Google stacks its legal team with former DOJ employees as it faces antitrust cases
People walk near the Google offices on July 04, 2022 in New York City.
John Smith | View Press | Getty Images
Google‘s parent company Alphabet has stacked its legal team with former Department of Justice employees as it fights two separate antitrust lawsuits from the agency, public profiles show.
Former DOJ employees make up both its in-house team and members of outside counsel firms it employs. The company has hired three former DOJ officials into regulatory roles since May 2022, and one before that in 2021, according to public information including social media profiles. Google also uses four different outside counsel firms loaded with nearly 20 former DOJ officials, many of whom worked in the Antitrust Division at various times.
Such hiring to its internal regulatory team is a reflection of the intense scrutiny Google is facing from governments around the world. It can be a signal that a company anticipates dealing with regulatory challenges in years to come, even if it doesn’t know exactly what form it’ll take yet, according to two former government officials.
“When companies find themselves under intense scrutiny from regulatory authorities, antitrust law or otherwise, they make moves like this,” said Bill Kovacic, a former Federal Trade Commission chair who now teaches antitrust law at George Washington University.
Google now faces two antitrust challenges from the DOJ, both to its search and ad tech businesses, and additional challenges from a slew of state attorneys general. Regulators around the world, including in Europe and Australia, have also presented policy and enforcement hurdles.
Google’s hiring is not surprising for a company under such a microscope, according to Doug Melamed, a former acting assistant attorney general at the DOJ Antitrust Division who’s now a scholar-in-residence at Stanford Law School.
The company had already been fighting one complex antitrust case that would likely require a team of 10 to 15 lawyers alone, according to Melamed, when the Department brought its second antitrust challenge against the company earlier this year.
“They don’t have the capacity to handle a case like that just sitting idle,” Melamed said. “They’ve got to now think about well, what outside lawyers are available that have to have the time and expertise to handle this case? And then, do I have the in-house capability to support it and supervise it?”
The added threat of new legislation targeting Google’s business, and that of other tech firms, looms. In the near term, it appears that a massive lobbying campaign by the industry has successfully delayed the most disruptive reforms. But the possibility of renewed energy around that legislation still hangs over the industry, and a company like Google “can take nothing for granted now,” Kovacic said, adding that’s likely a reason for the company to build out its regulatory forces.
“New entrants and new innovations are driving competition and delivering value for America’s consumers, publishers, and merchants,” a Google spokesperson said in a statement for this story. “We’re proud of our services and we look forward to making our case in court.”
Revolving door hiring
Alphabet now has at least five former DOJ staffers on its legal team, including Google’s director of competition Kevin Yingling, who’s been with the company for more than a decade and worked as a trial attorney at the Department of Justice from 2000 to 2005, according to his LinkedIn.
The company hired Kate Smith as counsel for Alphabet’s regulatory response, investigations and strategy unit in February 2021, according to LinkedIn. Smith was a trial attorney in the DOJ’s Civil Frauds division from September 2015 until January 2021.
In May 2022, according to LinkedIn, Alphabet hired Mike Kass, a former trial attorney in the DOJ’s Civil Fraud section, as its regulatory and litigation counsel for products.
A month later, the company hired Seema Mittal Roper as counsel on its regulatory response team. Mittal Roper worked as an assistant U.S. attorney for the DOJ in Maryland from 2013 to 2018, according to LinkedIn.
Most recently, the company hired Jack Mellyn as strategy counsel on its regulatory team. Mellyn was previously an attorney advisor and then acting assistant chief in the DOJ’s competition policy and advocacy section, according to a previously available social media profile.
It’s not clear which employees are working on the specific matters before the DOJ and Kass’ role appears focused outside of antitrust. It’s likely these employees never worked on Google-related matters they’re dealing with now during their time in government, given their dates and areas of previous employment, as well as federal ethics rules that bar certain conflicts.
But experts say this kind of hiring, which is common among businesses faced with regulatory scrutiny, can still be beneficial to a company because of the unique insight, touch or credibility that an ex-government attorney might hold when it comes to their former colleagues.
