that collectively lock up the primary avenues through which users access search engines, and thus the Internet, by requiring that Google be set as the preset default general search engine on billions of mobile devices and computers worldwide and, in many cases, prohibiting preinstallation of a competitor," a 2020 DOJ press release announcing the lawsuit said.
In Google's case, the DOJ has alleged that Google pays billions to browser developers, wireless carriers, and mobile phone makers to drive users to Google by agreeing to exclusively feature Google as the default search engine. Competing search engines will likely never be able to afford to outbid Google and form their own agreements, the DOJ argued. And denying them prominent placements across nearly every distribution channel prevents Google's rivals from reaching a broader scale of users and collecting a wider range of data that's needed to improve their search products. Google's market share is already too great for any rival to catch up, the theory goes, and Google has allegedly invested lots of money to keep it that way.
A nonprofit advocating for strong enforcement of antitrust laws, the American Economic Liberties Project, cited a recent estimate that "suggests Google paid over $48 billion in 2022 for these agreements." The nonprofit claimed that Google's outsize investment in these agreements was a red flag signaling a power grab and "as a result, search competitors who cant afford to cut billion-dollar checks to make their search engines accessible face an insurmountable barrier to entry." The DOJ agrees.
For Google, paying for those agreements has always been worth it, but the DOJ's attack on Google's key business strategy could end up costing Google big. If Google loses the trial, the search giant risks paying damages, potentially being forced to change its business practices, and possibly even being ordered to restructure its business. Among other remedies, the American Economic Liberties Project and a coalition of 20 civil society and advocacy groups recommended that the DOJ order the "separation of various Google products from parent company Alphabet, including breakouts of Google Chrome, Android, Waze, or Googles artificial intelligence lab Deepmind."
Although the trial starts today, the DOJ and Google started sparring earlier this year, when the DOJ accused Google of routinely deleting evidence and Google denied that anything important was deleted. Ahead of the trial, the DOJ and Google have already deposed 150 people, but the trial will call upon even more witnesses, potentially exposing parts of Google's core businessesandbecause Apple signed an agreement to make Google a default search engine on iPhonesalso Apple's. The testimony about trade secrets could be so sensitive that Apple executives requested the court block their testimony, but they were recently denied that request, Reuters reported.
The trial will be decided by Judge Mehta, and not a jury. To defend its search business, Google hired John E. Schmidtlein, a partner at the law firm Williams & Connolly, who will face off against the DOJ's head of antitrust, Jonathan Kanter.
Google employeesincluding CEO Sundar Pichaiand executives from other big tech companies like Apple will likely appear to testify. In a pre-trial brief, Google said that they would also be bringing in Google search users and advertisers as witnesses.
Former FTC antitrust attorney Sean Sullivan told Ars that the key questions before the court will be determining if Google possesses monopoly power in a relevant market and if Google got that power through anticompetitive conduct. That will likely require Google to explain in greater detail than ever before how it runs its search business, triggering even more interest in the trial, parts of which will be concealed from the public to protect Google trade secrets. While the DOJ appears confident that it can prove that Google has monopoly power, Sullivan said that antitrust cases are "rarely" straightforward.
"It is not enough that the defendant's conduct disadvantages its rivals," Sullivan told Ars. "Instead, the plaintiff ordinarily must prove that the defendant did things to disadvantage its rivals that lacked any business justification except to reduce the rivals competitive significance, or that needlessly disadvantaged rivals relative to other less restrictive ways of competing. That often funnels dispositive weight to whether the defendant can explain why it has done the things it is accused of doing."
The DOJ has said that it has the evidence to prove that Google didn't win a competitive advantage by building a superior product but by building a monopoly over search.
"A theme that will likely permeate Googles presentation at trial is its view that the company offers a quality search product that many users prefer," the DOJ wrote in its pre-trial brief. "But Googles conduct undermines this argument, as the monopolist feels the perpetual need to pay billions annually to ensure that consumers are routed to its search engine" by ensuring that Google "is the default search engine for iPhones, Android phones, and most third-party browsers, such as Mozillas Firefox."
This harms competitors, the DOJ said, because "Googles use of contracts to maintain default status denies rival search engines access to critical distribution channels and, by extension, the data necessary to improve their products." In turn, harming competition harms consumers because, while Google "attracts more users, who generate more data and who help attract more advertising revenue," Google's rivals "face an insurmountableand still growingdifference in scale" and are deprived "the opportunity to provide more accurate results" that would improve the search experience for consumers.
"Only Google has the full opportunity to improve," the DOJ argued.
At trial, the DOJ said it "will demonstrate that Google has maintained its durable monopolies in general search servicesand the related advertising markets that fund itby cutting off the air supply to Googles rivals," other general search engines.
To convince the court of Google's monopoly power, the DOJ said it would share evidence showing that Google competes in advertising markets with other general search engines that are also considered a "one-stop-shop" for searchers. And because Google has a dominant share of those markets and poses alleged barriers to entry, the DOJ argued that Google "easily meets" the threshold for monopoly power.
