Google engaged in a monopolistic feedback loop to maintain search dominance, DOJ alleges in first day of trial
Jonathan Kanter, Assistant Attorney General for the Antitrust Division at the Department of Justice, arrives at federal court on September 12, 2023 in Washington, DC.
Kevin Dietsch | Getty Images
Google pays billions of dollars to make sure its search engine runs by default on internet browsers and phones, feeding a cycle that pumps its own monopoly profits while making it harder for rivals to gain significant market share in search, the government alleged in opening arguments Tuesday at the biggest tech antitrust trial in decades.
Lawyers for the Department of Justice and a coalition of state attorneys general led by Colorado faced Google on Tuesday, as the 10-week trial kicked off in Washington, D.C. District Court. Day one of the trial set the stage for how the government and Google would argue their opposing views of how the company has maintained a large slice of the search market for years.
The government’s case is that Google has kept its share of the general search market by creating strong barriers to entry and a feedback loop that sustained its dominance.
Google says it’s simply been the preferred choice of consumers. That popularity, the company says, is why browser and phone makers have chosen Google as their default search engine through revenue sharing agreements.
The opening statements also previewed who each side will lean on to help make their arguments. In addition to economic experts that will speak to Google’s level of dominance and behavior, Google said the court would hear from several of its own executives and those from other businesses.
The court will hear from the company’s CEO Sundar Pichai, who the DOJ’s lawyer said Google intends to call. It will also hear from Apple’s Senior Vice President of Services Eddy Cue and Mozilla CEO Mitchell Baker, Google’s lawyer said. Several other Google executives, including those who oversee advertising services and search products, are also expected to be witnesses, the lawyer added.
Additionally, the court will hear from Sridhar Ramaswamy, a former senior advertising executive for Google who later co-founded a competitor search engine, Neeva, the DOJ said. The privacy-focused search engine founded in 2019 announced in May that it would shut down the consumer product and instead focus on artificial intelligence use cases. Neeva agreed that month to be acquired by Snowflake.
Following opening statements, the DOJ lawyer questioned its first witness, as it begins what’s known as its “case-in-chief.” The judge has allotted about four weeks for the DOJ to present its case, after which the coalition of state AGs led by Colorado will do so, followed by Google.
Hal Varian, chief economist at Google Inc., arrives to federal court in Washington, DC, US, on Tuesday, Sept. 12, 2023.
Ting Shen | Bloomberg | Getty Images
The DOJ’s lawyer walked Google’s Chief Economist Hal Varian through a series of documents, beginning with a 2003 memo he wrote called “Thoughts on Google v Microsoft.” At the time he wrote the memo, Varian said he was reporting to a boss who reported directly to the CEO.
In the memo, Varian had raised antitrust concerns with Google leaders, urging them to “be careful about what we say in both public and private” on the subject. Varian wrote, “we should also consider entry barriers, switching costs and intellectual property when prioritizing products.” During his testimony, Varian said the best entry barrier is a superior product.
DOJ and states’ arguments
“This case is about the future of the internet and whether Google’s search engine will ever face meaningful competition,” the DOJ’s lawyer, Kenneth Dintzer, told the court in his opening statements.
Dintzer alleged Google has more than 89% of the market for general search, citing an economic expert witness. General search is used by consumers as an “onramp to the internet,” Ditzner said, making it distinct from more specialized search engines. Unlike with a specialized search service, users seek out a general search engine when they don’t know the best website for an answer to their question.
“There are no substitutes for general search,” Ditzner said.
Google maintains its monopoly through a feedback loop that serves to strengthen its hold on the market while making it harder for rivals to enter. Google pays for defaults, which allow it to get more search queries. More queries means more data, which can be used to improve search quality, helping Google make more money. That gives Google more resources to pay for default status.
Since the Federal Trade Commission declined to bring an antitrust case against Google nearly 10 years ago, Patterson Belknap Webb & Tyler’s William Cavanaugh, who represents the states, said “Google has doubled down on its efforts to use defaults in its distribution agreements.”
