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US v. Google: the cost of “winning.” Summary of closing arguments

Elise Phillips, legal counsel for public knowledge policy, watched live from the U.S. Courthouse. E. Barrett Prettyman’s closing arguments in the landmark Department of Justice v. Google case. Look first week AND week four summary of opening statements.

Last week I revisited the U.S. Courthouse. E. Barrett Prettyman to watch closing arguments in USA v. Google (2020), the Department of Justice’s antitrust case against Google in the search and search advertising market. Due to the court’s very strict confidentiality rules, you could not watch the hearing unless you were inside the building and following court rules prohibiting the use of electronic devices. However, unlike opening statements, the court allowed the trial to be listened to on the conference line. This was likely due to outcry from the media and civil society groups that the proceedings were not sufficiently accessible to the public. Despite this change, I found that the display of heavily edited exhibits, placed on large TV screens for viewers to view, still left much to be desired.

Closing arguments lasted two days, with Judge Amit Mehta questioning both sides about the merits of their claims. Here’s a quick summary:

Day one: Search

The Justice Department has highlighted Google’s decision to invade privacy and create more targeted advertising as evidence that the company is flexing its monopoly power. The Justice Department argued that Google’s avoidance of introducing incognito mode shows that the company has the freedom to innovate without competitive pressure. Judge Mehta strongly upheld this argument – the Department’s argument seemed to imply that Google was not innovative enough, which is difficult to prove. There was little disagreement about Google’s dominance in general search, but Judge Mehta pressed for further clarification on which Google concludes there are no barriers to entry. Google argued that specialized search engines such as travel sites and social media were adequate competition and that thanks to massive investments in artificial intelligence and machine learning, the barrier to entry in the search market was lower than ever before. However, Google’s dominance in the already highly concentrated artificial intelligence market undermines this last point. Moreover, this argument underlined the government’s point: that scale remains a key barrier to entry not only in the general search market, but in technological innovation in general.

A common phrase I heard during Google arguments was, “We win.” Google argues that it legally gained search dominance because of the superiority of its product. Moreover, Google stated that the exercise of this power by a company that obtained a monopoly is lawful (due to its obligations to shareholders). However, the government responded brilliantly to this – if Google is truly a premium product, why enter into restrictive contracts with Android to ensure that Google Search remains the default search engine on Android? Similarly, why pay Apple, Android’s main competitor, billions of dollars to make Google Search the default search engine on iPhones?

Day two: search engine advertising

The government discussed Google’s monopoly position in search and text advertising, stating that pricing mechanisms harmed advertisers. The department focused in particular on Google’s pricing mechanisms and the lack of transparency in the search advertising auction process. The government’s characterization of Google’s intended pricing methods was particularly damning – Google uses a process called “squashing” that swaps the winner with the runner-up in the auction, which in turn drives up prices. Similarly, Google’s “Multijuice” program makes lower bidders appear to be high bidders, inflating prices and ultimately artificially increasing Google’s profits. In response, Google said its pricing mechanisms support product quality and ensure fairness in the bidding process – if the same bidder continues to win, product/ad quality may decline and there may be less innovation.

Judge Mehta asked an interesting question about transparency: Does it matter that auction participants do not know how the pricing mechanism works when Also you don’t know how pricing mechanisms work on competitive advertising platforms? In an ideal world, we would have a more competitive market that would allow us to observe whether greater transparency in advertising prices is a key benefit to auction participants. However, Google’s dominance and resulting control over this market is unquestionable; we simply cannot observe whether transparency is a byproduct of competitive pressures.

Next steps

Finding remedies is a challenge when we are dealing with huge companies that exercise enormous control over our daily lives – a prime example is Google’s control over access to information. Now that closing arguments are over, the baton has been passed to Judge Mehta, who is expected to make final determinations on each claim. But even then, we cannot predict the impact of his decision until the court determines what remedies are required (probably in several months).

We should not wait for the outcome of the case to make the necessary updates to antitrust law. Congress can now pass strong legislative proposals that will strengthen antitrust enforcement and give agencies the resources they need to address today’s anticompetitive harms. Similarly, given that technological innovations such as artificial intelligence often outpace regulation, we need a dedicated digital regulator with technical expertise to explore new innovative technologies and prevent further market consolidation.