The DOJ claimed that it would show direct evidence that Google raised advertising prices "above a competitive level." Officials also urged the court not to buy into "any argument by Google that competitive pressures force it to innovatethus cutting against a finding of monopoly power." That "runs counter to the evidence," the DOJ said.
To back up the DOJ, the agency will call upon its expert economist, Michael Whinston, to testify that this case "has all the hallmarks of an exercise of monopoly power in the relevant advertising markets." The DOJ will also tap accounting expert Christine Hammer to "explain that Google turns an exceptionally high profit margin" on its search businesses.
Ultimately, the DOJ told the court that "in a monopoly maintenance case such as this one, the operative question is not whether the defendant has acquired its monopoly through anticompetitive means, but whether, once acquired, the defendant used anticompetitive means to maintain its monopoly."
Google laid out its defense against the DOJ's antitrust claims in a pre-trial brief also filed Friday. Ahead of the trial, the company disputed how the DOJ defined its top competitors, argued that its dominance in the search market does not create barriers to entry for competitors, and alleged that procompetitive benefits outweigh harms of alleged misconduct. The company also challenged how Colorado, which is another plaintiff in the case after filing a separate complaint, defined its "duty to deal" with search advertising competitors like Microsoft.
Google's defense of its business starts by suggesting that the DOJ will be unable to prove that "Google possesses 'monopoly power in the relevant market' because the DOJ has failed to identify a relevant market with a "set of products that serve as important competitive constraints on Google."
In making this argument, Google seeks to convince the judge that rival general search engines like Bing, Yahoo!, and DuckDuckGo are not Google's key competitors, because they are not "the products and firms to which Google would lose search queries (in the short and long run) if the quality of its search offering declined."
Rather, Google claimed that "specialized vertical providers" (SVPs) like Amazon, Yelp, and Expediaas well as "other popular places users go to search for information such as TikTok and Instagram"are Google's top search market rivals. Google wrote:
By defining the relevant market to include only general search engines, plaintiffs distort the commercial reality that users routinely substitute other search providers for general search enginessuch as Amazon when they shop, or Expedia when they traveland thereby improperly exclude many of Googles strongest competitors from the relevant market.
At the trial, Google's economic expert, Mark Israel, will share empirical evidence showing that's why SVPs "are closer competitors to Google in these verticals than other general search engines like Bing," Google wrote.
In addition to being counted among Google's top rivals for users, SVPs and social media platforms are also more relevant competitors to Google for advertisers than other general search engines, Google argued.
At trial, Israel will share results from his "detailed examination" of how advertisers decide where to place search ads, showing that "Googles search ads compete with a wide range of other digital advertisements"all of which Google said have been "improperly" excluded from the lawsuit's defined relevant markets allegedly harmed by Google's monopoly power.
Israel's examination will go up against testimony from Google advertisers themselves. In Colorado's pre-trial brief, the state confirmed that advertiser witnesses "who have products but decline to sell them on SVP platforms" would testify that "they cannot substitute SVP ads for general search ads."
Google has argued that if the DOJ and Colorado had included "strong competitors like Amazon, Expedia, Meta, and Yelp" in definitions of relevant markets, the court would see that Google does not enjoy monopoly power and instead "faces substantial competitive constraints for both users and advertisers." As proof, Google claimed that "on the user side, Googles share of user traffic has decreased while the search traffic captured by SVPs has increased over time." And it's most significantly "losing share to platforms such as Amazon and Meta," Google noted.
To prove that "the evidence on output, price, and quality indicates that Google competes in a fiercely competitive marketplace," Google said it will trot out Google search users as witnesses, who "will detail the intense continuing investments Google makes to compete, including the launch of thousands of product improvements every year, from generative artificial intelligence capabilities to enhancing the breadth and depth of local results to new flight search interfaces."
And Google also plans to introduce testimony from advertisers, who "will describe the investments Google makes to continue to improve its search advertising products" and explain how that generates more revenue for both advertisers and Google.
Beyond disagreeing with the DOJ on which businesses Google actually competes with, Google also seeks to dismantle the DOJ's argument that rival search engines face barriers to entry that are greater than ever, which prevents them from achieving the scale they need to compete with Google.
Computer science experts Edward Fox and Ophir Frieder will help Google explain from a technical perspective that, while the Google practice of collecting heaps of "user data can improve search quality," there "are diminishing returns to scale." They will also explain that competitors like Microsoft have "sufficient scale to compete" and detail the "many aspects of search that can be improved without additional scale." These experts will be largely charged with convincing the court that "Google owes its quality advantage over rivals to its 'superior skill, foresight, and industry' and not to anticompetitive conduct.
Disputing Google's computer science experts on the question of scale, Colorado said it will present testimony from employees of general search engine competitors who have struggled to overcome Google's monopoly, advertisers who have struggled with shifting investments from Google to Bing, and Google employees who will explain how Google benefits from massive amounts of user data.
