TRIAL UPDATE #6: In Big Shift This Week, No Closed Sessions & Less Redacted Transcripts As the DOJ Proves Google’s Monopoly Power in Search
October 6, 2023
We just wrapped week 4 of US vs Google and the good news is this historic trial taking on Big Tech monopoly power in search is finally opening up to the public and getting the media coverage it deserves.
This week concluded with eight witnesses including Microsoft’s CEO Satya Nadella, Samsung’s Patrick Chang, ex-Googler and search start up CEO Sridhar Ramaswamy, expert economist Micheal Whinston and several Apple executives providing crucial testimony that only made the DOJ’s case stronger against the $1.7 trillion company Google.
A big departure from the first few weeks of the trial, this week there were no closed sessions. And yesterday’s transcript had no redacted bits. This is likely due to the solid media coverage and public pressure last week blasting the secrecy of the trial with headlines that called it “unprecedented secrecy,” “veil of secrecy,” and a “black box.” In fact, on Wednesday Judge Mehta unsealed much of the closed-door testimony provided by two previous witnesses, Search company DuckDuckGo CEO Gabriel Weinberg and Apple executive John Giannandrea. In particular, Judge Mehta stated that the two witness es’ testimony regarding partnership discussions between DuckDuckGo and Apple and Microsoft and Apple, respectively, “get at the heart of the case” and are “central to [its] contentions,” and will be available with limited redactions to protect trade secrets, as well as internal financial numbers. One thing he would not unseal at this juncture, Judge Mehta said, were the terms of Google’s exclusivity deal with Apple, asserting that it might put Google at a competitive disadvantage, but he said he might change his decision on that if those terms end up being key to the decision in this case
The week kicked off Microsoft CEO Satya Nadella’s testimony holding no punches and saying. “it’s not the open Web, it’s the Google web,” you can read about that in our last update.
Then we heard from ex-Googler CEO Sridhar Ramaswamy. His search start-up Neeva tried to create a version of the internet that didn’t scam users. But they were unable to compete with Google’s powerful search default agreements with big tech companies. Ramaswamy testified: “Being the default is enormously powerful.Payments made to Apple, mobile carriers or browsers provide an incredibly strong incentive for the ecosystem to not do anything.”
Dr. Adam Juda, Google’s VP of Product Management took the stand next. One of the biggest points of contention in his testimony that lasted several hours on Tuesday and Wednesday was Juda’s refusal to agree that Google has the power to affect ad pricing directly. The DOJ then offered an internal document, authored by Juda’s Ads Quality team which read, “We directly affect pricing through tunings of our auction mechanisms.” Juda eventually admitted that it “could be possible” that Google can directly affect advertisers’ costs through “tuning,” or “adjusting the cost of different types of clicks and impressions.” In another document, a memo that Juda sent to his supervisor advocating for his own promotion, Juda referred to himself as a “[k]eeper of many skeletons within Ads.” One of those “skeletons” included his advocacy against a 2019 proposal entitled “Incognito++,” which would have increased privacy within Google Search to the level that would nearly match DuckDuckGo and collect “significantly less data from users.” In his successful argument against Incognito++, which was never adopted, Juda warned that that adoption would lose Google multiple billions of dollars in ad revenue. We also learned that Google raised their prices by 5% and didn’t tell their advertisers.
We then heard from the DOJ witness Patrick Chang, former Director of Samsung NEXT, which is an innovation and corporate venture capital firm within Samsung. From our friends at the TWIGA Newsletter:
One of the first and main companies that Chang recommended that Samsung NEXT invest in was Branch Metrics ("Branch"), "a service that allows apps to link and have the current within the app searched" on a mobile device. Chang's testimony served as a follow-on to testimony from Branch's co-founder, Alex Austin, who testified previously that Branch's integration into Samsung mobile devices was stamped out by Google's restrictive contracts with Samsung and the mobile carriers with which Samsung worked. Chang's testimony brought further evidence that these contracts had the effect of crushing the ambitions of innovative nascent competitors in search, including those like Branch with functionality that acted as a "complement to Google search." In other words, Google’s payments have effectively crushed would-be competitors that innovated beyond Google's abilities. In a chat between Chang and David Eun, Founder and former President of Samsung NEXT, the latter stated that "Google is clearly buying its way to squelch competitors." He continued, "Outside of a potential antitrust action, I don't see Samsung refusing these terms." Later, Chang and two other colleagues discussed whether the action by the DOJ might lead Google to be "less aggressive in strict interpretations of contracts." Chang responded, "Actually the COMPLETE opposite. Google just did a fuck you to Samsung," and ramped up their aggression.
Ryan Krueger, a Google Product Manager for Search Ads 360 was questioned over several hours, the States argued that Google had intentionally limited SA360 to make it harder for its customers to use competing services from Microsoft. The States offered evidence of multiple companies comparing Google and Bing's auction-time bidding and finding that "performance actually improv[ed]" when they moved to Bing. While Google said it had begun to implement compatibility with Microsoft’s offerings, the States pointed out that this didn’t start until after they filed their lawsuit.
Week 4 closed with testimony from expert economist Michael Whinston whose research focuses on industrial organizations and microeconomics, testified that general search, general search text advertising, and general search advertising are relevant antitrust product markets, and that Google possesses "substantial market power protected by barriers to entry in each." He emphasized that market power can be identified not only by high prices, but also by a degradation in quality. When Judge Amit Mehta asked him how that is measured, Whinston testified that if over time a monopolist does not improve its product quality, or if that quality degrades, that is equivalent to a price hike for antitrust analysis. So far in this trial, the DOJ has shown evidence that Google has done both: it has hiked up prices on its ads while degrading its search business.
That’s all for now. We’ll let you know of all significant developments in the trial as they happen. We’ll be there, watching, learning and rooting for justice.