“There are lots of lawyers out there. But only alumni of an office really understand how that office works,” said Jeff Hauser, executive director of the Revolving Door Project, which tracks the business ties of executive branch officials. “That means its strengths and weaknesses, that means the tendencies of people in that office. And they can therefore give much more concrete intelligence and better-informed advice to their client.”
Hauser said this may mean the lawyers could advise a client or employer to flood the agency with information rather than comply with a certain document request, knowing that the enforcers don’t have the capacity to deal with it. Or, they might suggest strategies to approach a deposition, knowing the government staffer conducting it.
“A lawyer who’s had experience in the government doesn’t bring information about the specific matters of the companies involved, but rather brings a general perspective about how the agency is approaching these kinds of problems,” Melamed said.
Enforcement agencies also often have to trust whether they believe the target of an investigation has complied with its requests. Hauser said the agencies may be more inclined to take the word of their former colleagues, compared to a more removed attorney.
A recent event shows what can happen when that trust is broken. The DOJ last month accused Google of destroying chat messages it should have kept under a litigation hold related to the investigation. The DOJ made the accusation in a legal filing after Epic Games raised the concern in its own antitrust litigation against Google.
A Google spokesperson said in a statement at the time of the DOJ’s filing that they “strongly refute the DOJ’s claims.”
Google also works with outside counsel firms on its antitrust cases, including Axinn, Freshfields, Ropes & Gray and Wilson Sonsini, based on reports, statements and legal filings. Those firms collectively have around 20 former DOJ employees on their staff, many of them working in antitrust. Though these attorneys may not all work on Google matters, the firms themselves often tout the benefit of former government officials in bringing a helpful perspective to clients.
For example, Freshfields says on its website that its “deep bench of former DOJ and FTC trial attorneys gives us unique insight into how the enforcement agencies approach enforcement in general and litigation in particular.”
Kovacic said agency experience is something companies look for in hiring outside firms.
“In deciding who to retain, what law firm to retain or what economic consultancy to retain, they would place a lot of weight on how many former government officials are in those firms,” Kovacic said.
Freshfields attorneys Julie Elmer and Eric Mahr have led Google’s defense against an advertising technology monopolization case brought by a group of states led by Texas, The New York Times reported in 2021. And Bloomberg Law reported this year that Mahr will also lead its defense in the ad tech case brought by the DOJ.
Mahr was director of litigation for the DOJ Antitrust Division from 2015 to 2017, according to the Freshfields site, and Elmer worked as a trial attorney in the Antitrust Division from 2015 to 2020, according to her LinkedIn profile.
Revolving door hiring goes both ways between the public and private sectors, with government officials often working for previous employers or clients who become relevant in their work. For example, DOJ antitrust chief Jonathan Kanter previously worked for clients including Microsoft and Yelp which have complained of Google’s allegedly anticompetitive behavior.
Ultimately, however, Kanter was cleared to work on cases and investigations involving Google, despite the company’s suggestion that his past work should cast doubt on his ability to be fair in such matters.
The DOJ and Wilson Sonsini declined to comment. The three other firms mentioned did not immediately provide a comment for this story.
Limits for former government employees
There are limits on what former government officials can work on under federal ethics and Bar rules.
For example, the DOJ’s website says that former employees can’t represent someone before the government on an issue involving parties they “personally and substantially” worked on during their time in government. For two years after leaving the Department, a former employee also cannot represent anyone before the government in a matter involving parties they know “was pending under his official responsibility for the last year of government service and in which the U.S. is a party or has a substantial interest.”
And for one year after leaving the agency, former senior employees cannot represent someone before the agency “with the intent to influence” the DOJ on a pending matter or one in which it has an interest.
Personal and substantial work on a matter within government doesn’t depend on the length of time devoted to it, but the role a person played in potentially influencing the outcome or direction, according to Virginia Canter, the chief ethics counsel at Citizens for Responsibility and Ethics in Washington (CREW) who previously advised government officials on ethics at agencies including the Securities and Exchange Commission and the Treasury Department.
But even if a former government official can’t work on a specific matter they were privy to during their earlier employment, their insight might still be useful to a company.