Google itself recognizes the immense value of defaults. The company pays more than $10 billion per year to maintain default status across browsers and devices, the DOJ alleged. And the company once called the idea of losing its default placement with Apple “a code red situation,” Ditzner said.
At the same time, Google sought to “limit Apple’s ability to design products that compete with Google,” given it has the resources and foundation to build a powerful rival, Ditzner said.
In 2013, Ditzner told the court, Apple adopted its own suggestions in its browser when users begin a search. The feature “concerned” Google, Joan Braddi vice president of product partnerships at Google, later said in an email Ditzner referenced.
In turn, Google added to the revenue sharing agreement with Apple a stipulation that it could not “expand farther than what they were doing in Sept 2016 (as we did not wish for them to bleed off traffic),” Braddi wrote. “Also, they can only offer a ‘Siri’ suggestion exclusively for quality and not because they want to drive traffic to Siri.”
While Google argued browser and device makers freely enter agreements to make its search engine the default, the DOJ said Google has the upper hand in getting device manufacturers to sign its agreements. For example, manufacturers consider the Play Store a “must-have app” for Android phones, Ditzner said, but the only way to get it is by signing the exclusivity agreements.
The evidence will show device manufacturers and carriers accepted the exclusivity and revenuesharing agreements “because that was the only option,” Ditzner said.
In 2020, Samsung and AT&T were interested in partnering with Branch Metrics, which had a search engine that could answer questions by searching apps on a phone, the DOJ said. But Google told AT&T and Branch they couldn’t do the deal. Google’s lawyer later said there’s no evidence the company told carriers they couldn’t use Branch. Google’s lawyer added that Branch’s CEO would testify that it doesnn’t compete with Google.
The states also touched on their claims that Google used what was supposed to be a neutral ad buying tool to thwart rival Microsoft. Google will say it had no duty to deal with Microsoft, Cavanaugh said, but that doesn’t apply here because “they have chosen to deal.”
Finally, the government said the court would hear more about Google’s alleged document destruction, saying that it taught employees to hide evidence through its “Communicate With Care” program. Google told employees to include legal on “any written communication” about revenue share agreements, the government alleged. The DOJ also shared a 2021 message from Pichai in which he asked if he and a colleague could “change the setting of this group to history off,” before deleting the request.
Google’s argument
Kent Walker, President of Global Affairs and Chief legal officer of Alphabet Inc., arrives at federal court on September 12, 2023 in Washington, DC.
Kevin Dietsch | Getty Images
Google said it faces fierce competition and that the popularity of its search engine is due to its continued innovation, rather than efforts to thwart rivals.
In a world where search queries are increasingly entered across many different apps and websites, Google’s lawyer, Williams & Connolly’s John Schmidtlein said, “that competition has never been more real.”
Comparing the case to the DOJ’s 1990s allegations against Microsoft is misguided, Schmidtlein said. While the government accused Microsoft in that case of forcing PC manufacturers to preload its own browser over one that was preferred by consumers, here Google competed for default status, Schmidtlein said.
To the government, Microsoft is the supposed “victim” in this case, Schmidtlein said. But Microsoft failed to advance its position in search because it did not invest or innovate in it for a long time, Schmidtlein argued, focusing instead on its Windows desktop product.
Google also had no duty to deal with Microsoft, a rival, on its preferred terms with its search ad tool. Schmidtlein said Google had fulfilled four out of five of Microsoft’s feature requests for the tool. The one outstanding feature, real-time bidding for ads, took years for Google to build for its own product, and a version compatible with Microsoft’s tools is now being tested, he said.
Google also contended that advertisers are motivated by return on their investment and are very willing to switch platforms if they think they’ll get a better deal elsewhere.
Browser and device makers actually like having default features for many reasons, Google’s lawyer argued. For browsers, search engines are a reason for consumers to use their interface, and accepting a revenue sharing agreement for a default search provider is a good way for browsers to make money, given they are usually free to consumers.
