[On day one of the historic monopolization trial, the government
put Google’s chief economist on the stand to show that the company
valued default status on browsers and devices. ]
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JUSTICE DEPARTMENT SAYS GOOGLE ‘FLEXED ITS MUSCLE’ AS A
MONOPOLIST  
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Luke Goldstein
September 13, 2023
The American Prospect
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_ On day one of the historic monopolization trial, the government put
Google’s chief economist on the stand to show that the company
valued default status on browsers and devices. _

Department of Justice lawyers David Dahlquist, left, and Kenneth
Dintzer, center, depart following the first day of the United States
v. Google LLC antitrust trial at federal court, September 12, 2023, in
Washington., NATHAN HOWARD/AP PHOTO

 

WASHINGTON – On Tuesday, the government opened its first major
monopolization case in decades at the D.C. District Court with opening
statements from both the Justice Department’s Antitrust Division and
the defendant, Google.

Despite the stakes of the trial, the remainder of the legal proceeding
will take place in a near-total blackout, since requests for public
audio have been denied
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Judge Amit Mehta and even in-person attendants are restricted from
digital access inside the courtroom.

For nearly two decades, Google has served as the “on-ramp” and
gatekeeper of the digital world through its dominance of search engine
functions, which is the target of this case. The government has
unveiled a separate case against Google for its rollup of the digital
advertising market. Though related, that case relies on distinct
evidentiary claims, some of which will feature prominently in the
current trial.

To win a Sherman Act monopolization case given the prevailing
understanding of the law by most courts, the government not only has
to prove that Google’s market share qualifies it as a monopoly, but
also show that it’s used this dominant position to harm competition.
That’s the task ahead for the DOJ Antitrust Division’s team, led
by attorney Kenneth Dintzer, who also served on the Microsoft case,
the last major tech antitrust case from the late 1990s.

In the DOJ’s opening statement, Dintzer previewed the main points
that the government will use to make its case for how Google has
abused its monopoly power over general search.

_MORE FROM LUKE GOLDSTEIN_
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The opening remarks focused on Google’s explicit strategy to become
the default search engine by striking deals worth billions of dollars
across browsers, mobile, and desktop devices. As Google became the
default search engine, most consumers were conditioned to use its
product rather than switching to alternative search engines. Switching
costs will be a major point of contention during the trial, as Google
disputes that there are any difficulties imposed on internet users.
Dintzer held up multiple studies on barriers to switching, as well as
internal documents revealing that Google itself identified switching
costs as a key strategy to defend its market.

The widest-known example of these special deals is Google’s
licensing agreements with Apple, the largest mobile and computer
appliance maker, to be its default browser on Safari. Dintzer also
cited Google’s agreements with Samsung for Android devices and
Mozilla’s Firefox browser. Google’s loss of that agreement with
Firefox at one point led to a significant drop in market share over
search, as Dintzer pointed out.

Together, Google paid tens of billions of dollars to secure these
agreements. (The full amount is unknown and will stay unknown to the
public because Google has successfully contended that it constitutes a
trade secret; the figures will be redacted from trial transcripts and
confined to court sessions closed to the media.) To the government,
that’s clear evidence of the value Google placed on becoming the
default search engine, though Google’s lead attorney later disputed
the anti-competitive nature of these deals in his opening statement.

For nearly two decades, Google has served as the “on-ramp” and
gatekeeper of the digital world through its dominance of search engine
functions.

The first witness examination called forward by the government cast
doubt on this claim. While examining Hal Varian, Google’s chief
economist and longtime consultant, Dintzer pointed to internal company
communications showing that Google viewed the “power of defaults”
as “the Achilles heel” for competitors Yahoo and Bing (owned by
Microsoft). Varian is credited with coining the term “power of
defaults,” though he downplayed his role on the stand.

Company communications presented by Dintzer also revealed that Varian
and other top-level Google employees appeared to consciously dissuade
private use of the term “market share,” anticipating future
antitrust concerns, instead opting for “query share” to denote the
company’s capture of search engine traffic. Varian responded that
query share was a more accurate term.

Besides the default strategy’s windfalls to Google, the government
presented evidence that over the course of its relationship with
Apple, Google leveraged its revenue-sharing agreements to limit access
to alternative search engines, as well as Apple’s development of its
own search engine.

In a lesser-known case, Dintzer showed how Samsung’s plan to develop
a search engine tool called Branch Metrics, which would help consumers
switch browsers more easily, was squashed by Google because it
threatened their default position. Google leveraged its Android
agreement to undercut the development of Branch, the government said.
Though not a direct competitor search engine, it would have enhanced
competition against Google.

These default deals locked consumers into Google search and eventually
led to scale, the second major monopolistic feature that the DOJ
identified. Scale allows Google to collect vast amounts of data to
train its search engine, and also optimize data portfolios on user
patterns for advertisers. By achieving unprecedented scale, Dintzer
argues that Google’s data collection places barriers to entry for
competitors.

