“iPhone” is one of the search queries that generates the most advertising revenue for Google. This confidential data, which the company unsuccessfully tried to keep secret, highlights the love-hate relationship between Apple and Google at the heart of the lawsuit against the search engine for alleged abuse of its dominant market position. According to the Justice Department, 10 weeks of testimony before the 10th Circuit in Washington shed light on a toxic relationship, not for Apple and Google, but for the market and competitors.
More than fifty witnesses have marched through the courtroom of Federal Court No. 10 in Washington for more than two months. Among them were Satya Nadella, CEO of Microsoft, and Sundar Pichai, the head of Google, experts, professors and managers of the search engine and other technology companies. The hearings ended Thursday, but resolution of the most important competition case in two decades will take months. Judge Amit Mehta, appointed by Barack Obama in 2014, has asked the parties to submit a report on their conclusions in the coming months and summoned them to a final hearing early next year.
“I can tell you as you sit here today that I have no idea what I’m going to do,” Mehta said Thursday as he wrapped up the testimony period. If the judge concludes that Google has abused its dominant position in the US internet search engine market, where it has a 90% market share, a new trial should still consider the most appropriate remedies. The paradox is that a ruling that prevents Google from renewing its contracts with Apple could hurt Apple more than the search engine itself.
Google’s thesis is that its success is due to the fact that its technology is superior, because the company has developed new services and tools, from the Chrome browser to the Android mobile operating system, which have allowed it to increase the quantity and quality to increase search queries. The Justice Department’s thesis is that the search engine, based on its dominant position, made agreements that blocked the path to competition. The two theses are, to a certain extent, compatible.
The transcripts of the witness statements run to thousands of pages. In addition, there are hundreds of attachments and documents that were presented at the hearing, including internal reports and private communications between directors of the accused company. Some of them remained confidential, but others revealed Google secrets.
A document dated October 12, 2018 lists the 20 most profitable searches that generated the most income in the United States during the week of September 22, 2018. “iPhone 8” and “iPhone 8 Plus” are the first two; “iphone” itself also appears in the list. The new Apple phone model had just come out and retailers were paying to be included in the search engine to sell smartphones or accessories. Car insurance, cheap flights and pay TV services dominate the rest of the list.
This list is more anecdotal. The focus of the lawsuit filed by the Justice Department from the start has been the agreements through which Google paid tens of billions of dollars to become the default search engine for browsers and mobile phones. The Justice Department won the battle to release that number, even without a breakdown. In 2021 alone, Google paid $26,344 million (about €24,100 million at the current exchange rate) to establish the default search engine as a traffic acquisition cost. The number appears on an internal company slide, the secrecy of which has only been partially lifted. The main beneficiary of these payments is Apple.
The Justice Department has brought in experts and Google competitors to argue how these deals harmed competition. But perhaps the key moment of the trial came when Google CEO Sundar Pichai, subpoenaed by the defense, testified. In the first part of his statement, in response to questions from Google’s lawyer, he shared his personal success story to reach the top of Google and convincingly defended Google’s technological contributions. Then prosecutor Meagan Bellshaw arrived.
The Justice Department lawyer used proprietary documents to corner Pichai. He did this gently but firmly, asserting himself with simple questions that got the head of Google to gradually admit the key points that supported his claim. (Read the full transcript of the statement in English here).
“You wouldn’t approve contracts that pay billions of dollars every year to become the default search engine if that wasn’t good for Google, would you?” Bellshaw asked. “Right,” Pichai replied. After laying the groundwork, he attacked with a letter that Google sent to Microsoft when the company founded by Bill Gates wanted to use its own search engine by default in its new version of Internet Explorer. Bellshaw highlighted fragments of that letter that were like daggers in Google’s defense strategy. The search engine told Microsoft that users do not change the default settings and that Microsoft’s decision could harm competition. And the prosecutor had Pichai confirm everything.
“And since users don’t change the default settings, Google was deeply concerned that Microsoft’s actions could harm the competitive process?” he asked. “Yes, it is, Mr. Drummond [responsable legal de Google] is articulated here,” admitted Pichai. At one point, the Google boss said that it depends on the context and conditions to admit that “there are situations in which standard configurations are very valuable.” But the prosecutor did not allow him to escape this either. “And default settings are very valuable to your search competition, right?” “Yes,” Pichai admitted again.
The lawyer tried to argue that Google wanted to prevent Apple from becoming a competitor with its agreements. He displayed a message from Sundar Pichai asking to receive monthly updates about potential search employees who were leaving for the competition. And he added: “If someone is looking [se va] To Apple, please send me an email directly in individual cases.” “You won’t receive a notification when every one of Google’s 180,000 employees leaves, will you?” said the prosecutor ironically.
At the center was a report about a meeting between Google and Apple executives, attended by Pichai and Tim Cook, where these very arrangements were discussed for Google to become the exclusive default search engine for iPhones, iPads and Macs. Apple through its Safari browser. “Who is Tim Cook, for the record?” the prosecutor asked. “I’ve heard of him,” Pichai joked. “Mr. Tim Cook is the CEO of Apple.”
The summary of that December 2018 meeting said, in part: “Our vision is that we operate as if we were a company.” Bellshaw shot back: “Did you tell Mr. Cook or did Mr. Cook tell you ?” “I don’t remember saying that sentence,” Pichai replied, arguing that this point referred to working together to improve their mutual users’ experience with this product.
“And did you agree with this vision of Apple and Google operating as if they were a single company?” he insisted. “No,” Pichai said. But Bellshaw persisted: “And there is nothing in the notes to suggest that you or anyone else at that meeting disagreed with the vision of Apple and Google working together as one company?” Pichai later said that she did had been a little annoyed by that expression (“irrational exuberance,” as he called it) as they left the meeting because they had arrived nervous and with mutual suspicion. “We compete heavily on so many products that there has been a lot of tension and moments of mistrust between the two companies,” he said. “We make Android, they make iPhones. “We compete in the market every day for this and many, many other products,” he added.
That’s exactly part of the Justice Department’s argument. They compete in many markets, but not in search. There they prefer to maintain a revenue sharing agreement with an exclusive company that prevents other competitors from breaking through.
Thursday ended the handover of boxes of documents and dozens of lawyers who had accompanied each session of the trial. On the last day, Michael Whinston, a professor at the Massachusetts Institute of Technology, compared the fall of Google and its market power to that of other monopolies such as AT&T in long-distance or Microsoft (which is the victim in this case). in operating systems for personal computers. On the ground floor of the federal courthouse in Washington, a modest permanent exhibit commemorates these two cases, as well as other iconic cases that took place there. Maybe the exhibition needs to be expanded soon.
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