Joseph Coniglio joined host Cristiano Lima-Strong and fellow expert Karina Montoya on The Sunday Show podcast from Tech Policy Press to analyze the remedies phase of the Google search antitrust trial.

Episode Notes

Last year, a United States federal judge ruled that Google is a monopolist in the market for online search. For the past three weeks, the company and the Justice Department have been in court to hash out what remedies might look like.

Tech Policy Press associate editor Cristiano Lima-Strong spoke to two experts who are following the case closely: Karina Montoya, a senior reporter and analyst for the Center for Journalism and Liberty at the Open Markets Institute, and Joseph Coniglio, the director of antitrust and innovation at the Information Technology and Innovation Foundation (ITIF).

Transcript

Cristiano Lima-Strong:

Joe and Karina, thank you both so much for joining us. I wanted to start off by giving a little bit of an overview of where we're at for those who maybe haven't been following this case as closely. We're going to be talking today about the Google search antitrust trial. You could be forgiven for forgetting which specific case this might be referring to. There's also litigation ongoing that relates to Google's advertising technology, and there's some separate litigation over its app store practices. But we're going to talk today about the search trial which entered this key phase last year when a judge did rule that Google had broken antitrust law through some of its deals with companies such as Apple, Samsung, and Mozilla to have its search engine be a default on their browsers. And so for the past three weeks, the company and the U.S. government, the Justice Department, have been going to court to hash out what a remedy might look like to settle the case. Now Google has said that it does plan to appeal this decision, but it can't do so until after this phase in the process where they argue for what the remedy should be. And so here we are. Karina, I wanted to start off with you. You wrote a recent dispatch for us about the trial. What have been some of the key legal questions that have come up over the past three weeks that will ultimately decide what happens here and what the remedy will be in the case?

Karina Montoya:

Thank you, Cristiano. I would say there are many key questions, but I will try to summarize the ones that I think were more salient to me. Number one, I think that the case started as, and it is still obviously about monopolization of the search market and search ads market. But now that we've entered the remedies phase, there's really a big question about how the remedies will affect the competitive landscape moving forward. And moving forward means how we are going to incorporate the fact that artificial intelligence systems are also a very important business driver for not only Google, but I would say the entirety of the technology sector.

So that's one thing there at the very beginning of the case in chief from the DOJ, the very first discussion was not only how to separate the Chrome browser but also how the different ways in which Google is integrating artificial intelligence into its business is affecting competition. And so the judge will have to deliberate how to incorporate that in the remedies that he will impose based on both of the proposals presented by Google and the DOJ. So that is, I think, one important aspect. So the breakup of Chrome, artificial intelligence.

Also there is this important aspect that the DOJ is proposing which are licenses, like syndication licenses they call it for other market participants in the search space to access some of the data from Google's search index so that they can create different search engines, rank results in different ways compared to how Google does it or even how Bing does it. And at the same time, so they can create other ... They can gain a scale really, which is the heart of this antitrust litigation, which is the fact that this monopoly power that Google has exerted in the market has denied a scale to the search engine competitors and therefore they've been unable to fairly compete in the market and offer more choices to consumers.

So at this point I think we've moved towards questions of how are we really going to put these remedies in practice? And when I say these remedies, really is the DOJ's remedies because Google's stance on what needs to be fixed is more narrowly focused on the exclusivity characteristic of the contracts that they have with browsers, with phone carriers that work with Android and with Apple specifically. And so Google has been reasonably, I think or expectedly more focused on making the case that the rest of the DOJ's remedies aren't appropriate at all. And on top of that, they are also unfeasible to carry out in the real world.

Cristiano Lima-Strong:

So you alluded to the remedies that the two sides have proposed, just to take a bit of a step back, as has been alluded, what the Justice Department is primarily seeking is the spin-off of the Chrome web browser, which it's called a critical distribution point for Google's search engine. It has also proposed that Google be prohibited from making payments to third parties such as Apple and Mozilla to make its search engine the default. Now Google, which has said that it's going to appeal the decision has focused more narrowly on the distribution agreements and proposed a plan to make those more flexible and to basically lessen the exclusivity component. Joe, what do you see as some of the key questions that have been raised in the trial so far that are going to ultimately factor into how the judge rules here?