“You can read about it, but when you’re actually part of dealing with these cases, you know that there are certain factors that are going to either act as mitigating or … that are going to more favorably incline you to bring a case,” Canter said. “It’s just your general knowledge and experience.”
When companies hire former government officials, they may also have the idea that those employees will be viewed more favorably by the current regime.
“Maybe there’s just this general impression that they’re trying to surround themselves with what will be perceived by their former colleagues as the good guys,” Canter hypothesized.
Some might argue that experience could be beneficial to the government in some cases, Canter noted. A former government employee might have a deeper understanding of the importance of compliance or providing certain information to officials, for example, having seen up close what could be at stake if they don’t.
Hauser said it’s unlikely DOJ leadership, especially Kanter, who has made a point to bring more aggressive cases in the tech space and overall, would be overly swayed to view things Google’s way in ongoing matters. But, he said, the impact of former DOJ staff employed by Google could be more influential in an emerging issue, where there’s an opportunity to leave a first impression on senior leadership about it.
The degree of this kind of influence may be relatively small on the level of an individual case, Hauser said, but for a company under such a high degree of regulatory scrutiny, it could add up.
“You’re talking about billions and billions of dollars of potential implications for Google’s net worth,” Hauser said. “Relatively small changes in the scope of the investigation, the timeframe of the investigation, can be very big, even if they don’t go to the overall question of will there be any lawsuits by the Justice Department against Google.”
WATCH: How US antitrust law works, and what it means for Big Tech
A view of Google Headquarters in Mountain View, California, United States on March 23, 2024.
Tayfun Coskun | Anadolu | Getty Images
Advertising is so back.
After a brutal 2022, when brands reeled in spending to cope with inflation, and a 2023 defined by layoffs and cost cuts, the top digital advertising companies have started growing again at a healthy clip.
Meta, Snap and Google all reported first-quarter results this week, with revenue growth that exceeded analysts estimates and at rates not seen in at least two years. Their financials were primarily driven by improvements across their ad businesses.
The companies entered earnings season in a favorable position in that their numbers would be comparable to historically weak periods. But investors and analysts were cautious in their expectations, given the political and economic instability in various markets across the globe and the ongoing challenges posed by high consumer prices.
Meta, which was the first in the group to report results, put some fears to rest on Wednesday, showing a 27% jump in first-quarter revenue to $36.5 billion. For the Facebook parent, it was the strongest rate of expansion since 2021.
“When Meta was in its dark days two years ago, the company knew what they had to do to get back on track,” analysts at Bernstein wrote in a note after the earnings report. “To their credit, Meta defended the core.”
That dark era was defined by the combination of macroeconomic challenges and Apple’s iOS privacy change, which made it harder for social media companies to target users with ads. Meta lost two-thirds of its value in 2022 and was forced to dramatically cut headcount.
A smartphone is displaying Facebook with the Meta icon visible in the background.
Jonathan Raa | Nurphoto | Getty Images
Meta responded by rebuilding its ad system, with the help of hefty investments in artificial intelligence, so it could deliver value to brands despite the roadblock imposed by Apple. The stock almost tripled in 2023.
While the company’s first-quarter results beat estimates across the board, the shares tanked on Thursday after CEO Mark Zuckerberg focused his post-earnings commentary on the many ways Meta is spending money in areas outside of advertising, notably the metaverse.
“We’ve historically seen a lot of volatility in our stock during this phase of our product playbook where we’re investing in scaling a new product but aren’t yet monetizing it,” Zuckerberg said on the earnings call late Wednesday.
The Bernstein analysts, who recommend buying the shares, said Meta’s ad revenues were led by strength in online commerce, gaming, entertainment and media, and that China-based ad demand “remained strong.” Meta has benefited from a surge in spending from Chinese discount retailers like Temu and Shein.
“Without sounding overly religious, you either believe in Zuck or you don’t, and we do,” the analysts wrote.
