What to Expect from Closing Arguments in the DOJ’s Search Case Against Google
Has DOJ proven that default deals are all that matters in search success?
Closing arguments in the Department of Justice’s antitrust case against Google are taking place later this week, wrapping up last fall’s 10-week trial. Arguments will span across two days, starting on May 2nd.
Time will be primarily split between the Department of Justice and Google, with the Colorado Attorney General being allotted time towards the end to wrap up separate state claims against Google regarding the SA 360 product. Day one will cover Plaintiffs’ antitrust claims surrounding the market for general search, and Day two will address the market for search advertising.
If you want a deeper dive into what to expect from closing arguments, the Department of Justice, State Attorney Generals, and Google have submitted their post-trial briefs which have been made publicly available with redactions. I attended most of the trial in person and compiled a witness tracker that summarizes key points that were made for the over 50 witnesses that testified.
Throughout the presentation of evidence, several major themes and questions emerged which both sides will have a final opportunity to shed light on.
Who Does Google Really Compete With?
Market definitions are a critical element in establishing an antitrust claim — but even if the government’s proposed definitions are accepted, that is only the first hurdle it must cross.
Market 1: General Search Engines
Plaintiffs’ first alleged market are general search engines that they describe as “one-stop shops.” Characteristics of this broad classification of search engines are the “ten blue links” that appear in response to queries, their ability to be the “out-of-the-box” search default search engine on a browser. and the fact they can answer any type of commercial query.
However, Google contends that consumer online search is not confined to general search engines and that the Plaintiffs’ narrow market doesn’t reflect the reality of how a consumer searches for information online. Google faces competition in shopping queries from Amazon and local queries from Yelp. In contrast, competition from fellow “one-stop shop” Bing is negligible.
“Google’s own internal analyses and product development — in particular, Google’s development of vertical search experiences and Google’s response to the rise of social media apps — confirm that SVPs and social media channels serve as strong competitive constraints on Google Search. Google developed vertical search experiences in response to competition from SVPs successfully “cherry-picking” categories of queries from general search engines like Google, causing a decline in Google search queries in certain important commercial verticals”
Markets 2 & 3: Search Advertising and Text Ads
Plaintiffs also carved out relevant antitrust markets for search advertising and text ads that rely on the marketing funnel to distinguish them from other forms of advertising such as display ads. The Department of Justice describes search ads as “the only channel that can be targeted to reach a consumer precisely when a consumer expresses interest in a product or service, referred to as a moment of ‘intent.’”
Google poked holes in the Department of Justice’s over-reliance on the funnel and highlighted the fact that digital advertising allows advertisers to shift their spend across different ad types in order to maximize their return on investment.
Advertisers’ decisions at best may be influenced by general concepts from the marketing funnel, but in the rapidly evolving landscape of digital ads, return on investment is the deciding factor that drives decision making. Even the Department of Justice’s expert on digital marketing, Wilfred Amaldoss, conceded that ad types can run across all levels of the funnel.
There were also a number of advertisers who testified that they were willing to shift spend in and out of the Department of Justice’s proposed market in order to maximize their ad spend and some stated that they were “agnostic” when it came to varying advertising channels.
Another problem with the Plaintiffs’ proposed search advertising market is that they exclude the kinds of digital advertising that have a high degree of audience overlap but include those with less overlap.
Google’s economics expert, Dr. Israel, testified that empirical data shows that consumers frequently visit a Meta platform, Amazon, or other websites during the same web session in which they search on Google but it is much rarer for them to visit Google and another general search engine in the same session:
“Proper consideration of the relevant markets would fully account for the unbridled growth of Google’s closest competitors for advertisers’ dollars, including digital advertising behemoths Meta, Amazon, and TikTok“
Is Google A Lazy Monopolist Or Has It Continued to Innovate And Improve Search?
Plaintiffs allege that Google maintains a monopoly and its conduct has therefore “reduced its incentive to innovate, invest, and improve.” The crux of their argument is that Google settles for being “good enough” because it has insulated itself from competition.
However, Google hinged much of its defense on dispelling the notion that it has grown complacent and walked the court through the tremendous growth of general search engine output over the last twenty-five years as well as its continued pursuit of improvements to its search engine that “push its quality to new heights year after year”. Even Microsoft’s CEO Satya Nadella testified that Google is “competing every day to improve search” and “on search, I think the competition is pretty intense.”
Contrary to the Plaintiffs’ claims that search quality has decreased over the relevant period, Google continues to set measurable goals in improving, referred to as an IS score. It has made breakthrough innovations in artificial intelligence as well as gleaning improved insights from search quality engineers and human raters.
Plaintiffs also failed to establish that Google raised search ad prices. Google and its competitors adjust search ad prices to catch up to quality improvements in order to share in the value of those improvements. An increase in price that corresponds with an increase in quality is reflective of competition in digital advertising and the need for firms to restore equilibrium so they can continue to make investments and innovations.
Are Google’s Search Agreements Anticompetitive Or Par For The Course?
Fewer things during this trial drew more oohs and aahs than the amount of money that is paid by Google to secure default deals on browsers. We learned that Google pays Apple 36% of its search revenue from Safari, which is worth roughly eighteen billion dollars. Plaintiffs also repeatedly characterized Google’s browser default search agreements with Apple, Mozilla, and others as “exclusive” dealing arrangements that serve as a barrier to entry for rivals.
But Google rebutted these claims by noting that the agreements allow the browser developer to promote search rivals on the same browser, and Apple and Mozilla have in fact done so time and time again.
Mozilla entered into promotional deals with Microsoft, Yahoo, and DuckDuckGo — and Google’s agreement with Apple does not impact Apple’s ability to preinstall another search application or browser that defaults to a rival search engine on Apple devices. Google’s agreement with Mozilla also does not hinder a users’ ability to access a rival search engine.
Actual user behavior contradicts plaintiffs’ assertion that browser default agreements are “de facto” exclusive. Instead of simply looking at the popularity of Google search on browsers where it is the default, Google’s success where it is not the default is compelling evidence that users can and do switch to search engines they prefer regardless of the default.
So what is the value of the default and why does Google pay so much? Google CEO, Sundhar Pichai, said it best calling the agreements “enhanced promotions” and a seamless way for users to access Google:
…the dollar amounts that Google pays to its partners reflect competition against other search engines who also offer payments to be the default, but as importantly, these payments reflect that Apple and Android devices have proven to be extraordinarily popular with consumers and widely used by them to search online, and that Google’s search advertising technologies have proven to be incredibly valuable to advertisers. The billions that Google pays each year to search partners is a textbook example of a thriving competitive marketplace, where search and search advertising quality and output have continually improved over the very time period where Plaintiffs try in vain to find antitrust violations.
Google acknowledges that search defaults are powerful — but that search quality matters more. In order for the Department of Jusice to win, they have to successfully convince the judge that defaults are all that matters in search. That’s a tall order.
At the close of the evidentiary phase of the trial, Judge Mehta said he had “no idea” how he would rule in this landmark case. In the time since then, all sides have condensed millions of pages of evidence into concise briefs in addition to the more substantive findings of facts and conclusions of law that were submitted to the court.
Following closing arguments, it is unclear how long Judge Mehta will need to deliberate before handing down a ruling. Either side will appeal a loss — and if Google loses, we would likely see a lengthy remedies process.
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