Almost exactly a month ago, the United States kicked off a massive antitrust trial against Google for its alleged monopolist behaviours in the search engine and search advertising markets.
Described by the Department of Justice (DOJ) as a case “about the future of the internet”, commentators say that this is the biggest government-led charge on a tech company since 1998’s case against Microsoft for bundling Internet Explorer with its products.
In this two-part series, we explore the various points that Google, the DOJ, and other third-party stakeholders have argued before District Judge Amit Mehta over the last month in the ongoing hearings. Part one deals with the DOJ arguments that Google’s agreements with manufacturers to make its search the ‘default’ option on devices has anticompetitive effects.
A thank you: Notably, this often closed-door trial has also been criticised for its secrecy, with reporters unable to sit in on proceedings for the most part, and key documents being taken down from public viewing. For those of us from outside the United States, these sources, among others, have been invaluable in rounding up the trial’s key arguments:
- Josef Weitzman’s reporting for Big Tech on Trial.
- The Verge’s live blog of the proceedings.
- The New York Times’ crisp legal reporting of what’s at stake.
Back to basics: does being the default search engine give you a competitive edge?
To recap: The core issue here is that Google signs deals with phone manufacturers that prefer the default use of its search engines over others. Google says (among other things) that the reason its search is preferred by manufacturers is because it’s simply the best product out there. But these deals have exclusivity clauses baked into them—that prohibit pre-installing competing search engines. Don’t forget: Apple is also a party to the case—because of a multi-billion deal it signed that makes Google’s search engine the default provider on Apple products. Apple thinks this is a non-issue, it ‘chose’ Google’s engine because it’s the best one on the market.
Google thinks these exclusivity agreements are kosher: The tech giant added that setting its search engines as the default options on devices is a legal thing to do—for example, Microsoft’s Bing is the default search engine option on a Windows computer.
Judge Amit Mehta added another interesting question into the mix while Google made its point—do people really ever switch away from default search engines? Google replied that typically people don’t. The subtext here: while switching might be easy, being the default search engine option definitely gives you an edge, because people are unlikely to use another provider.
The DOJ hones in on the competitive edge being the default search engine brings: Aiding Mehta’s line of questioning—a 2011 email on these default search engine deals was brought up by the DOJ. As Shazam founder and former executive at Google Chris Barton said over a decade ago:
“We need to incentivize carriers to ship Google…Without an exclusive search deal, a large carrier can and will ship alternatives to Google…You can bet that Microsoft and Yahoo will enter contracts for search on Android through carrier deals if we do not.”
The DOJ also brought in an expert witness—CalTech behavioural economics professor Antonio Rangel—who agreed that setting a search engine as the default provider creates a “sizable and robust bias” towards it.
Google questioned Rangel’s arguments, once again (unfortunately for Microsoft) arguing that placing Bing as the default search engine didn’t help the product grow. In short—default placements are important, but they’re not going to coerce consumers into settling for “inferior” products. The Verge has the best description of this line of arguments: “It’s almost impressive what a punching bag Bing has become in this trial”.
Exploring Apple’s Billion-dollar Deals with Google Search
Apple’s two cents—we pick Google search because it’s the best option: The DOJ also claims that Apple and Google’s potentially multi-billion dollar agreement hurts competition by keeping Apple out of the search engine sector. It also hurts smaller engines like DuckDuckGo from competing effectively in the market.
Unpacking Apple’s deal with Google: Eddy Cue, Apple’s Senior Vice President of Services, suggested that its deals with Google were in the interest of consumers—after all, Google’s search engine is the ‘best’ option out there.
“We pick the best one [search engine] and let users easily change it,” Cue said, adding that the deal was mutually beneficial to both companies. “One of the benefits that Google gets from Apple is that we’re telling the world Google is the best search engine, because that’s what customers expect us to pick.” Google added that press releases announcing Safari and the first iPhone from the noughties highlighted Apple’s integrations with Google search.
Not helping either company’s case here, Apple told Google back in the 2000s that it was considering developing a choice screen so that users could pick which search engine they’d like to use. Google allegedly responded by saying, “No default placement — no revenue share.”
This is a decades-old agreement, but is it mutually beneficial? Apple and Google’s tie-up has been around since 2002, but its current version was negotiated in 2016 by Cue and Google’s CEO Sundar Pichai.
During the negotiations, Cue specifically sought for a bigger slice of the revenue Google earned from Apple users redirected towards its search engine. Pichai was happy to keep the revenue share as it was. The two parties met each somewhere halfway—and Google has been paying Apple a publicly undisclosed amount ever since. Responding to the DOJ, Cue added that he never considered walking away from the deal despite the companies’ differences. “I always felt like it was in Google’s best interest, and our best interest, to get a deal done,” Cue said, adding that “certainly there wasn’t a valid alternative to Google at the time [none exist currently either, he said].”
