Antitrust enforcers allege that Google illegally maintained a monopoly over search. (REUTERS)News 

Uncovering Google’s Antitrust Secrets: 6 Documents You Need to Know!

Internal documents provided the most incriminating evidence in the US antitrust trial against Google, which recently concluded in Washington. This evidence overshadowed the testimonies of witnesses from various companies, including Apple and Microsoft.

During the 10-week trial, the Justice Department used emails, slides and other records to illustrate how Google’s lavish payments to other companies ensured its search engine of choice almost everywhere people use the Internet.

Antitrust watchdogs argue that Google illegally held a monopoly on search, where it controls nearly 90 percent of online queries by paying smartphone makers, web browsers and wireless carriers. That dominance allowed Google to raise prices for advertisers without consequence, they argue, and delayed the innovation and privacy features consumers want when they search online.

The fate of the world’s fourth-largest company now rests in the hands of U.S. District Court Judge Amit Mehta, who postponed hearings until May and is unlikely to have a decision for several months. If he finds that Google has breached competition law, the second procedure will decide on remedies – including the possible break-up of the company.

The 10-week trial heard the testimony of Apple executives, Google CEO Sundar Pichai and Microsoft CEO Satya Nadella. But the big revelations came from internal documents and emails, only a small portion of which has been made public.

Here are six documents that best illustrate the Justice Department’s case:

1) Google defaults to $26 billion

Google pays other companies to set their search engine as the default search engine by sharing a portion of their advertising revenue. The exact percentage varies between contracts, and Google has kept both the rate and the amount it pays certain companies confidential.

As the default search engine, Google uses more data than its competitors, allowing it to improve its algorithms and results and making it harder for competitors to attract users.

Mehta allowed the Justice Department to reveal how much the company has paid annually — in 2021, it paid $26.3 billion of the $146.4 billion it earned in search advertising, or about 18 percent. That’s up from 2014, when it paid $7.1 billion of the $46.8 billion it brought in through search advertising, or about 15 percent. The Justice Department argues that Google’s growing payments for default status show how important they are to its continued dominance in search.

By comparison, the market capitalization of Warner Bros Discovery Inc., Delta Air Lines Inc. and 215 other S&P 500 companies is less than Google’s 2021 default payments. According to the International Monetary Fund, 97 countries in the world, including Haiti, Albania and Nicaragua, also have a lower gross national product than this.

Google’s largest payment each year is to Apple: Google’s CEO testified in a separate antitrust lawsuit that the payment was “well over $10 billion” last year. Both Google and Apple have resisted publicly disclosing details of the deal, although a witness accidentally revealed that the search giant pays 36 percent of search advertising revenue on Macs, iPhones and iPads.

Google claims the payments support the Android ecosystem, which competes against Apple’s iPhone. And competitors like Microsoft have long paid to have their products pre-installed and set as default settings on computers.

2) Google Makes more than 100 billion dollars from search ads

Google’s search advertising – the text displayed at the top of the search results page for user queries and shopping promotions – are the company’s most profitable business. About two-thirds of Google’s total revenue comes from search ads, executives testified at trial, and was more than $100 billion in 2020.

Google CFO Michael Roszak prepared notes for a 2017 speech that the Justice Department says provides insight into how the company’s employees view competition. He wrote that search advertising is a lucrative business model rivaled only by criminal drug or contraband. Google has the luxury of being able to ignore demand pressures and focus on the supply side or ad revenue, he wrote.

Witnesses from JPMorgan Chase & Co., Home Depot Inc., Expedia Inc. and Booking Holdings Inc. testified at the trial about the importance of Google search ads in reaching consumers. Several said the cost of their Google search ads had risen in recent years when the company changed the auction rules used for pricing. And they don’t have good alternatives to Google, the first place many people start looking for something online.

Google argued that Roszak’s notes were only part of the training and did not represent the views of the company. It also disputes the idea that its search advertising is a “must-have,” saying it competes with Inc., Meta Platforms Inc. and ByteDance Ltd.’s TikTok.