Joseph Coniglio:

Well, thanks Cristiano. Let me say, I think there have been four things that have really emerged at trial and things that Google in particular has really tried to press and I think it's had some success in trying to provide evidence for. So the first concerns the remedies that involve preventing anti-competitive conduct and here we're talking about the distribution agreements and the idea of divesting Chrome. I think Google has argued that it's already made changes to these distribution agreements to try and prevent the sort of provisions and exclusivity that the DOJ was concerned about, and also showing how divesting Chrome would both be unnecessary to remedy the deal with the competitive concerns the DOJ has but also could result in harms to consumers. So I think that's point number one.

The second point I think, very important that Google has tried to highlight is that the various other behavioral remedies, specifically those around data sharing and syndication, that these are really primarily helping competitors rather than going to be fostering competition and could actually end up harming user privacy and security.

Third, the government really is trying to use this remedy to help competition in the AI space, but again, it seems ... I think Google has argued that there already is a lot of competition and innovation going on in AI and it's not clear how or why government intervention vis-a-vis this remedies trial is needed to keep that competition innovation, AI going.

And then, finally, another point that I think sets an interesting backdrop here is how in some ways this remedies proposal almost takes a regulatory form, feels like regulation in certain areas, especially around the technical committee and other things that DOJ is proposing. And in fact how even some of these remedies may even go further than what the Digital Markets Act in Europe is doing, which is setting it a little bit of international context, but it's certainly relevant and specifically with respect to some of the data that Google is being asked to share. I'm happy to drill down onto those four points, but I think those are really the four key issues that I've seen in the trial.

Cristiano Lima-Strong:

Thanks so much for that. Karina, how has the Justice Department gone about arguing for a divestiture of Chrome, specifically what's some of the evidence they've presented, some of the witnesses they've called that could factor in here?

Karina Montoya:

Yeah, so I think the DOJ has made a good effort to show that Chrome really has been one of the main components of Google's tech stack in the search market, to make the search engine, the full choice that it has conditioned through its contracts with Android operators or phone operators to pre-install, preload and prevent that they would do similar dealings with other providers at the same level as Chrome has been positioned in the mobile space. That Chrome really is a vehicle also for data collection that also strengthens and gives really an outside advantage to Google's dominance on the search space, that it creates a conflict of interest having Google monopoly on the search market, which they still deny and that is the reason why they're going to appeal the ruling itself, not only just the remedies.

And so I think they made a strong case so far that it is also an attractive asset and if worked out carefully, it could be a divestiture that could be executed. So I think all of those elements were put forward in court. It was very interesting to see players from the sort of mergers and acquisitions side of the market opine and give their analysis as if it were just any other asset that can be operated by other market players as well. Also, particularly I would say the interest of other providers such as AI companies and how there could be different ways in which Chrome can offer more choice and benefit consumers.

Cristiano Lima-Strong:

So part of what we've heard on the stand, Google CEO Sundar Pichai had testified that a divestiture of Chrome would effectively be a divestiture of search and that the company would have to forego a lot of the intellectual property and technology and research that it spent decades developing. Could you unpack that argument a little bit? Why is it that the company's arguing that the Chrome divestiture in particular would have a broader impact on its business?

Joseph Coniglio:

Yeah, sure. I think there are a couple of things to note regarding the Chrome divestiture. The first is just how really it's not related to the conduct that the DOJ found to be any anti-competitive in this case. There was no allegation that Google was leveraging any market power in Chrome to benefit its search business or vice versa. The conduct that was at issue here involved the pre-installation agreements with other browsers, third-party browsers and of course the Android OEMs. So again, it is kind of hard to see how a Chrome divestiture is necessary or in fact related to the conduct that the DOJ was concerned about. So I think that's point number one.