But it’s important browsers pick the right search default, Schmidtlein said, as Mozilla learned when it switched its default from Google to Yahoo in 2014. By 2017, Mozilla terminated what was supposed to be a five-year deal, with its Chief Business and Legal Officer Denelle Dixon saying in a statement that the company “exercised our contractual right to terminate our agreement with Yahoo! based on a number of factors including doing what’s best for our brand, our effort to provide quality web search, and the broader content experience for our users,” TechCrunch reported at the time.
Similarly, Apple has touted that Google is the default search engine on its browser.
“Apple repeatedly chose Google as the default because Apple believed it was the best experience for its users,” Schmidtlein said.
On the phone manufacturing side, Google argued that its revenue sharing agreements have the effect of “enhancing competition between Apple and Android, causing those two mobile platforms to invest, to develop better devices.”
WATCH: DOJ takes on Google in antitrust lawsuit over Google Search
United Launch Alliance Atlas V rocket carrying the first two demonstration satellites for Amazon’s Project Kuiper broadband internet constellation stands ready for launch on pad 41 at Cape Canaveral Space Force Station on October 5, 2023 in Cape Canaveral, Florida, United States.
Paul Hennessey | Anadolu Agency | Getty Images
Amazon delayed the launch of its Kuiper internet satellites due to poor weather conditions on Wednesday night.
A United Launch Alliance rocket carrying 27 Kuiper satellites was set to lift off from a launchpad in Cape Canaveral, Florida, but ULA said it couldn’t continue countdown operations as “stubborn cumulus clouds” and heavy winds pushed the launch outside its planned window, according to a livestream.
“Weather is observed and forecast NO GO for liftoff within the remaining launch window at Cape Canaveral this evening,” ULA said. The company said it will provide a new launch date at a later point.
Six years ago Amazon unveiled its plans to build a constellation of internet satellites in low Earth orbit, a region of space that’s within 1,200 miles of Earth’s surface. The company aims to sell high-speed, low-latency internet to consumers, corporations and governments, offering connections through square-shaped terminals. Commercial service is expected to come online later this year.
Amazon is racing to compete with SpaceX’s Starlink, the dominant player in the market, with 8,000 satellites already up in the air. SpaceX CEO Elon Musk now has a central role in the White House as one of President Donald Trump’s top advisors, overseeing the Department of Government Efficiency, or DOGE. Since Musk took on the role, Starlink’s footprint has increased within the federal government.
The clock is ticking for Amazon to meet a deadline set by the Federal Communications Commission, which requires the company to have half of its total constellation, or 1,618 satellites, up in the air by July 2026.
Once it completes its first launch, Amazon expects to ramp up its production, processing and deployment rates. It’s begun prepping satellites for its next mission, which will also hitch a ride on one of ULA’s Atlas V rockets.
Alphabet CEO Sundar Pichai meets with Polish Prime Minister Donald Tusk in Warsaw, Poland, on February 13, 2025.
Klaudia Radecka | Nurphoto | Getty Images
Google has reversed a policy forbidding employees from discussing its antitrust woes following a settlement with workers.
The company sent a notice to U.S. employees last week saying it rescinded “the rule requesting that workers refrain from commenting internally or externally about the on-going antitrust lawsuit filed against Google by the U.S. Department of Justice,” according to correspondence viewed by CNBC.
Google settled with the Alphabet Workers Union, which represents company employees and contractors, according to the U.S. National Labor Relations Board, or NLRB. The settlement and policy reversal mark a major victory for Google staffers, who have seen increased censorship on subjects such as politics, litigation and defense contracts by the search giant since 2019.
The U.S. Department of Justice filed an antitrust lawsuit against Google in 2020, alleging that the company has kept its share of the general search market by creating strong barriers to entry and a feedback loop that sustained its dominance.
Google said it “will not announce or maintain overbroad rules or policies that restrict your right to comment, internally or externally, about whether and/or how the on-going antitrust lawsuit filed against Google by the U.S. Department of Justice may impact your terms and conditions of employment,” according to last week’s notice.
The policy change was first reported by The New York Times.
The reversal comes as Google and the DOJ prepare to return to the courtroom for their scheduled remedies trial on April 21. The DOJ has said it is considering structural remedies, including breaking up Google’s Chrome web browser, which it argues gives Google an unfair advantage in the search market.