The graveyard of competitors includes not just Bing and Yahoo, which
have waned over the years in the shadow of Google. The scale and data
advantage make it all but impossible for new entrants to gain a
foothold, one example being the recent failure of newcomer Neeva, a
once-promising search engine startup created by former Google
engineers.

The final component of the DOJ’s argument is that Google has used
these massive troves of data on users to dominate the advertising
technology for placing general search ads.

The legal representative for 38 state attorneys general who are
co-plaintiffs in the case, Bill Kavanaugh, laid out the technical
details of how Google’s adtech ownership tilts the playing field
against competitors and leads to rising costs for advertisers. It also
is a point of leverage to punish competitors: Google repeatedly
delayed and refused to allow its advertising tools to support
Microsoft ad features.

It’s notable that much of the government’s opening argument
involved the details of adtech, since it has a second case coming
against Google focused explicitly on its adtech control. In this case,
the government’s argument is narrowly aimed at Google ad tools for
search, namely Google Search Ads 360 (SA360), whereas the scope of
Google’s adtech control is much broader and more intricate for other
services, such as for newsroom ad placements.

Judge Amit Mehta, who is presiding over the case and will be its sole
decider in this bench trial, periodically engaged Dintzer with
questions to specify the DOJ’s timeline for monopolization and
clarify definitions of terms like “market share” and
“browser.” In one notable exchange, the judge asked Dintzer to
specify at what exact point in time the government alleges that Google
became a monopoly. Dintzer replied that roughly 12 years ago Google
flexed its muscle as a monopolist to crush competitors through its
revenue-sharing agreements with mobile providers and web browsers, but
it reached monopoly status much earlier in the 2000s.

The scale and data advantage held by Google make it all but impossible
for new entrants to gain a foothold in the search engine market.

Google’s lead lawyer, John Schmidtlein of Williams & Connolly,
responded with the defendant’s opening statement.

Schmidtlein’s rebuttal rests on two major arguments. First, Google
cannot have a monopoly on search because it’s impossible to define
the market for search queries. A search for restaurants would place it
in competition with Grubhub and Uber Eats; searches for retail goods
put it up against Amazon and others.

What’s more, Schmidtlein claimed that even if Google were a
monopolist, it’s only because consumers prefer using Google since
they’ve built a superior product.

Schmidtlein said Google’s default positions (which he described as
not exclusive) have pro-competitive spillover effects in other markets
outside of search, such as in web browsers and other cellphone
providers, by incentivizing them to build better products.

Google also will try to make the case about Microsoft, claiming the
government is merely protecting another dominant incumbent firm from
Google’s own competitive forces in the search market. Other search
engines like DuckDuckGo and Neeva have been relatively ignored by the
defendants’ legal team.

Pro-antitrust enforcement attendees at the trial noted that it was a
bold decision to call on Varian, a luminary in the economics field
within academia, as the government’s first witness for examination.
Some initially questioned the strategy, but after the testimony many
were singing the government’s praises for Dintzer’s handling of
the examination. Along with showing that the power of defaults was a
conscious strategy to acquire monopoly power and that antitrust issues
were a concern inside the company, another Google memo brought forward
by the government exposed scale as a company priority.

Varian, in an interview with CNET from 2009, famously was quoted
saying, “Scale is bogus.” However, communications between Varian
and Google’s head of search, along with other company employees,
illustrates that many top-level technologists at the company
vehemently disagreed. Google’s chief scientist even said, “We
don’t have better algorithms, we just have more data.”

In examination, Dintzer suggested that Varian may have been trotted
out on a press interview to downplay the importance of scale to the
company to preemptively try to avoid antitrust concerns.

Google’s legal team objected to Dintzer’s lines of inquiry through
the examination, interrupting to demand that Judge Mehta block
unwarranted evidence and often referring to documents as
“hearsay.”

By the time Google’s legal reps tried to intervene over the question
of “scale,” their repeated objections wore on the judge’s
patience. Judge Mehta rejected their protest with incredulity since
Google’s legal team was calling an unedited interview transcript
with their top economist “hearsay.” There were audible laughs from
the courtroom audience.

Many antitrust reformers left the court confident about the trial
ahead after the government’s performance on the first day. In a
statement, the American Economic Liberties Project’s counsel Lee
Hepner said, “The Department of Justice’s opening arguments
revealed that Google’s dominance over search not only
‘hermetically seals off competition,’ but also allows it to flex
its power to influence how other companies, like Apple and Samsung,
market and develop their own products.”

On his way out of the courtroom, Google’s top in-house lawyer Kent
Walker, described as the company’s “steady old hand
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by _The New York Times_, was photographed alongside popular D.C.
activist the “Monopoly Man” stalking him in the background.

_Luke Goldstein is a writing fellow at The American Prospect._

_Read the original article at Prospect.org.
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_Used with the permission. © The American Prospect, Prospect.org,
2023. All rights reserved. _

_Click here to support the Prospect's brand of independent impact
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