WASHINGTON—The Justice Department’s (DOJ) prosecution of Google in Washington is headed toward an end with closing arguments on May 2 and 3—roughly three years since the DOJ brought the indictment and various state governments joined.
Attorneys sparred on May 3 in attempts to convince D.C. Judge Amit Mehta of whether Google held an illegal and monopolistic edge within the market for search ads.
DOJ prosecutor David Dahlquist presented Google as hiking prices to drive revenue even though they may see a decline in quality. Only a monopolist, he said, could still make money while making their product worse.
Google’s attorney, John Schmidtlein, argued the tech giant was constantly innovating to improve quality and compete with others like Meta or TikTok. Those groups, he said, were viable competitors that Google considered internally.
Judge Mehta questioned how comparable searches on social media were to those on engines like Google. In other words, did they provide a suitable substitute for advertisers looking for alternatives to Google?
Attorney Bill Cavanaugh, who represented states involved in the lawsuit, argued that even if other platforms like Bing served as substitutes, they didn’t provide the kind of volume that Google did.
Mr. Schmidtlein repeatedly said the DOJ hadn’t presented robust evidence, such as a regression analysis, but instead relied on anecdotal testimony from advertisers. Mr. Dahlquist, meanwhile, argued that the DOJ didn’t need to provide quantitative analysis. Moreover, he said, the evidence showed that Google conducted its own experiments whereby it increased prices by as much as 15 percent and was still able to maintain 50 percent of its revenue.
There wasn’t, Mr. Dahlquist suggested, a massive fleeing from the market that one might expect in a competitive setting.
Defining Markets
Much of the debate surrounded how to define the markets in question and whether Google faced any substantial market pressure in selling ads on its search engine. Mr. Dahlquist told Judge Mehta that advertisers kept choosing Google “because they have no viable alternatives.”
The case has been described as the biggest antitrust case since the DOJ’s landmark suit alleging that Microsoft monopolized web browser services.
Both Judge Mehta and Mr. Dahlquist pointed to the U.S. Microsoft precedent in suggesting that innovation alone didn’t prove that companies weren’t acting as monopolists. Mr. Dahlquist emphasized that the key question wasn’t about innovation but whether competition in a given market can constrain prices.
While price increases may occur in a market, Mr. Dahlquist said, competition should determine where the price falls.
In a twist of fate, Microsoft recently testified with criticism of Google in its ongoing lawsuit in D.C. District Court. CEO Satya Nadella has joined the DOJ in criticizing agreements Google secures with companies like Apple in order to promote their search engine.
He worried about Google’s dominance and said that as publishers and platforms become more aware of how their data is used to train AI systems, they may start to sign exclusive deals that would allow only Google to use their data, according to reports of his testimony.
Google has reportedly defended itself by claiming its actions were sound business decisions and that other search engines failed because of inferior quality.
During May 3 arguments, Mr. Schmidtlein framed Google’s prices as increasing alongside heightened quality. Mr. Dahlquist disputed that, arguing that Google engaged in a practice known as squashing in its auctions for advertisers in order to lower quality while raising its price.
The Charges
The DOJ has accused Google of violating the Sherman Act, which prohibits monopolization and attempts at doing so.
“Google monetizes this search monopoly in the markets for search advertising and general search text advertising, both of which Google has also monopolized for many years,” DOJ’s 2020 indictment reads. “Google uses consumer search queries and consumer information to sell advertising.”
It claimed that through “exclusionary agreements” with manufacturers and carriers, the company “has thus foreclosed competition for internet search.”
One of the main points of contention is that Google dominates the search engine market by getting companies to set Google as the default search engine on their devices. In return, Google shares a portion of its ad revenue with the company.
A University of Chicago professor revealed during the ongoing trial that Google shares with Apple 36 percent of its search engine revenue that it makes from the latter’s web browser Safari.
“I think the difficulty that the government faces here is that the facts in the case can reasonably be seen as compatible with Google’s theory: that a lot of consumers choose Google because it provides a good product,” Competitive Enterprise Institute General Counsel Dan Greenberg told The Epoch Times via email.
“The government repeatedly suggests that high Google use demonstrates that Google is up to something illicit, but Google’s story is that lots of people use it because it is better.”
The Stakes
According to The New York Times, Rebecca Haw Allensworth, a professor at Vanderbilt Law School, said: “This will be the most important decision and the most important antitrust trial of the 21st century.”
Judge Mehta is expected to issue a ruling down the middle that modifies some of Google’s activities while allowing others to remain in place.
“The judge has a great deal of discretion in deciding whether to apply statutes and case law that were produced in a very different time, for a very different kind of economy, based on a very different understanding of economics,” Mr. Greenberg said.
“Judge Mehta has an opportunity here to find that, ultimately, the application of antitrust law here just doesn’t make sense.”
Judge Mehta’s ruling could alter the landscape for search engine competition and curtail the competitive edge that one of the biggest tech companies in the world enjoys. It could also set a precedent for other tech giants facing similar legal challenges.
Google’s market cap is $1.7 trillion, and the company controls around 90.68 percent of the U.S. search engine market, while Microsoft-owned Bing claims only a 3.23 percent market share in the same segment.
The DOJ could request that he break up the business or impose restrictions on its behavior, the Times reported.
He must first determine if Google constitutes a monopoly in this space, as well as whether it broke the law through agreements to become the default search engine.
Rashi Varshney and Naveen Athrappully contributed to this report.
From The Epoch Times