Google, DOJ Go Back to Court to Fight Over Search Monopoly (2)

The US government hasn’t broken up a company since AT&T in 1982. Now it’s trying to persuade a judge to make Alphabet Inc.’s Google next.

On Monday, Google began squaring off against the Justice Department and dozens of state attorneys general in a Washington court room over what changes US District Judge Amit Mehtawill order to prevent the company from monopolizing the online search market.

The government wants Google to sell its Chrome browser, license search data to competitors and stop paying for exclusive positions on other services and devices, among other proposed changes. Google says the government’s proposal would hurt consumers by breaking a range of products that people use every day and dent US technological leadership.

During opening arguments Monday, Google’s lawyer John Schmidtlein called the Justice Department’s proposals “extreme remedies” that would “reward competitors with advantages they never would have earned in the market.”

The US would force Google to share the data underpinning its search results, Schmidtlein said, which risks harming user privacy and unfairly penalizes Google. He suggested the judge focus on the preferential contracts with device makers that were at issue in the case to “pry open the market.”

But Mehta interrupted Schmidtlein with a telling question — asking whether the increased amount of data Google collected was because of its monopoly.

“There is some relationship between data and search quality,” he said. “How then does the market look any different unless there’s a remedy that addresses the gap in data?”

Read More: Google’s AI Search Gives Sites Dire Choice: Share Data or Die

Schmidtlein said that the Justice Department hasn’t shown how much data Google garnered from its illegal monopoly versus what it gained from being the best search engine. “Google won its place in the market fair and square,” he said.

The final decision will be up to Mehta, who found last August that Google has an illegal monopoly in internet search. Mehta will hear testimony from both sides during a three-week trial focused on how to remedy the harm caused by Google’s dominance. He has said his decision will likely come by August.

US District Judge Amit Mehta

Photographer: Mark Wilson/Getty Images

In his ruling last year, Mehta said that Google illegally dominates the search market via more than $26 billion in payments to Apple Inc. and other companies to make its search engine the default option on smartphones and web browsers, effectively blocking any other competitor from succeeding in that market.

“Google is a monopolist,” Assistant Attorney General for Antitrust Gail Slater said in remarks before the hearing started Monday, “We are not here to relitigate this case. We are here to ask the court to fix the harm from Google’s unlawful conduct.”

Justice Department attorney David Dahlquist in his opening statements said the remedy should address not just search but generative artificial intelligence. Google’s monopoly power in search is already helping the company improve its AI products, he said. The company is also already paying “enormous” sums of money to Samsung Electronics Co. to preload its Gemini app as the default AI on devices, he said.

Generative AI “is a method to access search. Period,” Dahlquist said. “A wolf by any other name is still a wolf.”

Jonathan Sallet, a lawyer on behalf of the states, urged Mehta to include the conditional divestiture of Google’s smartphone operating system, Android and its Play Store. Under the proposal, Google would be required to sell off Android in five years if the other remedies aren’t successful.

The conditional Android divestiture “is designed to have Google have an incentive not to fight against the remedies on a daily basis,” he said.

Google’s Schmidtlein pushed back on the Justice Department’s proposals related to AI, saying startups don’t need help with distribution.

“ChatGPT is doing just fine without any of the remedies in this case,” Schmidtlein said of the Open AI chatbot.

Read More: Google Monopolized Search Through Illegal Deals, Judge Rules

The trial is the latest example of mounting antitrust pressure on Google. It kicks off just days after a different federal judge ruled in a separate case that Google illegally monopolized the market for online advertising technology. That decision sets up another so-called remedy hearing in the coming months.

The Google remedy proceeding marks the first time a court has considered whether to break up a company since the Microsoft Corp. trial more than 25 years ago. And if Mehta does force Google to sell Chrome, it will be the first time a Justice Department antitrust case led to a corporate breakup since the 1982 settlement splitting up AT&T — known at the time as Ma Bell.

“Google’s distribution agreements foreclose a substantial portion of the general search services market and impair rivals’ opportunities to compete,” Mehta said last year in his 286-page ruling. By monopolizing distribution on phones and browsers, Google has been able to consistently raise the prices of online advertising without consequences, Mehta wrote.

Extraordinary Alignment

That ruling was the result of years of investigation and litigation and shows extraordinary alignment between the Trump and Biden administrations on the need to curb the power of giant technology companies.

The Google cases date back to the first Trump administration, when the Justice Department opened up a sprawling investigation into nearly every part of the company. In October 2020, the department filed the Google search case, which was then shepherded by the Biden administration to a major victory at trial. The case involving Google’s advertising technology business came out of the same probe and was filed by Biden’s antitrust enforcers.

At the hearing, Mehta will hear from Google executives including Sundar Pichai, as well as senior Apple executive Eddy Cue. Employees of Microsoft, OpenAI, Verizon Communications Inc., Mozilla Corp. and others are expected to testify, in addition to myriad economists and other expert witnesses.

Sundar Pichai exits federal court in Washington, DC, in 2023.

Photographer: Valerie Plesch/Bloomberg

The Justice Department may face opposition since many of the witnesses don’t support its proposals. Apple, for example, stands to lose billions in revenue if the DOJ proposal is adopted, and other browser makers don’t want to lose access to Google’s payments. Google’s Schmidtlein said that both Samsung and the company that makes the Opera web browser both oppose the proposal to force the divestiture of Chrome since they use its open-source version as the basis for their own products.

Whatever Mehta decides will have resounding ramifications for the government’s ability to police the tech sector and corporate concentration more broadly. But there will likely be a years-long wait for any changes to take effect at Google, which is expected to appeal and potentially take the case to the US Supreme Court.

(Updates with Google’s opening statement beginning in third paragraph.)

To contact the reporters on this story:
Leah Nylen in Washington at lnylen2@bloomberg.net;
Josh Sisco in San Francisco at jsisco6@bloomberg.net

To contact the editors responsible for this story:
Sara Forden at sforden@bloomberg.net

Elizabeth Wasserman, Michael Shepard

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