Google on trial: Feds challenge deals that set your web search defaults

The US Department of Justice (DoJ) has used the first week of its much-anticipated competition case against Google to argue that the search ads giant violated antitrust law and stifled competition to maintain its market leadership.

The government complaint [PDF], initially filed in October 2020 and amended [PDF] the following year, contends that Google has "foreclosed competition for internet search" through a series of exclusionary contracts with makers of mobile phones, developers of web browsers, and telecommunication companies.

Through these contracts, Google Search becomes the default search engine on Android phones, on Apple iOS and macOS devices, and in rival browsers like Mozilla's Firefox. Google also made Google search the default service in its own Chrome web browser.

During opening arguments last week, Kenneth Dintzer, deputy director in the DOJ's civil division, said the case was about the future of the internet. He argued that Google's monopoly begins with deals that make its search engine the default.

"For a general search engine, by far the most effective means of distribution is to be the preset default general search engine for mobile and computer search access points," the government argued in its pre-trial brief [PDF]. "Even where users can change the default, they rarely do."

The ten-week bench trial – to be decided by Judge Amit Mehta rather than a jury – is separate from another government antitrust case against Google that's focused on ad auction infrastructure. That case, filed in January 2023, is set for trial in March 2024.

Meanwhile the Federal Trade Commission is pursuing an antitrust case [PDF] against Meta that was filed back in 2020 and later amended. Further competition-related investigations into Amazon and Apple are said to be ongoing.

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The search and ads case against Google can be compared to the US government's challenge of Microsoft back in the 1990s in terms of its significance to the tech industry. Many of the arguments made by the US government back then are echoed in the claims against Google.

"Google's use of contracts to maintain default status denies rival search engines access to critical distribution channels and, by extension, the data necessary to improve their products," the DoJ argues in its pre-trial brief.

Google, by ensuring it is the default search engine in mobile phones and web browsers, effectively gives itself an insurmountable head start in its race with rivals, the feds contend.

Microsoft, back in the day, made it hard for PC-makers to offer operating systems other than Windows, giving itself a head start that meant even IBM couldn’t make its rival OS/2 competitive.

Google maintains, as it has for the past decade, that competition is just a metaphorical click away. Or per its revision of that timeworn claim prior to trial, literally two clicks for Safari on macOS and four for Safari on iOS – or six per The New York Times.

The search ad biz argues that the government has improperly defined the relevant market by failing to consider all the competitors.

"The proper inclusion of strong competitors like Amazon, Expedia, Meta, and Yelp in the relevant markets demonstrates that Google faces substantial competitive constraints for both users and advertisers," the company argued in its pre-trial brief [PDF].

And Google insists that its search service is implemented as the default because it's the best option. The company cites testimony from Apple SVP of services Eddy Cue to that effect: "the reason we have always picked Google [for the Safari default] is because they are by far the best search engine available."

Apple, it's perhaps worth noting, has reason to be happy with the status quo. According to the DoJ's complaint, "In exchange for this privileged access to Apple’s massive consumer base, Google pays Apple billions of dollars in advertising revenue each year, with public estimates ranging around $8–12 billion." That’s two-to-three percent of Apple revenue.

Arguably the most noteworthy detail to emerge from the trial thus far is testimony from Jerry Dischler, VP for Google’s advertising products, that Google manipulates ad auctions prices by as much as five percent to hit revenue targets. It does so, apparently, by raising the reserve price (minimum spend) on ad auctions, often without disclosure to advertisers. These price hikes appear to involve cooperation from ostensibly separate product groups like Chrome.

As the case proceeds some disagreement about making trial exhibits available to the public have emerged, as many are sensitive Google business documents. The Justice Department wants more documents to be available; Google unsurprisingly would like its privacy to be respected.

Remedies remain obscure

If the government prevails, the remedies imposed could significantly alter the way Google does business. In the most severe outcome, Google could be forced to divest itself of Android or Chrome. Or Judge Mehta could impose a relatively simple penalty, like the disallowance of defaults, which could take the form of a non-manipulative choice screen to select browser and search engine.

If Google prevails, it will be business as usual for its search business, although the emergence of AI-driven search and the high computation costs of delivering such services will likely mean a refresh of web ad business models.

That could prompt Congress, which has been working on competition bills, to reach a cross-aisle political consensus and pass some rules that regulate Big Tech. But don't count on a display of such competence, civic commitment, and cooperation from US lawmakers.

In Europe, strong competition laws governing Big Tech look more likely thanks to gatekeeper constraints imposed by the EU Digital Markets Act and Digital Services Act, not to mention the privacy benefits that continue to accrue from the General Data Protection Regulation. ®