In passing, Cue also mentioned that Apple could create its own search engine if it couldn’t see eye-to-eye with Google. While the DOJ hasn’t picked up on this yet, commentators like Yosef Weitzman observe that this could demonstrate a “clear anticompetitive effect”. That is, the revenue share Google paid Apple caused the latter to stay out of the search engine market.
In Apple’s defence, Microsoft and DuckDuckGo were once on the cards: Apple held similar talks on search engine defaults with Microsoft and DuckDuckGo too. In fact, Microsoft was the default search engine for Apple’s Siri and Spotlight services between 2013 and 2017. However, court documents reveal that the company’s talks of using Bing might have been more of a bargaining chip during its negotiations with Google.
“We build them [Microsoft] up, create incremental negotiating leverage to keep the take rate from Google, and further our optionality to replace Google down the line,” said Adrian Perica, Apple Vice President, reported The Washington Post.
Apple and DuckDuckGo also discussed making the search engine the default option for private browsing on Safari. Apple executives said they weren’t aware that the company was considering switching to DuckDuckGo, adding that the browser risks sharing user information with Microsoft as it relies on search information from Bing.
If Apple cares about privacy, then why pick Google? Commentators noted that the DOJ was leading Apple towards an interesting implied question—if Apple truly cares about privacy, shouldn’t it allow consumers to opt out of using Google Search, after telling them about how much Google tracks its users?
“We’ve always thought we had better privacy than Google,” Cue conceded separately. In fact, its search engine deal with the company includes provisions that make Google allow Apple users to search the Internet without logging in. Apple has also tweaked Safari and its other platforms to make tracking users harder for Google.
The DOJ also asked Cue if Apple could include a “search engine choice screen” while setting up iPhones to improve consumer agency. Cue said that Apple’s agreement with Google prevents that from happening—and that the company doesn’t want to do that either way, as it tries to “get people up and running as fast as possible.”
Point to note: Apple reportedly fought to keep Cue out of the proceedings. Apple’s Head of AI and ex-Googler John Giannandrea testified before Cue did—but there’s little insight on what he said during those largely closed-door proceedings.
US telecom giant Verizon echoes Apple’s arguments: Verizon’s Chief Customer Experience Officer Brian Higgins testified that when renegotiating its deal to keep Google as the default search engine on its devices, he was unaware of other companies being solicited to compete alongside. Some argued that this actually undermined Google’s arguments that it had “won” these contracts.
Also, when asked by Google’s lawyers about the ‘negative’ product reviews from users after Bing was made the default engine on Verizon’s Android devices in 2010, Higgins added that he hadn’t seen negative reviews when Google’s search engine was preloaded on the devices instead.
The dual focus of the DOJ’s argument—Google’s search dominance enables its ads dominance: The DOJ alleged that Google engages in monopolist behaviours, like raising the prices of ads up for auction without informing its advertisers, and with few consequences. While testifying under oath in 2020, Jerry Dischler, a Google ads executive, added that “we tend not to tell advertisers about pricing changes”.
Doing this allowed Google to increase the revenues it earned from its search ads.
Also, how do you determine anticompetitive effects when the targeted product is free?
To recap: It’s easier to figure out when a company becomes a monopolist when the good it’s selling has a price. But, Google’s search engine is free. So, how exactly do you determine whether it’s behaving anti-competitively or not? Or, as commentators noted: “Google Search is free, after all — so does the average user really suffer from having to work slightly harder to reach an alternative?”
The Court’s opening questions: Judge Mehta hit the ground running, asking Google during its opening statements about how to define the search engine “market” when the product in question is free. Google’s response—the question here is slightly different. That is, can another competitor’s actions coerce Google into making moves that keep it profitable?
So, what kind of market is Google operating in then?: Commentators speculated that Google would argue that its market consists of every platform with a search function, ranging from TikTok to ChatGPT.
On the other hand, the government may argue that Google is simply operating in the “general search” market, where its only competitor is Microsoft. The DOJ also brought in the privacy arguments here. That is, Google currently pays to be the default search engine on devices. If it was really competing with others though, then it would have more incentives to better protect user data, and improve on its “lax privacy standards”.
- US v Google: Did Google search engine’s dominance hurt Bing’s chances at competing in the search engine market?
- US Vs Google Landmark Antitrust Trial Begins Today, Here’s All You Need To Know
- Google ‘Monopoly Gatekeeper’ For Internet: Key Takeaways From US Antitrust Lawsuit
- U.S. Goes After Google’s Ad Tech Business In New Antitrust Case: All You Need To Know
- Google’s AdTech Business Faces Anti-Trust Probe In EU, May Have To Sell Part Of Its Services
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