Point number two, and I think this is also something that was discussed is that the DOJ is going to face a higher legal standard to show that it can get a breakup of Chrome relative to the standard that Judge Mehta applied in his opinion, which I think creates a very high legal bar for the DOJ to show that a divestiture is warranted.

But on the other hand, and I think this is getting at your question, while there wasn't really any argument that Google was leveraging Chrome to benefit search, what we do know is that there are tremendous synergies that obtain between the Google search and Google Chrome and there was I believe testimony that if Chrome was divested, users would be worse off by virtue of not enjoying those ... Google not being able to offer the benefits that come from those synergies and that can involve sort of user experience, reduced innovation and even security frankly.

And again, I think it's also true. If you want to have remedies that are focused on remedying the anti-competitive conduct, you really want to avoid punitive disgorgement that can involve investments, intellectual property and other things that Google has really invested in to make Chrome a great product. It's almost two decades worth of investment that it's put into Chrome and to making it the great browser that it is. I think those sort of concerns should have purchase even though of course it is true, there are definitely competitors that would love to purchase Chrome precisely because it is such a great product.

Cristiano Lima-Strong:

Speaking of divestiture, of course if there were to be a forced divestiture here, there'd be the question of who would buy it and we heard testimony to that effect during the trial. We heard witnesses from OpenAI and the company Perplexity expressed their willingness to potentially acquire the company in the event of a divestiture. Karina, could you unpack that a little bit? Why is that a significant point for the DOJ's case, what the market would look like if there were a divestiture?

Karina Montoya:

Yeah, so here we're entering into the realm of speculation, of course. I do think it is important to point out that, and I think Judge Mehta made this sort of clear, or at least it was to me in his opinion, that Google's ability to distribute search to such an extent on applications such as Chrome but also Safari and tie all that together with Android. Sure, that is the result of the exclusive agreements and the payments that came with those agreements. But without having those distribution points and without having that massive distribution, really, they wouldn't have been able to gain the scale that they have today and that they've accumulated in the last two decades to make the great product that they have. And the consequence of that is that they've denied that scale to other competitors that really were also trying to challenge the business model of the browser and the search engine itself as a market product.

So we, I think, in a world where the Chrome browser is not tied to the logic of just one single corporation, we can have a browser that can operate in ways that are more privacy-preserving. So the Chrome browser is really a vehicle for data collection that benefits Google not only in the search space, and this is maybe a bit of the limitation of an antitrust litigation in which you need to have a relevant market so that you can point to anti-competitive conduct in that market. But the market reality is that Chrome really serves as a vehicle for data collection that goes far beyond search and I think that we are now before the question of how we want to have a browser market in which the logic of just one corporation is not the one that dictates how the browser business should be run.

I think that generally speaking, and I'm trying to recall the exact language, but really what we are trying to see is that Google will eventually need to lose the market share or at least one of the consequences for the remedies to be successful is that the monopoly ceases to exist and that is going to be reflected in a way in the market share.

So the idea is to have different providers that can serve different needs for search for consumers in a browser that can interoperate with all of these other providers in similar ways that I think Google has been doing it with Safari. Like Apple doesn't have a search engine currently and I know that they said before that they're not going to develop it, but I think there are news recently that they're apparently trying to do a different deal for a provider for Safari different than with Google. I think that's very interesting. I think also that the existence of this trial itself is serving as an incentive for market players to rethink their relationship with Google, which I think it gives a strong signal that there was a sort of coercive effect coming from these contracts that the remedies are not trying to address.

Cristiano Lima-Strong:

So Joe, in dealing with sort of what a divestiture would look like and the impact, part of what the government witnesses had argued is that a spinoff and also giving companies essentially access to Google search and ad data would give potential incumbents, AI companies that are up and coming more of a chance to compete with Google. Some of what we've heard to counter that is that it could be another large corporation like Microsoft that scoops it up or something. How do you think this idea of what a divestiture would actually lead to in terms of the market, and particularly with regards to up-and-coming AI companies, how's that going to factor in here?

