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'Monopoly Maintenance'

In Opening Statements, DOJ, Google Spar Over Google's Default Arrangements

Lawyers for DOJ and 48 states, in opening statements Tuesday in the government's antitrust bench trial against Google in U.S. District Court in the District of Columbia, argued that the tech company exercised monopoly power through ad sales tools and through deals requiring its search engine to be the default on Android phones and in some browsers. “Monopoly maintenance starts with defaults,” said Kenneth Dintzer, DOJ senior trial counsel.

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Countered Google's attorney, John Schmidtlein of Williams & Connolly, Google’s default arrangements increase competition among makers of web browsers and allow Android to serve as an important competitor to Apple’s iPhone. DOJ’s claims “seek to distort search competition all in the hopes that forcing people to use inferior products will somehow be better for competition in the long run,” he said.

The opening statements kicked off a trial brewing since DOJ’s initial antitrust complaint in 2020, brought by then-Attorney General William Barr. The bench trial is expected to last 10 weeks, presided over by Judge Amit Mehta. While DOJ’s case is focused on deals that make Google the default search engine for devices and browsers, the states’ argument targets what they say is anticompetitive behavior around the Google-owned tool Search Ads 360 (SA 360), which allows companies to manage and place ad campaigns in search engines.

By limiting the SA 360 features that could be used by advertisers seeking to place ads on Microsoft-owned search engine Bing, Google has imposed higher costs on advertisers and harmed its rivals, said William Cavanaugh of Patterson Belknap, representing the states. Many other arguments by the states, including that Google’s search results were biased, were thrown out by Mehta in a ruling last month.

Google’s arrangements with phone manufacturers and web browser companies such as Mozilla were intended to protect the company’s share of the search engine market against competition, argued Dintzer Tuesday. DOJ’s first witness in the case was Google Chief Economist Hal Varian, who was involved in the creation of several memos and slide decks in the early 2000s arguing that making Google the default browser was a key to discouraging competition from Bing. “Users do not always make a deliberate choice of search engine,” read one document entered into evidence. In another, Varian said the best way to defend against Bing was to increase the cost to users of switching software and devices.

Dintzer also queried Varian about protocols at the company to avoid using language that could be used against Google in future antitrust proceedings. Google took steps to keep sensitive documents private by moving discussions to chat software, where it was later deleted, and frequently invoking legal privilege, Cavanaugh said.

The value to Google of being the default browser is shown by the company’s “checkbook,” with the company paying more than $10 billion per year for those privileges, Dintzer said. He also said the company took action to discourage companies from any offerings that impinged on Google’s default status, such as adding terms to agreements with Apple barring the company from expanding a feature that offered alternative search suggestions. “This is a monopolist flexing,” Dintzer said. “Hoarding defaults allows Google to block rivals from improving the quality of search results.”

Google is the default search engine on many devices and browser because it is the search engine consumers prefer, said Schmidtlein. “Consumers use Google because it delivers value to them, not because they are forced to,” he said. Apple and Mozilla held open competitions for their default browser, and Google provided the best results, he said. The courts cannot intervene if Google is simply winning the competition in the marketplace on the merits, Schmidtlein told Mehta in response to a question from the bench. “That is anathema to U.S. antitrust law.” Apple “is making their product in a fashion their users prefer,” he said.

Defaults don’t foreclose competition, Schmidtlein said. Google is the most used search engine for users of Windows PCs, though those ship with Bing as the default, Schmidtlein pointed out. Google’s default agreements also don’t prevent browsers or Android phones from using other search engines, and competitors such as Bing and Duck Duck Go also pay phone manufacturers and browsers to be presented as alternative choices when users seek to change their defaults, he said.

The default agreements also create revenue that allows Android to serve as the main viable competitor for Apple’s iPhone, available at a wider variety of price points, Schmidtlein said. He made similar arguments for browser defaults, arguing that they spur competition among browsers. “The evidence will show that defaults don’t foreclose consumers from accessing rival products,” Schmidtlein said.

Both sets of opening arguments also focused on Google’s competitors. Bing and Google are two of only a few search engines that provide information in response to almost any query, called general search engines, Dintzer said. That distinguishes them from the subject-specific search functions provided by specialized websites such as Amazon, TikTok, Facebook or Expedia. That view of the market “does not comport with economic realities,” said Schmidtlein, who argued that Google faces competitive pressure from subject-specific retailers that serve as destinations for consumers searching for specific products. Google has never had a share of digital advertising over 50% and has seen that share decrease in recent years, Schmidtlein said.

The DOJ argument is legally weak and will be difficult to prove as no actions blocked consumer choice in search,” said CCIA President Matt Schruers. The DOJ case “comes at a time when older search technology is being challenged in the market by AI, ChatGPT, voice assistants and a host of specialized vertical search services." If the DOJ "is successful in this case, it will be undermining smartphone products, undercutting their ability to make business decisions, and harming consumer privacy,” tweeted NetChoice.