‘Incrementally positive’
Alphabet followed on Thursday, reporting ad revenue for the first quarter of $61.66 billion, up 13% from the year prior, with YouTube ad revenue jumping 21% to $8.09 billion. The company as a whole grew 15%, a rate last seen in 2022, and the stock shot up 10% on Friday, the sharpest rally since 2015.
During the quarterly call with investors, Alphabet finance chief Ruth Porat said the company is “very pleased” with the momentum of its ad businesses.
Analysts at Citi wrote in a note on Friday that the broader advertising environment is “clearly strengthening,” pointing to accelerating growth within Google Search and YouTube.
“We emerge from Q1 results incrementally positive on shares of Alphabet,” the analysts wrote, maintaining their buy recommendation.
Snap shares rocketed 28% on Friday after the company reported a 21% increase in revenue to $1.19 billion, the strongest growth in two years. In each of Snap’s past six quarters, sales either grew in single digits or declined.
The company said it’s seeing accelerating demand for its ad platform and benefiting from an improved operating environment, according to its investor letter.
Deutsche Bank analysts wrote in a report on Friday that Snap delivered a “much-needed” beat, and that its ad stack is back on track. The analysts, who have a buy rating on the stock, said investors appear “most encouraged by the ad platform investments, which are showing increasing promise.”
Despite the rally, Snap shares are still down 14% for the year.
Investors will get a clearer picture of the digital ad market next week, with Pinterest reporting on Tuesday alongside Amazon, which has emerged as a giant in online ads. Reddit will follow on May 7, reporting earnings for the first time since the social media company’s initial public offering in March.
Technology
Snap shares rocket 28% after company reports unexpected profit, better-than-expected revenue
A view of the atmosphere during the Snap Partner Summit 2023 at Barker Hangar on April 19, 2023 in Santa Monica, California.
Joe Scarnici | Getty Images Entertainment | Getty Images
Snap shares surged 28% on Friday after the company surprised Wall Street by showing a profit and reported sales and user numbers that exceeded analysts’ estimates.
The stock climbed $3.15 to close at $14.55, its biggest percentage gain since 2022. Even after the rally, the stock is down 14% for the year due to a 31% plunge in February.
Revenue in the first quarter increased 21% to $1.19 billion from $989 million a year earlier, topping analysts’ estimates for sales of $1.12 billion, according to LSEG.
The company reported adjusted earnings per share of 3 cents, while analysts were expecting a 5-cent loss. Adjusted EBITDA (earnings before interest, taxes, depreciation and amortization) was $46 million, compared to analysts’ expectations for a loss of $68 million.
Snap said adjusted EBITDA “exceeded our expectations” and was primarily driven by operating expense discipline, as well as accelerating revenue growth.
Snap has been working to rebuild its advertising business after the digital ad market stumbled in 2022. Its investments are starting to pay off. The company said in its investor letter that revenue growth was primarily driven by improvements in the advertising platform, as well as demand for its direct-response advertising solutions.
“I think more broadly, we saw a much more robust brand environment, which played out in all of our regions in Q1,” CFO Derek Andersen said on the earnings call.
User growth was also better than expected. Snap reported 422 million daily active users (DAUs) in the first quarter, up 10% year over year and topping the average analyst estimate of 420 million, according to StreetAccount.
In February, Snap announced it would lay off 10% of its global workforce, or around 500 employees. The company said Thursday that headcount and personnel costs will “grow modestly” through the rest of the year.
Advertising revenue came in at $1.11 billion in the first quarter. Snap’s “Other Revenue” category, which is primarily driven by Snapchat+ subscribers, reached $87 million, an increase of 194% year over year. Snap reported more than 9 million Snapchat+ subscribers for the period.
Though Snap’s growth was its fastest since March 2022, it still fell behind that of Meta, which reported 27% growth in its better-than-expected first-quarter results on Wednesday. Meta shares plunged anyway after the company issued a light forecast and spooked investors with talk of its long-term investments.
For the second quarter, Snap expects to report revenue between $1.23 billion and $1.26 billion, up from the $1.22 billion expected by analysts, according to StreetAccount.
WATCH: Watch CNBC’s full interview with Snap CEO Evan Spiegel
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