Joseph Coniglio:

Yeah, thanks Cristiano. So first there is a lot of language that the DOJ has raised about using remedies to terminate illegal monopolies and trying to eliminate the monopoly market share so to speak. But here I would note Judge Mehta made a monopoly maintenance case, not a monopoly acquisition case, and actually he found Google acquired its monopoly lawfully. So this shouldn't be about breaking up Google as much as it should be about stopping the practices that he found to be anti-competitively maintaining that monopoly. And also you also hear language about using remedies to force companies to get rid of the fruits of their ill-gotten monopoly behavior. But again, that has nothing to do with Chrome. So the data that Google might have gotten or the scale it might have gotten through these agreements would have occurred separately from Chrome because that wasn't the conduct that was challenged.

With respect to AI, again, interesting to note off the top that Judge Mehta did not believe that AI was in any way a constraint on Google's alleged monopoly power in search. If he did find that, it's not even clear that the DOJ would have won the case. So it is I think very interesting now that the government is making such a big deal about AI. And here I would note that the question of whether or not there is sufficient reason to use government intervention to benefit the AI space, even if you thought that was a legitimate objective, again, I just think there hasn't been a lot of evidence in the trial to show that's necessary.

On the contrary, what we have seen, I think, is a very competitive AI space in which Google is competing very vigorously with a lot of other players. OpenAI and Google competed for a distribution deal with Apple, to work with Apple Intelligence and OpenAI won. ChatGPT has given every indication that it's able to grow very successfully without needing any help from the government vis-a-vis this type of remedy. Given that competition, I certainly don't think it makes sense, on the other hand, to diminish Google's ability to compete in AI, because we want Google to compete and innovate in AI just like we want all the other companies to do. I don't think the government should get in the way of that. Either trying to use this remedy to support other AI companies who are proving they're able to compete, or on the other hand, trying to kneecap Google from it being able to innovate in AI.

Cristiano Lima-Strong:

Karina, how else have we seen AI come up during these proceedings, and what role do you think it'll ultimately play in a decision?

Karina Montoya:

To the point of AI in competition and how Google is also competing against other market players, I think we should remember that both Perplexity and OpenAI have said on the record for this court that they wouldn't really even be having these conversations with phone providers or even Apple if it wasn't for the prospective possibility that these contracts, the way they've been designed will cease to exist. So I think that's an important fact the judge will consider that they have been very explicit about the impossibility of having some phone operators getting around their contracts with Google, especially on the Android side.

So I think that does give some evidence to the court that as long as Google continues to have this monopoly power that comes from critical distribution points and that aids the maintenance of its monopoly over search, it will continue to have an advantage on the development of AI systems as well, especially on the systems that ground AI generated results. That is something that was also very present during the discussions in court. AI really as we know it, it's not just like the training sets that the companies have scraped from public content on the web and this is a different issue, but they have also scraped from paywall content, and there's a lot of other copyright issues there.

They've also pointed out too, the fact that Google has more power to outbid them in terms of their dealings with or the dealings that this market overall is trying to do with content providers in general, whether those are news publishers or whether those are other types of specialized content producers. So we saw the example, and I don't know if you remember, but with Reddit, once they signed a deal with Reddit, there were a lot of other search engines that couldn't access Reddit's content anymore, and that was also due to exclusivity.

But that sort of negotiating power really does come from monopoly and I think those are the ill-gotten fruits of the monopoly that we're talking about here. It's just very hard to point to exactly when the monopoly started on a specific day and we're going to make a calculation from there moving forward so that we can exactly just get rid of that. I think just in the last two decades, the entirety of the business model is founded on monopoly power, not only on search but also on digital advertising and I think that will be something that we need to take into account.

Cristiano Lima-Strong:

Joe, what are some other key pieces of evidence or interesting points that you think have come up in these proceedings the past few weeks?

