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    Here’s what the US Government had to say about Google in its antitrust lawsuit

    On 3 May 2024, the US Department of Justice (DOJ) presented its closing arguments for the antitrust lawsuit against Google to US District Judge Amit Mehta. The lawsuit filed in October 2020 by the US Department of Justice, accused Google of maintaining a monopoly and indulging in anti-competitive practices in the search engine and advertising market.

    Some of the allegations against Google concern: its multi-billion dollar deal with Apple to make Google the default general search engine on the Safari browser; its exclusivity agreements with device manufacturers and operating systems prohibiting preinstallation of any competing search services; and revenue-sharing agreements for preferential treatment for its search engine on devices, web browsers, and other search access points.

    The lawsuit is considered to be the biggest challenge against a tech giant by the US government since the landmark 1998 battle against Microsoft over bundling Internet Explorer. The outcome of this lawsuit, expected later in the year, will set a global precedent as Google faces regulatory scrutiny around the world.

    If found guilty, Google may have to void some of its extremely lucrative agreements and in an extreme scenario break up its business to make Search a separate company.

    Here are some of the key arguments made in the trial, gathered from the court transcripts: 

    Google’s dominance in search

    Does Google’s scale make it impossible for other companies to compete?

    The Government argued that Google dominates the search market, noting that Google accounts for almost 90 percent of all search queries in the US. It claimed that Google maintained a monopoly over the market through its exclusive contracts with operating services, devices and browsers to be the default search engine. It argued that Google paid billions of dollars to be the default search engine because it realizes that users are more likely to return to the search engine set as default. It said:

    “Google was willing to invest billions of dollars in them. The defaults led to the searches, which led to data, and which led to an enormous scale advantage for Google.”

    This scale, it argued made it extremely challenging for other search engines to compete with it as “scale drove quality in all areas.” Unable to reach the scale of Google, search engines could not improve their quality, and thus could not compete with Google, they claimed.

    Alternative services to challenge Google

    Another key feature of a monopoly is a lack of alternative services and Google was accused of not having competitors in the market. However, Google disagreed with the fact that there was no competition in the market. Google said there are multiple specialized websites that users can access which posed an adequate competition to Google Search. Google compared Search to a “one-stop” shop, where users could access multiple channels of information. But, they could also easily access other information channels at a very low cost. For example, users could either use Google to access products on Amazon or directly access Amazon. Notably, the judge questioned if this counted as an effective substitute for Google.

    Google also claimed that it faced competition from other search engines, citing DuckDuckGo as an example. It stated that during the public backlash to Google’s involvement in the Cambridge Analytica scandal, DuckDuckGo responded by “aggressively trying to make the case that it was more privacy-focused.”

    Google claimed that it “made innovations and improvements in privacy” to compete efficiently and not lose its market share.

    Exclusionary contract with Apple

    Google and Apple have a multi-million dollar deal for Google to be the default general search engine on Apple’s browser Safari. The DOJ alleged that the deal was an exercise in maintaining a monopoly, as Google did not have any competition for the default search engine spot.

    As evidence for the claim that Google maintained a monopoly on the search market, the DOJ cited a testimony by Google CEO Sundar Pichai. The question said, “At any point in your discussions in 2016 with Mr. Cook [Apple CEO, Tim Cook] and Mr. Cue [Apple Senior Vice President Services, Eddy Cue], did you communicate to them that they didn’t really have any leverage in negotiating a revenue share percent because Google was the only viable option?” The Government said that Pichai took what was said into account and agreed which was why Google didn’t pay the share Apple wanted. It claimed that Google was aware of the fact there was no meaningful competition in the Search Market and thus could negotiate a better deal for itself for its contract with Apple. Google, however, disputed this and said there was intense competition citing that in 2016, Google’s revenue-sharing contract with Apple was renewed to give Apple a higher cut of the profits.

    Google also claimed thatIf Apple believed there were better search engines in the United States presumably they would have asked for that” and that Apple’s ability to get out of its contract with Google is a sufficient indication of competition.

    It also cited Mozilla dropping Google as its default browser in 2014 as evidence of competition. Thus, it concluded that Google won the contract with Apple based on its merits.

    “Google is winning because it’s better, because Apple is deciding Google is better for its users. Apple could change that decision. Mozilla changed that decision.”

    Further, Google claimed that its position increased competition in the market. It cited a letter written by Mozilla submitted to the court that allegedly stated that if Google was prevented from competing, Mozilla might go out of business because Microsoft’s Bing would be the sole dominant player and destroy competition.

