Google defends sway as antitrust trial begins
Companies choose Alphabet’s Google as the default search engine for their browsers and smartphones because it is the best one, and not because of a lack of competition, a Google lawyer said Tuesday at the start of a high-stakes antitrust trial in Washington.
Consumers use Google “because it delivers value to them, not because they have to,” John Schmidtlein, a partner at Williams & Connolly who is representing the company, said during his opening statements on the first day of the trial. “Users today have more search options and ways to access information online than ever before.”
Schmidtlein pushed back on claims by U.S. Justice Department antitrust enforcers that Google has used its market power — and billions of dollars in exclusive deals with web browsers — to illegally block rivals. Users have choices, and it’s easy to switch, he said. For example, Microsoft preselects its own search engine, Bing, on Windows PCs, yet most PC users switch to Google because it’s a better product, he said.
Web browsers offered by Apple and Mozilla, which makes Firefox, have long chosen a default search engine in exchange for a revenue-share that helps pay for innovations, Schmidtlein said.
“Google won these competitions on the merits,” he said. “There are lots of ways that users access the Web other than through default search engines, and people use them all the time.”
The monopolization trial is the first pitting the federal government against a U.S. technology company in more than two decades. The Justice Department and 52 attorneys general from states and U.S. territories allege Google illegally maintained its monopoly by paying billions to tech rivals, smartphone makers and wireless providers in exchange for being set as the preselected option or default on mobile phones and web browsers.
This first phase of the trial will assess whether Google has illegally monopolized the online search market. U.S. District Judge Amit Mehta, who is overseeing the trial, is expected to issue a decision next year on whether Google broke the law. If the Justice Department wins, it may seek remedies at the second phase of the trial to break off Alphabet’s search business from other products, like Android and Google Maps, which would mark the biggest forced breakup of a U.S. company since AT&T was dismantled in 1984.
Mehta asked Schmidtlein to respond to the Justice Department’s main allegation, that “what you say are competition for defaults are not really competition at all, that really only Google can be selected for the default.” A government lawyer earlier said Google controls 89% of the market.
Schmidtlein said Google’s size doesn’t always determine it will win, and that the judge shouldn’t “second guess” Apple and Mozilla’s decisions about how to design their browsers. In 2014, Mozilla switched to Yahoo as the default search engine and that “significantly harmed” Mozilla because users opted for other browsers that used Google, Schmidtlein said.
The revenue a browser gets from the search default is the “primary” way they make money, Schmidtlein said. That creates an incentive for companies to invest money to innovate and make better browsers or devices, he said.
Earlier, a Justice Department lawyer said Google pays more than $10 billion a year to maintain its position as the default search engine on web browsers and mobile devices, stifling competition.
“This case is about the future of the internet and whether Google’s search engine will ever face meaningful competition,” Kenneth Dintzer, a government lawyer, said in his opening statement. “The evidence will show they demanded default exclusivity to block rivals.”
‘Monopolist flexing’
Dintzer said Google had “weaponized” the use of default agreements to discourage rivals and exercised its market power by blocking Apple from pursuing options that were better than Google as the default browser on its computers, phones and other devices.
Apple first licensed Google for use in its Safari search engine in 2002, and there was no money and no exclusivity required, Dintzer said. Three years later, Google approached Apple to propose the revenue share agreement, he said.
In 2007, Apple wanted to offer a choice screen that would have allowed users to pick between Google and Yahoo, according to Dintzer. But Google responded via email, “No default placement, no revenue share,” he said. “This is a monopolist flexing,” Dintzer said, adding that Apple had no choice but to cave to Google.
By 2020, Google was paying between $4 billion and $7 billion to Apple for the default on Safari, Dintzer said.
Google pays more than $1 billion to wireless carriers to be the default on Android smartphones under agreements intended to protect Google from rivals, Dintzer said.
For example, Samsung Electronics and AT&T partnered with a start-up called Branch Metrics to create a product that would allow a user to search for information across apps already downloaded on the phone, the government lawyer said. Google felt this was a “threat,” Dintzer said, and subsequently changed its agreements with AT&T and Samsung to prohibit it.
Google contends that it competes with a number of other online sites, including TikTok and Meta Platforms’ Facebook. But Dintzer said those services don’t offer “one-stop shopping” for what’s on the internet.
Ad revenue surge
William Cavanaugh, a lawyer with Patterson Belknap Webb & Tyler who is representing the states in the case, told the judge that Google’s monopoly power led to a surge in advertising revenue for the company, which was able to raise prices for online ads.
Google derives “the vast majority of its revenue” from text ads that appear at the top of a search results page, Cavanaugh said. That includes advertisers known as “vertical search” rivals — companies including Yelp or Expedia Group that offer information on a single topic — who spend billions of dollars to ensure consumers can find them when they search online via Google, he said.
“They put billions and billions of dollars into advertising on general search engines” to “attract people to their website,” Cavanaugh said. If Google was really the same as other websites like Amazon, “they wouldn’t need to do that,” he said.
Expedia’s spending on Google marketing has surged over the years, creating “an incentive to go somewhere else, but there was nowhere else to go,” Cavanaugh said. Google’s share of the search business on mobile devices was 98%, with Microsoft’s Bing at just 2%, he said.
Google has faced a number of probes related to the same conduct overseas including three E.U. cases, in which the company has racked up more than €8 billion ($8.6 billion) in fines, for abuses of dominance on its mobile operating system, its search business and its display advertising operations.
Dintzer said the government’s first witness at the trial will be Hal Varian, Google’s chief economist.
Kent Walker, Google’s chief legal officer, attended opening statements, seated in the front row behind the company’s lawyers. Assistant Attorney General for Antitrust Jonathan Kanter also attended on behalf of the Justice Department.
The case is: U.S. v. Google, 20-cv-3010, U.S. District Court, District of Columbia.