A U.S. District Court judge ruled in August that Google illegally held a monopoly in the search market. Google said it would appeal the decision. The DOJ doubled down on its calls for a breakup in a March filing.
Following the August ruling, Kent Walker, Google’s president of global affairs, sent a companywide email directing employees to “refrain from commenting on this case, both internally and externally.”
Shortly after, the Alphabet Workers Union filed an unfair labor practice charge against Google with the NLRB. The union alleged that Walker’s message was an “overly broad directive” and said that a breakup could impact workers’ roles. The NLRB in March ruled that Google must allow workers to speak on such topics.
Google’s settlement states that the National Labor Relations Act gives employees the right to form, join or assist a union. It notes that Google is not rescinding its prior clarification that states employees may not speak on behalf of Google on this matter without approval from the company. The settlement also adds that Google will not interfere with, restrain or coerce workers in the exercise of their rights.
Despite the settlement, spokesperson Courtenay Mencini said Google did not agree with the NLRB’s ruling.
“To avoid lengthy litigation, we agreed to remind employees that they have the right to talk about their employment, as they’ve always been free to and regularly do,” Mencini said in a statement to CNBC.
The settlement by Google comes at a “crucial moment” ahead of the remedies trial, the Alphabet Worker’s Union said Monday.
“We think the potential remedies from this trial could have impact on our wages, working conditions and terms of employment,” said Stephen McMurtry, communications chair of the Alphabet Workers Union-CWA, told CNBC.
Apple CEO Tim Cook inspects the new iPhone 16 during an Apple special event at Apple headquarters on September 09, 2024 in Cupertino, California.
Justin Sullivan | Getty Images
Apple shares skyrocketed 15% on Wednesday after President Donald Trump announced a 90-day pause on his administration’s “reciprocal tariffs,” which would have affected the company’s production locations in Vietnam, India, and Thailand.
The rally added over $400 billion to Apple’s market cap, which now stands just under $3 trillion. It was Apple’s best day since January 1998, when late founder Steve Jobs was the interim CEO and three years before the company unveiled the first iPod. At the time, Apple’s market cap was close to $3 billion.
Apple has been the most prominent name to get whacked by Trump’s tariffs. Before Wednesday, it was on its worst four-day trading stretch since 2000. Investors worried about Apple’s outlook because the company still makes the majority of its revenue from selling physical devices, which need to be imported into the U.S.
Most of Apple’s iPhones and other hardware products are still made in China, which was not exempted from tariffs on Wednesday. In fact, Trump increased tariffs on China to 125% on Wednesday, up from 54%.
China issued an 84% tariff on U.S. goods this week, raising the possibility that Apple could get caught up in a trade war and lose ground in China, its third-largest market by sales.
Apple has worked to diversify its supply chain to lessen reliance on China in recent years.
On Wednesday, tariffs on Vietnam were reduced from 46% to 10%, and tariffs on India were cut 26% to 10%, which raises the possibility that Apple will be able to serve a large percentage of its U.S. customers from factories outside of China with lower tariffs.
Stocks skyrocketed across the board on Wednesday after Trump announced the tariff pause. The Nasdaq Composite climbed over 12%, its second-best day ever.
Apple hasn’t commented publicly on Trump’s tariffs, but CEO Tim Cook will likely address the topic on an earnings call on May 1.
-
Sports2 years ago‘Storybook stuff’: Inside the night Bryce Harper sent the Phillies to the World Series
-
Sports1 year agoStory injured on diving stop, exits Red Sox game
-
Sports1 year agoGame 1 of WS least-watched in recorded history
-
Sports2 years agoMLB Rank 2023: Ranking baseball’s top 100 players
-
Sports4 years ago
Team Europe easily wins 4th straight Laver Cup
-
Environment2 years agoJapan and South Korea have a lot at stake in a free and open South China Sea
-
Environment2 years agoGame-changing Lectric XPedition launched as affordable electric cargo bike
-
Business3 years agoBank of England’s extraordinary response to government policy is almost unthinkable | Ed Conway