    The Government disagreed with Google’s arguments that it won the contract with Apple based on merit and that Apple could easily switch to another default. The DOJ stated that this did not align with the billions of dollars Google paid Apple to stay as the default browser. It said:

    “Google’s theory doesn’t make sense, which is, everybody loves us and defaults are easy to switch. Those two things don’t add up to paying billions of dollars for default. Why pay Apple for any default?”

    The judge also questioned Google’s assertion that the position of default browser was fair game, as Google due to its scale had the ability to innovate and grow better than other browsers. He said, “I’m just wondering how anybody would be able to spend billions and billions and billions of dollars as a new entrant to possibly dislodge Google as the default search engine from the Safari browser.”

    Advertising revenue

    Competition for Google in the field of Advertisement

    The DOJ accused Google of using its advertising revenue business to fuel its monopoly, charging advertisers high prices and abusing its dominance over the advertising market. It said:

    “Even though these companies have seen their advertising costs rise and rise, because blue links have been demoted and Google decided to monetize search, they’ve seen their costs go up. But what do they still do? They still go to Google and search ads.”

    However, Google disagreed and claimed that the advertising business was extremely competitive. It claimed that “companies are competing tooth and nail to deliver increased ROI [Return on Investment],” since advertisers have shifted towards favoring a better ROI over traffic.

    Further,it claimed that it faced serious competition from social media platforms like TikTok, Facebook and Instagram when it came to advertising. However, the Government argued, “If the world really turned on ROIs, [Return on Investment],  all the money would move to the channel with the best ROI. But that isn’t the case, because they [social media platforms] are different products, with different attributes with different advertiser objectives.”

    The Court also seemed to favor the argument that Google and social media platforms engaged in 2 distinct forms of advertising. Advertising on Google is far more direct as users explicitly entered the product into Google Search as opposed to social media platforms that base their users’ preferences on complex algorithms.

    Google’s advertisement auctioning process

    The DOJ also brought up Google’s advertising auction process. The system has brought on multiple anti-trust probes into Google. To put it briefly, the process of buying advertising space online requires a server, an exchange, and a website. Google owns all three. So for advertising, Google’s ad server solicits bids for ad space from businesses. Their ad exchange organises auctions for this ad space and suggests bids from their winning buyers to the server. The winning bid from the advertiser gets ad space on a website.

    Google claims that the system was designed to help small-to-medium-sized advertisers who don’t have adequate expertise and technology. It also claimed that the process was fair as Google had a simple ranking system giving precedence to advertisers who are likely to pay a higher price, and had been transparent with the process.

    However, the Judge stated, “ Google still, at the end of the day, has these controls.” He added, “The question is, “Can they use those controls in a way to sustain an increase in price at a monopoly level without losing customers?” And some of the documentation suggests that that’s exactly what they can do.”

    Google responded that if it was a monopoly, it would “stay constant, reduce output, reduce the number of ads and have everybody just bid through the roof, and that’s what you would expect to see from a monopolist.” It argued that it indulged in none of this behavior, thus it was not a monopoly.

    Google delayed its SEM tool to target Microsoft

    An SEM (Search engine marketing)  tool enables advertisers to run targeted ad campaigns across multiple search engines and media channels. Thus with Google’s SEM tool, SA360, advertisers can manage their targeted ads not only on Google but also on Bing, Yahoo, DuckDuckGo, etc. on the same platform. “SEM tools provide a lifeline for smaller general search engine providers, the small players”, said the Department of Justice.

    The DOJ reminded Google of its promise that the SEM tool was “going to be a neutral third-party, helping you, the advertiser, achieve the highest return on investment.” However, it accused Google of dragging its feet in improving certain features in the tool that would allow Microsoft to bid fairly. It alleged that Google unreasonably delayed auction-time bidding for Microsoft’s Bing and created obstacles for Bing to advertise on Google, causing Microsoft to lose revenue.

    Google denied these claims and said that Microsoft had not effectively communicated the urgency of this issue. It also claimed that the delay was simply because “their technology is different from our technology.”

    Google’s destruction of chats

    The final accusation against Google concerned Google’s practice of asking its employees to not retain its messages. Employees were asked to make their instant messages ‘off the record’. The DOJ said, “Google’s systemic destruction of documents to avoid discovery demonstrates anticompetitive intent and violates the federal rules and warrants sanction.” The Judge also stated, “[It is]surprising to me that a company would leave it to their employees to decide when to preserve documents.” However, Google argued that it was wrongful and prejudicial to assume that the chats deleted were related to anti-competitive practices.

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    The post Here’s what the US Government had to say about Google in its antitrust lawsuit appeared first on MediaNama.

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