The fate of Google’s search operations now rests in the hands of Judge Amit Mehta, the landmark case concluded on Friday.
The Justice Department and prosecutors on Thursday made their final arguments about Google’s alleged anticompetitive behavior in the general search market, and on Friday focused on Google’s alleged illegal behavior in search advertising. Google also came under fire (separately) for failing to preserve chat messages that the DOJ believes could have been relevant to the case.
The government is trying to show that Google has closed off key distribution channels to the general search engine market so that potential rivals cannot become major threats. It says this was done through contracts with phone makers and browser companies to be their exclusive default search engine. If the judge agrees that Google has successfully foreclosed competition in that market, it can consider the government’s arguments about the search advertising market as evidence of anticompetitive behavior.
In his summary, DOJ attorney Kenneth Dintzer said the last major decision on the technology monopoly US v Microsoft, “fits like a glove” on Google. Google’s lead attorney in the case, John Schmidtlein, disagreed. In MicrosoftAccording to him, manufacturers were forced into deals and customers were presented with an inferior product that they did not want. “Google won with a superior product,” he said.
“The importance and significance of this case are not lost on me,” Mehta said as he concluded Friday’s court proceedings. “Not just for Google, but for the public.”
An adequate replacement for Google ads
If Google charges higher prices for advertising, are there suitable alternatives that advertisers would flee to? The answer to that question could say a lot about whether or not Google has the monopoly power that the DOJ claims it has created through the contracts that require it to be the default search engine across browsers and devices. Google says there are plenty of alternatives for advertisers; the government disagrees.
Mehta seemed sympathetic to the government’s arguments, though he acknowledged that alternatives to Google are robust advertising businesses in their own right. Amazon, for example, isn’t exactly an inferior alternative to Google for advertising, Mehta said. As opposed to wrapping a sandwich in newspaper instead of cellophane, Mehta said, “When you move your ad dollars from Google to Amazon, you don’t wrap your ad in newspaper.”
But Mehta later distinguished advertising platforms such as Facebook and TikTok from Google. Users who search on Google have a strong idea of what they are looking for, and pretty much spell it out in the search query. Social media platforms often have to infer that intention from indirect signals.
In 2017, Google conducted a weeks-long experiment and found it could raise prices by five to 15 percent while growing revenue
In 2017, Google conducted a weeks-long experiment and found that it could raise prices by five to 15 percent and grow revenue at the same time. “Google can determine for itself what margin they will acquire. And that’s why they’re running experiments to say, ‘If we increase it by 15 percent, how much in revenue are we going to lose?'” Mehta told Schmiddlein. “Isn’t that something only a monopolist can do?” Schmiddlein disagreed, saying it’s fair to conduct pricing experiments to find out if they’re charging the right price.
Mehta pointed out that there is “no evidence that Google ever looks at competitors’ prices for that purpose.” Schmiddlein replied that it was not that simple. Because ads are sold through a complicated auction, even Google doesn’t have a full understanding of the pricing mechanism behind it. It’s just not the same as a Coca-Cola representative walking through a supermarket to see Pepsi prices.
Sabotaging ads on Bing
The plaintiff – the attorneys general of 38 states led by Colorado and Nebraska who filed the lawsuit alongside the DOJ – also allege that Google deliberately delayed building certain features for SA360, the search engine marketing tool. SA360 helps advertisers manage ads across platforms – not just Google, but competitors like Microsoft’s Bing.
The states say Google has fallen behind in building an SA360 feature for Bing ads, even though it had already implemented it for Google search ads.
“The evidence here is a little tricky for Google,” Mehta said, noting that Google had said quite publicly early on that it “wouldn’t play favorites” when it came to SA360. While Google could have chosen from the start to exclude Microsoft from the tool, “that’s not the choice they made,” Mehta said.
The tool was not delivered for almost five years after Microsoft requested it. “How can this not at least be considered anti-competitive?” Mehta asked.
Chats deleted
The entire case hinges on whether Google deliberately deleted or failed to preserve documents that may have been used as evidence in this trial.
Google had a policy of turning history off by default for its chats, leaving it up to employees to determine when to turn it on for relevant conversations. DOJ’s Dintzer called the alleged destruction of documents “unequivocal and truly breathtaking.” He added that “there is no doubt” that executives “intentionally engaged in conversations with history turned off.”
“Google’s retention policies leave much to be desired,” the judge said, adding disapprovingly that it was “surprising to me that a company would leave it up to its employees to decide when to retain documents.”
“Google’s retention policy leaves a lot to be desired”
Shortly afterwards, Dintzer’s slide deck paused on a slide that read, “This is wrong,” as the DOJ lawyer noted that Google has never apologized for the unretained documents or promised not to do so in the future . He said it is imperative that the court imposes sanctions showing that the risk of destroying documents is not worth it. The DOJ is asking Mehta to draw an adverse inference about Google for any part of the case where it believes the plaintiffs lack sufficient evidence. That would mean the judge would assume that all the deleted chats would have been bad for Google and demonstrate their anti-competitive intentions behind their contracts with manufacturers and browsers. The DOJ also wants Mehta to view the destroyed chats as a signal of his anti-competitive intentions.
Google attorney Colette Connor said the company’s lawyers informed the state of Texas (one of the plaintiffs) about its retention policy early on. In fact, Dintzer said the disclosure came months after the lawsuit and that the DOJ would have “obviously” acted if they had known.
Mehta didn’t seem to believe Google’s defense. “I think it’s interesting that Google has been very deliberate – and perhaps after seeing what happened with Microsoft – has been very deliberate in advising employees on what not to say,” he said. In a training for employees, the company recommended avoiding terms such as “market share.” (Bloomberg Law noted that this is a common practice in large companies.)
It’s now up to Mehta to decide how to take these absent chats into account. He didn’t provide a timeline for his decision, but in the meantime, Google and the DOJ will prepare for their second antitrust showdown over ad tech in the fall.