Washington, D.C. — Halfway into a landmark ten-week trial taking on Google’s $1.7 trillion search monopoly, the Department of Justice Antitrust Division called its last witness, closing weeks of rigorous testimony from leading economists and executives from Google, Apple, Microsoft, Samsung and others.

On the occasion of the conclusion of the government’s affirmative case, the American Economic Liberties Project released the following statement:

“If the government’s one job was to prove that Google’s defaults blocked competition and illegally maintained its monopoly, we’ve heard a very compelling case,” said Lee Hepner, Legal Counsel at the American Economic Liberties Project. “Google has benefited from access to immense amounts of search data, and it has exploited its power to hike prices for advertisers and create barriers to new rivals. As we prepare for the next phase of the trial, it bears understanding that Google doesn’t need to disprove any of that and may instead seek to rationalize those harms.”

Key Testimony:

The DOJ’s case, presented over the first half of the trial, elicited key testimony that Google’s default search agreements excluded rivals and maintained Google’s monopoly power in relevant markets. Here are highlights of what we heard:

• From the outset, we heard testimony from Google Chief Economist Hal Varian, who championed the “power of defaults” at Google over the past quarter century. Varian was confronted with evidence that Google’s own executives considered “general search” to be a relevant market for assessing Google’s monopoly power, and that Google itself calculated its share of general search on a monthly basis.
• The DOJ followed Varian’s testimony with Caltech Professor Antonio Rangel, a behavioral economist. Rangel offered a thorough explanation of the power of defaults, and why internet users are unlikely to switch away from them. Rangel also testified to the power of Google’s brand, which has become synonymous with internet search by virtue of its monopoly power, and how that has created an additional barrier to users who may desire an alternative to Google’s search engine.

Even in 2007, Google understood the potential harm to users and legal vulnerabilities of its default search agreements. In a 2007 email from Google’s Sundar Pichai, before he became CEO, Pichai expressed concern about Google’s default search agreement with Apple, writing, “I don’t think it is a good user experience, nor are the optics good for us to be the only provider in the browser.”

• Regarding the Google-Apple default agreement, Microsoft CEO Satya Nadella testified, “Apple and Google have a fantastic oligopolistic arrangement.” He added, “It’s not the open web, it’s the Google web,” and “the entire notion that people have choice is complete bogus.” Although the actual value of Google’s agreement with Apple has been redacted from court documents, according to analysts at Bernstein, Google most recently paid Apple between $18B and $20B per year in a revenue-sharing agreement to maintain default search status on the iPhone.
• “The power of the defaults is very significant,” said Michael Whinston, an economist and professor at the Massachusetts Institute of Technology, said as the last DOJ witness took the stand on Monday, Oct 16. Whinston, who was hired by the Justice Department to conduct an empirical analysis for the case, testified on October 6, “When you see Google paying billions and billions and billions, there has to be a reason. That’s the first thing that, as an economist, slaps me in the face,” he said. Former Google employee Christopher Barton admitted several times that getting exclusive default status from mobile carriers and manufacturers was important, underscoring Google’s preferred strategy of barring access to rivals rather than competing on the merits.

The court heard from one potential rival. Neeva, a search engine startup, tried to create a version of the internet that wasn’t built on top of private personal information.

• Ex-Google executive and Neeva founder Sridhar Ramaswamy testified that Google abused its market share to create an illegal monopoly and block innovative competitors from succeeding. A leader and pioneer in AI-integrated search, Neeva’s story illustrated how Google’s default search agreements create insurmountable barriers to entry, thereby harming competition and depriving consumers of choice in the relevant market for general search engines.
• The court also heard from Arjan Dijk, Chief Marketing Officer at Bookings.com, who referred to Google as a “benevolent dictatorship.” Before joining Booking.com, Dijk worked at Google for 11 years, persuading companies to use its ads platforms. “If you want to be found on the web, there is one door that is controlled by Google and we need to use that door… We have to use Google,” he said. At the trial we saw an old memo from Google executive Michael Rozak that said, “Search advertising is one of the world’s greatest business models ever created … there are certainly illicit businesses (cigarettes or drugs) that could rival these economics.”

For its part, Google attempted to poke holes in the government’s relevant markets, suggesting that Google in fact competes with a broader range of market stakeholders than those in the government’s more narrowly-defined markets.

• The court heard testimony from Joshua Lowcock, Global Chief Media Officer at media agency Universal McCann, who disputed Google’s argument that search ads have viable competition. Lowcock testified that search ads are “mandatory” for his clients and irreplaceable by other types of digital ad buys, even if the price of ads increases by as much as 5%. DOJ established through the testimony of Google VP of Ads Jerry Dischler that Google has raised its ad auction prices by 5%, and that Google could raise prices as much as 10% to boost revenue. Google’s ability to raise prices on advertisers without losing market share is an indicator of its monopoly power in the government’s proposed relevant market.

As the trial proceeds, the State AG’s will present their affirmative case against Google, followed by Google’s rebuttal case. Google may seek to prove that there are procompetitive effects of its anti-competitive conduct that outweigh its anti-competitive conduct.

Trial Secrecy: An overarching theme of the trial has been its secrecy. Google pushed hard to keep information about this trial private and that’s made it difficult, almost impossible, for reporters. This week, the New York Times, with the support of Bloomberg, the Wall Street Journal, the NY Post, and Law 360 filed a motion with Judge Mehta seeking enhanced access to trial exhibits and a procedure for news media to argue for public access in advance of any future sealed proceedings. In opening arguments, DOJ lead counsel Kenneth Dintzer argued Google ignored an order to preserve documents and told its staff to delete search history: “They turned history off so they can rewrite it.” Judge Mehta has yet to rule on the DOJ’s corresponding motion for sanctions.

Economic Liberties Poll Showed 60% of Americans Think Google Has Too Much Power: During the trial, a poll conducted by American Economic Liberties Project found that 60% of Americans across party lines believe big tech giants like Google “have too much power in the market, which puts competitors at a disadvantage and hurts both smaller businesses and consumers.” The poll also found that a growing number of people have an appetite for an alternative search competitor. When asked whether they would try a new search engine theoretically introduced by Apple, 58% of respondents indicated they would be likely to do so.

Conclusion: 

“The evidence laid out by the DOJ in this trial, despite the secrecy sought by Google, shows how Google’s dominance is constraining user choice and competition from other innovators. At the turn of the century, the government’s successful antitrust case against Microsoft paved the way for a new era of technological innovation,” added Hepner. “A quarter century later, we have a new crop of gatekeepers. The real potential of this trial is to shake loose a new generation of innovators who actually have to compete for user preference. That’s particularly important in the context of artificial intelligence, a nascent technology that carries either great promise or serious harm.”

Visit USvGoogle.org for more.

Learn more about Economic Liberties here.

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The American Economic Liberties Project works to ensure America’s system of commerce is structured to advance, rather than undermine, economic liberty, fair commerce, and a secure, inclusive democracy. Economic Liberties believes true economic liberty means entrepreneurs and businesses large and small succeed on the merits of their ideas and hard work; commerce empowers consumers, workers, farmers, and engineers instead of subjecting them to discrimination and abuse from financiers and monopolists; foreign trade arrangements support domestic security and democracy; and wealth is broadly distributed to support equitable political power.