Seven Ways Google’s Defense Undercut The Justice Department’s Search Antitrust Case

The Department of Justice’s antitrust case against Google wrapped up two weeks ago. The DOJ tried to paint a picture of a once-great monopolist that hinders innovation but controls online search through anti-competitive contracts. Google countered that it continues to improve the search experience for users and stimulates competition both in search and related markets.

Here are some key takeaways from Google’s defense:

1. Google’s Innovations are the Reason for its Continued Success

In a world where Google and search seem to be synonymous and Google has secured real estate in the dictionary, it’s hard to imagine a time where that was far from the case. In 1998, CNN crowned Yahoo! as king of search and for running laps around competitors.

Enter Google.

Google walked the court through its PageRank algorithm and other early innovations that put it on the map, such as Autocomplete, Universal Search, and Knowledge Graph. Several Google employees detailed continuous achievements within search, online advertising, AI, and privacy. This was meant to counter the DOJ’s position that Google no longer evolves and stifles innovation in search.

Google’s Senior Vice President of Search Prabhakar Raghavan testified that research and development at Google is on an upward trajectory, and that it would be “concerning if Google wasn’t spending as much…the space is exploding with players who all ‘have a special secret sauce’… it would be foolish to not put our best foot forward.”

And to rebut allegations that Google’s default position has led to a decline in privacy protection, Google Senior VP Jen Fitzpatrick walked through Google’s privacy enhancing technology, including federated learning — a Google invention that relates to machine-learning training on local devices where personally identifiable information stays on a device but learnings are transmitted (i.e: keyboards can learn auto-complete based on individual input but personal data isn’t shared).

2. Android and Chrome are Related Markets That Stimulate Search

Google’s browser and Android search default deals are at the heart of this case. As part of its defense, Google highlighted how closely tied search is to smartphone and browser markets, and how its investments have grown search as a whole.

Google invested in building search-related products, such as web browsers (Chrome), operating systems (Android), and AI language models (BERT). These innovations have all been made open-source, free, and are used by Google’s search rivals.

• Chrome: Google’s Chrome browser is currently the most popular browser in the United States and Windows PCs, where Microsoft’s Edge browser is set as the default. Google’s CEO Sundar Pichai testified that Chrome’s inception was motivated by a stagnation in browsers. A few browsers that rely on Chromium include Microsoft Edge, Brave, and Opera. Google made Chrome free because “improving the state of browsers would increase online activity, search usage, and Google’s search.”
• Android: Google designed Android to be a free “world-class operating system” that is customizable to meet the needs of global users and enables manufacturers to build affordable smartphones that compete with Apple. Before Android, roughly 600 million people had mobile phones. Pichai testified that Google “helped bring 100s of millions of people to computing which wouldn’t have been possible with another model.” This in turn increased usage of the internet and search.

3. Scale Isn’t Everything and is Increasingly Inconsequential to Search Quality

Google addressed the DOJ’s scale arguments head on by calling an information retrieval expert who conducted a quantitative analysis on the effects of scale.

Virginia Tech Professor Edward Fox conducted a data reduction experiment, where Google’s algorithms were re-trained with smaller volumes of data and used to generate search results. The search results generated by the original version and the retrained version were evaluated and their search quality was compared. Professor Fox found that over 97% of the quality gap between Google and Bing is attributed to non-scale factors.

DOJ felt compelled to have its own expert, Professor Douglas Oard, respond to Fox’s experiment during the rebuttal stage of the trial — a sign that Fox’s argument had an impact.

Google’s defense also argued that the role of user data in search grows increasingly unimportant in artificial intelligence, meaning scale will fall further to the wayside when it comes to search quality. Google’s Pandu Nayak stated that Google relies on its machine learning innovations to advance search quality and these tools rely on the open web rather than user click-query data.

4. Google Wins Default Deals on the Merits and They are Pro-Competitive

Google rebutted the idea that defaults at face value are anti-competitive by highlighting the fact that virtually every browser in the United States uses a default search engine and that selecting a strong search engine is key to browser design and competition.

Browser Deals

Google argued that browsers choose it to be the default because it has the best search product. Mozilla CEO Mitchell Baker testified that when Firefox switched its default to Yahoo! she couldn’t find the answers she was looking for and would “switch to Google and find what I wanted. That happened so many times that I even gave up. I couldn’t even use the experience shipped out as the default.”

Mozilla and other independent browsers that rely on revenue share agreements with search engines, like Google, may be the real victims in this case. One month before the DOJ filed their complaint, they met with Mozilla who warned them that this case would “significantly harm” small independent browsers and that Mozilla’s viability would be on the line.

