Google Antitrust Trial to Set “Future of the Internet,” DOJ Says

From a Wall Street Journal story by Miles Kruppa and Jan Wolfe headlined “Google Antitrust Trial to Set ‘Future of the Internet’ DOJ Says”:

Google paid huge sums to cement its dominance in internet search, shut out competitors and stifle innovation, the Justice Department alleged Tuesday in kicking off the biggest antitrust trial in more than two decades.

“This case is about the future of the internet and whether Google will ever face meaningful competition,” said Justice Department lawyer Kenneth Dintzer during his opening statement.

The ruling in the nonjury trial, scheduled to go through mid-November, will come from U.S. District Judge Amit Mehta, who could order a breakup or changes to the way Google, a unit of Alphabet promotes its search engine.

The courtroom packed with tech-industry and Justice Department attorneys provided a forum for both sides to debate the tactics Google has used to bring people to its search engine, a product that has become synonymous with internet search in general.

Google’s opening statement emphasized that consumers widely prefer its search engine. The company’s lead trial attorney, John Schmidtlein, said the overwhelming majority of Microsoft computer software users preferred Google, even though the company’s search engine Bing came preloaded on its Edge browser.

Any judgment barring Google from competing for contracts with Apple and others would be “anathema” to U.S. antitrust law, Schmidtlein said.

The Justice Department has alleged Google’s agreements with companies including Apple and Samsung to make its search engine the default option on web browsers and mobile phones illegally helped maintain a monopoly in that market. Google has said it competes fairly for the contracts, and users can easily switch away from defaults.

Dintzer described those agreements as defensive walls used to deny opportunities to competitors and stifle innovation. The contracts, he said, provided Google the benefit of additional advertising revenue and search data, creating a feedback loop that cemented its dominance and allowed it to keep paying large sums to ensure that its search engine gets favorable treatment.

Dintzer said Google paid Apple and other partners more than $10 billion a year, giving the government’s estimate of a figure analysts and investors seek to closely monitor. Much of the evidence presented on Tuesday, including internal estimates of market share and precise revenue figures, were redacted for the courtroom.

The Justice Department called as its first witness Google’s chief economist Hal Varian, who has been with the company more than two decades. Dintzer questioned Varian about studies Google conducted showing the benefits of default settings, along with internal data about search market share.

The trial is expected to include testimony from Alphabet CEO Sundar Pichai, Microsoft CEO Satya Nadella and Apple executive Eddy Cue, a longtime adviser to Apple CEO Tim Cook.

Google chief legal officer Kent Walker and Susan Creighton, a key outside lawyer at Wilson Sonsini Goodrich & Rosati, observed the proceedings from inside the courtroom. Jonathan Kanter, the head of the Justice Department antitrust division, also attended the hearing.

Outside the Washington courtroom, the trial is being closely watched by lawmakers and policy experts who have pushed for stricter policing of U.S. tech giants. The Justice Department hasn’t brought an antimonopoly case to trial since it successfully sued Microsoft in 1998 for using its dominance in personal computer software to squash upstart web browsers.

Google handles about 90% of search queries worldwide. That supports an advertising business with more than $160 billion in sales, making up the majority of Alphabet’s annual revenue.

Google has also been sued by a bipartisan group of state attorneys general making similar arguments as the Justice Department. The State AGs allege Google favors its own search engine when building tools placing ads across multiple services, an accusation Google has also fought.

William Cavanaugh Jr., a lawyer at Patterson Belknap, delivered an opening statement for the states. He said the bipartisan nature of their coalition shows that reining in Google isn’t a political issue.

Schmidtlein of Williams & Connolly, presenting Google’s case, said the company operates in a competitive market and owes its popularity to being a superior product.

While Google’s search engine is preloaded on web browsers and smartphones, consumers can easily switch to other search engines such as Microsoft’s Bing, Schmidtlein said. Bing’s small market share, he argued, reflects Microsoft’s failure to innovate in a way comparable to Google.

The Google lawyer said there had been renewed interest in Bing because of its artificial-intelligence capabilities, calling it a sign that competition is alive and well.

In August, Bing had 3% market share worldwide, according to analytics firm StatCounter—the same share it had in January, the month before Microsoft launched an AI-powered version of Bing. Microsoft has disputed outside data and is calling the new Bing a success.

Mehta played an active role in the proceedings, peppering Dintzer with questions about Google’s market share and precisely when the government believes the company created an unlawful monopoly. At one point the judge interrupted Schmidtlein to ask for data on how many consumers actually switch away from a default search engine that has been preloaded on a device. Schmidtlein said such data is hard to come by but that there was clear evidence that consumers prefer Google.

Any ruling against Google would trigger a separate trial, also overseen by Mehta, to decide how to fix the illegal conduct. Analysts said the judge would likely require changes to Google’s distribution agreements rather than ordering a more far-reaching breakup if the proceedings reached that stage.

The Justice Department in January brought a separate case alleging Google abuses its role as one of the largest brokers, suppliers and online auctioneers of ads placed on websites and mobile applications. That case is in Virginia, not in Mehta’s Washington, D.C., courtroom. Google has said that case attempts to pick winners and losers in a competitive market.