3) Google’s most important default agreement is with Apple

Google first signed a deal to be the default search engine for Apple’s Safari browser in 2002. Today, it is the most important of Google’s default offerings, putting the search engine on the iPhone, the most used smartphone in the United States.

The latest iteration — negotiated in 2016 between Pichai and Apple dealer Eddy Cue — includes a provision that the two will “support and defend” the deal against antitrust.

Notes from a 2018 courtroom meeting between Pichai and Apple CEO Tim Cook described Google’s partnership with Apple in search: “Our vision is that we operate as if we were one company.” This line raises red flags for antitrust regulators because Google and Apple are each other’s biggest competitors in the smartphone industry and should compete.

When he testified in late October, Google’s Pichai said he didn’t remember making the statement and that the company is in fierce competition with Apple, even though they are partners in search.

4) Being the default is important because most people don’t switch

Google’s default position in a web browser or mobile phone prevents people from switching to competing search engines, the Justice Department claims.

And Google is well aware of the value of that key position. In 2007, Google’s chief economist Hal Varian called the default homepage “a powerful strategic weapon in the search battle.” In 2014, Google noted that Android users “rarely stray from preloaded apps”. And in 2015, Google described as a “code red” the loss of an agreement with Apple to keep it as the default search engine in Safari browsers.

The government’s key financial witness – Michael Whinston of the Massachusetts Institute of Technology – calculated that Google’s contracts shut down about 50% of search queries in the United States. (This figure does not include the other 20% of searches in the US through Google’s Chrome browser, which is the default search engine.)

Using data on when people have changed their default settings — for example, when Apple removed Google Maps as the default service on iPhones in favor of its own app — he calculated that about 33% of all searches in the US always go to the default setting. That means a competing search engine could only hope to get about 17% of US search traffic thanks to Google’s offerings.

Google’s financial expert Kevin Murphy disputed this calculation, claiming that Whinston was wrong to use the Apple Maps example in his calculations. He also disputed the idea that Google’s contracts shut out competitors, as companies like Microsoft and Yahoo could compete for default themselves.

5) “Google is magic” because user data fuels search

Search engines rely on users to improve their results. Eric Lehman, a 17-year Google veteran who worked on search ranking, gave internal presentations about how the company’s search engine works under the title “Google is magic.”

According to Lehman, the “key” to Google’s magic is the user data that flows back into the search engine. “When people interact with search, their actions teach us about the world,” he wrote. “For example, a click can tell us that an image was better than an online result.”

Google logs this information – not only what the user clicks, but also how far they scroll down the page or along the carousel, whether the mouse hovers over a particular result, and some other information, such as the person’s location.

“The source of Google’s magic is this two-way dialogue with users,” Lehman’s presentation concludes. “With every survey, we give information and get a little bit back.”

The Justice Department argues that Google’s contracts not only ensure that its search engine gets the most user data — 16 times as much as its next-closest competitor — but that the flow of data also prevents its competitors from improving their search results and competing effectively, watchdogs say.

Google rejects the idea that user data is necessary for search engines today due to technological advances. Lehman and other Google witnesses have testified that user interaction data has become less important due to improvements made possible through artificial intelligence and machine learning.

6) Google told employees what not to say

Google was founded in 1998, a month before the Justice Department’s famous antitrust lawsuit against Microsoft. Partly for this reason, the company has long been concerned about antitrust enforcement, so much so that the Justice Department says it taught employees to “communicate carefully” — adding lawyers to email threads to shield conversations from government scrutiny and avoiding certain words in written communications.

In one company presentation, Google employees were told not to use terms like “crush,” “kill,” “hurt” or “block” when talking about competitors. They should also avoid “lock”, “market”, “bundle” or “bond”. And when discussing competitors, they should include a lot of them. “If you really must list a group of competitors in a given area, list as many as possible (or make it clear that it’s a partial list). It’s just wrong to say we’re dominant or dominate in any industry.”

The Justice Department claims that these actions may have hidden evidence that could have proven Google’s alleged antitrust violations.

Google denies trying to hide evidence, saying it legitimately encouraged employees to seek legal advice on complex legal or regulatory issues. The communication guidelines were intended to provide best practices for handling confidential or sensitive topics.

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