Android Deals

Pichai testified that Google’s revenue share agreements (RSAs) with phone manufacturers and carriers contain provisions aimed at further incentivizing the maintenance of regular letter/security upgrades, to ensure Android devices effectively compete with Apple.

Motorola executive Eric Christensen testified that no carrier ever complained to Motorola about pre-loading Google products on devices or suggested pre-loads other than Google. He also testified that no other search engines or browsers approached Motorola to pre-install their products. In Christiansen’s view, RSAs are in the best interest of Motorola’s business/end customers and payments from Google are important to Motorola’s manufacturing business.

The other type of Android deal discussed in this case, the Mobile Application Distribution Agreement (MADA), does not prevent OEMs and carriers from pre-loading any apps made by Motorola or any other 3rd party. Google highlighted the amount of competition Android faces from Apple, with the US smartphone market essentially being Android v. Apple. Android users expect Google services out of the box and Android partners want to avoid “bloatware” by pre-loading too many apps which leads to fragmentation issues. In order to effectively compete with Apple, Android devices need to be a streamlined product. Without strong Android investments from Google, competition would erode. Both MADAs and RSAs help fund the Android ecosystem.

5. Google Pays A Lot For Defaults, Which Reflects Intensity of Search Competition

The amount of money that Google pays in revenue share agreements to be the default browser, or receive exclusive pre-installation status on devices has received a lot of scrutiny. Pichai was asked directly, “Why does Google pay so much money for the default?” His response was that Google views these agreements as “enhanced promotions” and wants to make it easy and seamless for users to use Google.

Google economics expert Dr. Mark Israel testified that Google paying a significant portion of its ad revenue to be Apple’s browser default is contrary to monopoly power because a true monopolist would adopt a “take it or leave it” approach, rather than meet rising bids from competitors.

We also heard that Microsoft continues to aggressively compete to secure distribution from Apple, by upping their offer and with promises to close the quality gap between Bing and Google.

6. Google’s Largest Search Competitors Aren’t Other Search Engines

The DOJ argued that Google only competes with other general search engines like Bing and Yahoo, but Google asserted that it faces stiff competition from other services like Facebook, Amazon, and TikTok. Testimony from Meta executives also affirmed they intensely compete with Google. Meta’s 2021 SEC Form 10-K listed Google as a key competitor.

Only 20% of Google queries are monetized and eligible for ad placement. We heard that Google fiercely competes with Meta, Amazon, and TikTok for ad spend. Retailers like Amazon are good at “closing the loop” meaning users are able to carry out the entire purchase journey on their site. The Amazon US ads business is nearly the size of Google’s text ads business, and is growing twice as fast as Google.

Social media platforms are also significant competitors that are advantaged because they track “latent intent.” Young people spend hours each day on platforms and emit intent signals. This coupled with “volumes of data are put together very efficiently to glean insights on user purchase.”

7. DOJ’s Relevant Antitrust Market Definitions Rest On Thin Ice

Google disputed the antitrust market definitions the DOJ set forth: general search services, search advertising, and general search text advertising.

General Search Services Market: Did the “One Stop Shop” Flop?

Google’s expert in industrial organization and economics, Dr. Mark Israel testified that, “user-side competition is not all or nothing. Even if a user uses a general search engine for an initial query about clothes, if all subsequent queries go to a specialized vertical provider like Amazon, that is substantial competition.” We also heard from Richard Holden, Google’s Vice President who oversaw travel products, that there is increased competition for queries due to companies “cherry picking the most interesting verticals” like travel and shopping, and in order for Google to stay relevant it needed to “do a lot of work to have competitive offerings for users.”

Advertising Markets: Marketing Funnel or Downward Spiral?

It was easy to lose count of how many times the marketing funnel came up over the course of the trial. The DOJ distinguished between text ads and other forms of ads like display and social media as being separate relevant antitrust markets. The basis of this distinction rested on the marketing funnel and how text ads sit at the bottom of the funnel whereas the others rest at the top.

Google argued that in the world of digital advertising, advertisers increasingly use all ad types to target the entire funnel and that budgets constantly shift between social media and search ad campaigns in order to maximize their return on ad spend.

The evidentiary phase of the trial has concluded but this case is far from over. Both sides will need to file their findings of fact, conclusions of law, post-trial briefs, and reply briefs early next year.

Closing arguments are scheduled to begin on May 1, but after Judge Mehta thanked both sides for their professionalism throughout the trial, he gave us an inkling as to how he may rule… “I have no no idea what I’m going to do.”

Judge Mehta certainly has his work cut out for him as he spends the next few months pouring over thousands of documents and hours of additional video depositions that have been designated as evidence.

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