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By Davey Alba and Leah Nylen
The US Department of Justice reiterated its argument that Google has broken antitrust laws through exclusive, multi-billion-dollar deals to maintain a dominant position in the market for online search and related advertising.
In closing arguments for a landmark competition case, the government presented evidence that Google has paid Apple Inc., Samsung Electronics Co. and others billions over decades for prime placement on smartphones and web browsers. This default position has allowed Google, a unit of Alphabet Inc., to build up the most-used search engine in the world, and fueled more than $300 billion in annual revenue largely generated by search ads, the government alleged, urging a judge to find the behavior illegal.
“Google uses its hold on the industry” and keeps rivals out, even Apple, Justice Department lawyer Kenneth Dintzer said on Thursday in a federal court in Washington. Those competitors aren’t able to scale the way Google does and don’t have the incentives to invest in the search-engine market, he added. “The fact that they may be happy cashing Google’s checks, doesn’t tell us anything about Google’s conduct.”
The two-day closing arguments come six months after testimony ended last November. The case is the first antitrust trial pitting the federal government against a US technology company in more than two decades. US District Judge Amit Mehta, who is overseeing the case, is expected to issue a decision later this year on whether Google broke the law. If the Justice Department wins, it may demand the separation of Alphabet’s search business from other products, like Android and Chrome, which would mark the biggest forced breakup of a US company since AT&T was dismantled in 1984.
Throughout the 10-week trial last fall, Google argued that it has cornered more than 90 per cent of the global market for search because it has the best product and that people choose to use it over rivals such as Microsoft Corp.’s Bing.
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“Google winning contracts because it has a better product is not a harm to the competitive process,” said John Schmidtlein, Google’s lead litigator.
President Joe Biden’s administration has taken on the Big Tech industry and made promoting competition in commerce central to its economic policy. Apple, Amazon.com Inc. and Meta Platforms Inc. also face federal and state lawsuits for monopolistic behavior. As the first one to come to trial, after more than a decade in the making, Google’s case is likely to set a precedent for the rest of the industry.
Apple first agreed to use Google in the Safari browser in 2002 for free. But the companies later decided to share revenue made from search advertising. By May 2021, that translated to Google paying Apple more than $1 billion a month for its default status, documents revealed at trial showed. That quickly ballooned and became a significant contributor to Apple’s bottom line. In 2020, Google’s payments to Apple constituted 17.5 per cent of the iPhone maker’s operating income, for example, and by 2022, Google was paying Apple $20 billion for its default status, antitrust enforcers said.
Being the default search engine gives Google access to more users generating more queries than its rivals, allowing it to improve its algorithms and results and making it even harder for competitors to attract users, Justice Department lawyers said.
“If you don’t have access to distribution, you don’t have access to scale,” Dintzer said on Thursday. “This is the source of Google’s magic.”
Google has argued that the payments help support the Android ecosystem, which competes against Apple’s iPhone. And rivals like Microsoft have long paid for their products to be pre-installed and set as the default on computers.
Microsoft, which faced its own infamous antitrust trial against the US government more than 20 years ago, has repeatedly tried to entice Apple away from its relationship with Google. The company offered to share 90 per cent of its advertising revenue with Apple to make Bing the default in Safari, court documents showed. But Apple didn’t bite, determining there was no price the Windows maker could offer that would get them to change, according to testimony from company executives during the trial.
On Thursday, Mehta asked whether it would be even possible for a new competitor to ever dislodge Google from the Apple contract. The rival would need billions of dollars to create a new search engine and billions more to ensure that Apple wouldn’t lose the money it gets from Google, he said.
“I can’t conceive of a world in which a new competitor could do that if Microsoft couldn’t do it,” Mehta said.
Schmidtlein said the contracts emerged from a fair competition. “The antitrust laws are not designed to ensure competitive markets. They are designed to ensure a competitive process,” he said.
The specter of artificial intelligence, which has the potential to change Google’s core search business, also loomed in the background of closing arguments in court.
Google’s lawyer sought to portray the government’s case as backward-looking, since search is undergoing a major transformation with the “massive investment going into AI.”
Google has been integrating generative AI technology, which can create new text, images or even video based on user prompts, into its products and services, from Gmail to Google Docs. But it has been more deliberate about introducing the technology directly into its flagship search engine, which it risks being cannibalized by AI chatbots, such as OpenAI’s ChatGPT, that can answer general questions in a more conversational tone, rather than providing a list of links to other websites. Google claims that the rapid growth of AI has put it on the defensive in search from rivals like Microsoft, which has invested roughly $13 billion in OpenAI and is infusing its Bing search engine with ChatGPT functionality.
But Mehta dismissed such challenges as irrelevant to the case at hand. “No one’s saying that a purely AI-driven search engine couldn’t succeed tomorrow,” Mehta said. “What I’m focused on is today.”
If government lawyers succeed in proving that Google’s agreements violate antitrust laws, the case will move to a second stage aimed at imposing remedies to alleviate any harm caused by the company’s conduct. The judge could rule to break up the company or require Google to share the data its searches generate with rivals to help them improve their search engines. Or, he could absolve the company completely. Closing arguments will continue on Friday.