Joseph Coniglio:

I think in addition to the question of Chrome and the breakup and the agreements and then also the AI issue, it is really important to talk about a lot of the other data sharing behavioral remedies and syndication issues because that's also really a big part of what is going on here. And here, I think it's important to note a couple of things. First, we've heard this from Google's CEO that sharing this type of very important data like search ranking signals, search index queries, things like that is basically allowing competitors to reverse-engineer Google. And it's long been recognized in American economics and also Supreme Court case law, antitrust law that's for sharing, really diminishes incentives to innovate both on the company that's forced to share that information. But also the incentives to innovate from third parties who, instead of having to do the work themselves, basically are able to free-ride off the investments that in this case Google has already made. So I think that's a serious issue.

And the other thing I would note that's come out in this respect is how a lot of this forced data sharing, again, not just going to harm competitors but it will help competitors but actually is going to come at the expense of consumers, especially when you think of things like privacy and security. So we heard a Google employee testify that this stuff is really going to harm user privacy and that there really aren't a lot of limits being put forward by the DOJ to prevent this sort of thing from happening. I think those concerns about privacy and security and also innovation are really important to consider when you think about these behavioral remedies that involve data sharing and syndication.

Cristiano Lima-Strong:

So, as we wind things down here for reference, Judge Mehta has said that he plans to issue a decision on remedies by August. We'll see what that ends up looking like, of course, there's a potential appeal on the table, so I'm sure we'll be talking about this for some time still, but I wanted to give you both a chance to take a bit of a step back and just talk about how significant is the decision here for the future of the web. Karina, do you want to take that first?

Karina Montoya:

I think this is just such an incredible juncture just for everyone that is invested in not only just the business of the web but also as consumers to rethink how we want the open web to continue thriving alongside other products, other services, other markets such as social media, video sharing. We have now on the advertiser side, retail media. Something that I wanted to point out is that I don't think last year it was very clear how the search case was going to impact some of the reasoning for the judge overseeing the digital advertising case. But now I think it's becoming a little bit more clear that the judge in the digital advertising case in which Google is essentially an intermediator of ad sales between publishers and advertisers. This is outside of search, this is outside of YouTube.

She cares about that analysis. So she has asked the DOJ to also consider how the remedies in the search case may impact digital advertising, I think by September, which is when the remedies phase or the remedies hearings will start for the digital advertising case, we will hopefully have a ruling on the remedies for the search case. So that is going to be very interesting. I think that even without the structural relief, which I think it's really crucial if we want to see any significant dismantling of these monopolies over these two markets. But even without it, the behavioral remedies and the fact that there is language on non-discrimination and language of anti-retaliation and also just this perspective that these are essential infrastructures and that they intermediate a lot of businesses reaching consumers. That's really what they are.

I think we are about to see if we can reimagine a market in which Google is not the only one dictating the rules because really I think this is something undeniable at this point after seeing many different witnesses on both cases, that there is this sort of coercive power and this sort of inability to challenge a business model as it currently exists on the internet. And so I think it's a very exciting moment that we're about to find out what new ideas both on the tech side as development itself may come up, but also in terms of the business logic behind the commercialization of the internet.

Cristiano Lima-Strong:

How about yo, Joe? How big is this for the future of the internet?

Joseph Coniglio:

It's a huge case, no doubt about it. Obviously, for Google, potential remedies here involve not just divestitures of Chrome, which of course is an extremely important product for Google and in search distribution, but also as a browser. But also potentially Android, which is also on the table. And then again, not just the structural remedies but these behavioral remedies, which I think ... Very real concerns that this could basically end up de facto regulating one of our most important digital industries.

So when you look at this case, both in itself, it's huge for Google, it's also huge because, of course, the ongoing ad tech case. Very similar issues there. Possible divestitures of Google's ad products, two of Google's ad products, its ad exchange, and its ad server, and then also very extensive behavioral remedies there surrounding what Google can do. Both industries—search, ad tech—very much the lifeblood, maybe so to speak, of the internet. So I think there are huge cases for Google and also the internet more generally.

I would also note for antitrust law, these big monopolization cases don't come around all the time, and this is going to be a huge precedent, I think, much like the Microsoft case was, and could have very real and immediate impacts given all these other big tech cases that are going on. Both on the business side and the law side, this is really a big moment.

Cristiano Lima-Strong:

Karina, Joe, thank you both so much for joining me.