US vs Google Closing Arguments: Top Moments from Day One

The lawyers representing the Department of Justice, the state of Colorado alongside 37 other states, and Google met again on Thursday in the US District Court in Washington, DC to present closing arguments in the first antitrust case against Google for monopolization of search and search advertising markets.

For two days, the US government and Google will reiterate their arguments before Judge Amit Mehta, who presided over the case trial between September and November of 2023. As Judge Mehta is expected to issue a ruling soon, the two days will also offer a window into the direction that the ruling may take.

Thursday was all about Google’s alleged anticompetitive practices in the search market, which have foreclosed competition and helped fortify its monopoly power, the DOJ and plaintiff states argue. At the end of the day, it was clear that Judge Mehta’s questions served to test the soundness of each party’s arguments. Although he was careful not to make direct judgments, the exchanges revealed the extent to which some arguments were likely to be more convincing than others.

Market Definition: “The average person would not say Google and Amazon are the same”

Defining the market over which Google holds monopoly power has been a contentious issue since the start of the case. But this time, Judge Mehta’s questions seemed aimed at dissecting the argument that Google’s direct competitors are not only search engines such as Bing, DuckDuckGo, or Yahoo, but also all other specialized search engines of the likes of Amazon, TripAdvisor, Yelp, or even Kayak.

Google contends that the “whole picture” of the search market should be seen on a “category” or “query-by-query” basis. By insisting on this approach, Google aims to counter the DOJ’s characterization of the company as a “one-stop shop” for internet users. This would also mean that Google’s position in the search market would shrink, for example, when it comes to commercial search queries — which would be captured by Amazon.

Judge Mehta questioned Google’s reasoning. “The average person would not say that Google or Amazon are the same […] People can go to Google and get answers for any questions they have,” he said. “How is it possible that Google is the same as other specialized search engines? We can generally say that 80% of searches are on Google, but we cannot say anything like that about other specialized search engines.”

Although Judge Mehta was careful in not conveying support for the DOJ’s proposed market definition, he was clearly not convinced by Google’s characterization of a “broader” search market where the Amazon Marketplace and other social media platforms can substitute Google — or any other general search engine, to that effect.

Monopoly Power: “Are There Not Barriers to Entry in Search?”

Defining a relevant market is key to establishing monopoly power and how it is exercised. Google argued that the DOJ hasn’t shown any evidence of such power. The DOJ, on the other hand, contends that Google has not suffered a loss of clients nor revenues despite having diminished the quality of its search engine and raised prices of search ads — this would be the evidence of monopoly power needed for the case.

Mehta challenged the DOJ on how to establish monopoly power based on Google’s lack of innovation in improving its search engine. “How do I draw a baseline… How much is ‘enough’? It seems to me it’s a hard road […] for me to conclude monopoly power from that record,” Mehta said. The DOJ’s lead lawyer Kenneth Dintzer replied that the court doesn’t have to define whether or not Google has innovated, as this would be an effect of monopoly power.

In another exchange, Judge Mehta challenged Google’s notion that there are no barriers to entry in search, even if in 20 years Google has only faced one significant competitor – Bing. “Or are you saying that DuckDuckGo is creating competitive pressure on Google?,” Mehta asked Google’s lawyer, John E. Schmidtlein. “Absolutely,” replied Schmidtlein. After a pause, he went on further to say that if a firm holds monopoly power, it would be “duty bound” to use such power to deliver to its shareholders.

But Judge Mehta noted that if Google ran an experiment and raised prices of search ads, and found it would not lose clients, this would be evidence of monopoly power — even if it’s not exercised. Schmidtlein made a sort of unintended acknowledgment of today’s reality: if this were the case, Google would need to do this for an “extended period of time.” If we continued to see no competitors substituting Google, then that would be evidence of monopoly power, he said.

Exclusionary Behavior, Defaults, and Scale: “Is There Real Competition to Become A Default Search Engine?”

In the afternoon, a good amount of the discussion centered around Google’s exclusive contracts that secured its place as the default search engine across devices and other browsers, for which Google pays billions of dollars a year — $20 billion to Apple alone in 2022, per new unsealed court documents. This was, perhaps, the most technical part of the hearing in terms of analyzing antitrust law.

Since the last similar antitrust case of the internet era is US v Microsoft in 1998, Judge Mehta referred to it many times to challenge Google’s notion that the billions of dollars it pays to maintain its position as a default search engine is a sign of competition, and that monopolists should be allowed to compete as “anybody else.”

Google reiterated that it is winning exclusive contracts because it has a good quality product. If said contracts affect competitors, “this doesn’t mean they have anticompetitive effects,” Schmidtlein said. For Google’s lawyer, US v Microsoft proved anticompetitive effects because Microsoft’s exclusive contracts with PC manufacturers hurt Netscape Navigator, a then-competitor of Internet Explorer, which already had a substantial presence in the PC market. For Google, the DOJ needs to find evidence other than Google’s contracts having the effect of foreclosing the market to competitors to prove exclusionary behavior.

Judge Mehta was explicit here and said he disagreed with Google’s take on this. “Why would the plaintiffs need to find something else than market foreclosure? […] If so much of the market is tied up, then this disincentivizes investing in challenging a monopolist, right? […] Wouldn’t the folks that wrote the Sherman Act be concerned that it would take billions of billions of dollars to dislodge Google [from being a default search engine]?”

Schmidtlein doubled down as well: “The Sherman Act protects competition, not competitors […] The Sherman Act can’t come and say ‘We’re going to elevate Bing and Yahoo, even if they are inferior products, to compete’ […] How is it pro-competitive to force Apple to pick an inferior search engine for its browser?” Judge Mehta replied: “Is there real competition in getting a slot for defaults? […] In 15 years only Microsoft has won one of such contracts.”

On the issue of quality, the counsel representing Colorado and other plaintiff states, William Cavanaugh, Jr., made a notable intervention. Cavanaugh Jr. challenged how Google could maintain its exclusive contracts due only to its product quality, when scale is critical to search quality on mobile and long-tail queries.

“There is no doubt that scale equals quality,” Cavanaugh Jr. continued. When a search engine already has scale, more data does not generate much more improvements, but it is critical for nascent competitors. But they are locked out of scale today. “Quality can’t be a pro-competitive effect for the market because it arises from scale, which in the case of Google, comes from exclusionary behavior,” he noted.

That seemed to have satisfied Judge Mehta’s search for answers on this issue, as he had no further questions on the matter.