Google also claimed that "there is no shortage" of procompetitive benefits from alleged anticompetitive behaviors. Among them, Google said that its economic expert, Kevin Murphy, and other witnesses would testify that Google becoming the default search engine both increased search usage and thus expanded its search outputbenefiting users. This also provided critical funds to browsers, which could then invest in improvements and innovations to improve browser functionality, Google argued.
Perhaps more significantly, Google's mobile application distribution agreements (MADAs) have "greatly benefited consumers and search competition by fostering the success of the Android platform, an innovative mobile platform that today provides the most significant competition to market-leading Apple in the United States," Google argued.
Google has claimed that "reengineering the MADAs, as Plaintiffs demand, would undermine these important benefits without boosting search competition."
Since Google has identified alleged procompetitive benefits, it will be up to plaintiffs to rebut them in the trial. The DOJ already claimed in its pre-trial brief that "the trial record will confirm that any purported benefits are outweighed by the anticompetitive effects in this case." The DOJ also suggested that consumers could enjoy the same benefits if Google used less anti-competitive meanssuch as paying for search traffic, instead of paying for exclusionary default search agreements.
Finally, Google argued that Colorado's claims that Google had a "duty to deal" with Microsoft and implement Bing Ads in its search engine marketing tool are "dead on arrival." And this could be crucial to proving what Sullivan said is essential to win the case: that Google "needlessly disadvantaged rivals relative to other less restrictive ways of competing."
However, according to Google, Colorado has failed to identify competitive harms caused to Microsoft by Google's delay in implementing Bing ads in its adtech tool. Google also argued that "even when a duty to deal exists, as long as the monopolist has 'valid business reasons' for the refusal to deal, the refusal does not violate" antitrust law.
"Google looks forward to presenting its case at trial," Google's pre-trial brief concluded.
It may not be easy for the public to follow all the nitty-gritty details of the Google antitrust trial online.
The juiciest parts of the trialwhere Google and Apple will discuss trade secrets driving core businesswill be sealed, and it appears that unsealed portions of the trial will likely only be accessible for those who can attend live.
In the days ahead of the trial, the American Economic Liberties Project joined other organizations in requesting that the court provide live audio feeds of the proceedings so that the public could follow the unsealed portions of the trial. But Mehta denied the request last weekend, citing judicial policy that does not allow either civil or criminal courtroom proceedings in the district courts to be broadcast, televised, recorded, or photographed for the purpose of public dissemination.
Among his reasons for denying the request, Mehta wrote that "the court has serious concerns about the unauthorized recording of portions of the trial, particularly witness testimony." Mehta said that the district court has recognized that live witness testimony is "particularly sensitive" and exempted those proceedings from audio feeds "even when those proceedings involved 'a matter of public interest[.]'
Senior counsel at the American Economic Liberties Project, Katherine Van Dyck, in a press release criticized Mehta's decision, saying that it would shroud the trial in secrecy and "prioritizes Googles privacy over the publics First Amendment right to listen, in real time, to witnesses that will lay out how Google monopolized search engines."
"The company whose infamous mission is to organize the worlds information and make it universally accessible was successful today in its effort to block the public from accessing the most important antitrust trial of the century, Van Dyck's statement said.
Van Dyck told Ars it seemed unlikely that Mehta would change his mindbeyond possibly piping an audio feed into a room where press will be gatheredbut some advocates have not given up hope that the trial will be accessible online. On Sunday, the trade organization Digital Context Next filed a similar request asking the court to provide a live audio feed, arguing that "there is substantial public interest" in the case and "there does not appear to be any good reason to close the trial completely for this testimony other than to shield Google and Apple from potential embarrassment."
Van Dyck told Ars that Mehta's decision would make it harder for the public to follow the trial. She said that the American Economic Liberties Project would send experts to attend public hearings and provide timely updates on a website dedicated to the trial. That website will also compile research and reports from other advocacy groups that joined the American Economic Liberties Project's coalition, including advocates opposing monopolies like Open Markets and tech-focused groups like Fight for the Future and Demand Progress.
Sullivan told Ars that it's too soon to say how this antitrust trial will affect the average Internet user.
"If the government wins, the court could order Google to change its behavior or divest parts of its business," Sullivan told Ars. "If so, and if that order survives any relevant appeals, then users could see changes in the search products they are offered." However, if Google wins, "then maybe nothing changes at all."
Publicity from the trial could cause some Internet users to shift their behaviors, though, Sullivan suggested.
"One indirect but significant way that the case might impact average people is by causing them to stop and think about how they make their search decisions," Sullivan told Ars. "One important tenet of the government's case is that default search engine assignments are sticky. That might be true as a historical and empirical assertion, but nothing compels it to be so. Maybe this litigation inspires people to change the default search engines on their phones and personal computers."
Read the original here:
Heres exactly what Google will argue to fight the DOJs antitrust claims - Ars Technica
Read More..