How will the States make their case?

As Week 5 of the trial comes to a close, the focus is shifting to the States' separate claim about Google's proprietary search engine marketing tool SA360.

(Photo Illustration by Pavlo Gonchar/SOPA Images/LightRocket via Getty Images)

The DOJ’s case is coming to a close. After today, DOJ is expected to call only two more witnesses. One is the economist Michael Winston who already provided some expert testimony, and the other is a fact witness who won’t be called right away due to scheduling issues.

That means the States’ case is now coming to the fore. The States — which refers to 38 different Attorney Generals led by the state of Colorado — have questioned the DOJ’s witnesses throughout the trial and have already presented some of their own witnesses. But for the next two weeks until Google begins its defense, we will hear primarily from witnesses for the States.¹

I’ve made various references to the States having a separate claim from the DOJ, but I haven’t yet discussed it in much detail. So here is a primer on what exactly the States are claiming beyond the DOJ, as well as a brief note on the States’ other claim that got tossed out before the trial started on summary judgment.

As Judge Mehta’s summary judgment order summarized, the States charged two forms of anticompetitive conduct beyond their joint allegations with the DOJ about Google’s use of default search engine agreements:

First, the Attorneys General claim that Google’s conduct has weakened Specialized Vertical Providers (“SVPs”), which are companies focused on niche markets—like Expedia or Tripadvisor for travel, OpenTable for restaurant reservations, and Amazon or eBay for shopping. Google has harmed SVPs, the Attorneys General allege, by (1) limiting the visibility of SVPs on Google’s Search Engine Results Page, and (2) demanding that SVPs make their data available to Google on terms no less favorable than it does to others. The weakening of SVPs, the Attorneys General say, harms competition in the general search and general search-related advertising markets.

Second, the Attorneys General claim that Google uses its proprietary search engine marketing tool—SA360—to thwart competition. Buyers use SA360 to purchase digital advertisements across multiple platforms, including on Google (through Google Ads) and its closest rival Bing (through Microsoft Ads). The Attorneys General accuse Google of harming competition by delaying the implementation of various SA360 product features for Microsoft Ads that have long been available for Google Ads, thus harming Microsoft’s ability to compete.

Judge Mehta granted Google summary judgment with respect to that first claim based on his finding that “Plaintiffs have not demonstrated the requisite anticompetitive effect in the relevant markets to make out a Section 2 prima facie case.” He explained that the States’ “theory of competitive harm rested on a multi-linked causal sequence” that relied “almost entirely” on an expert witness report rather than actual evidence in the record.

The second claim about Google’s disparate development of SA360 features was allowed to proceed to trial, though, so that will be the focus of much of the testimony we hear over the next two weeks.

Indeed, we’ve already heard a good amount of testimony regarding this claim from witnesses like Ryan Krueger (a Product Manager at Google), Ryan Booth (an advertising executive at Home Depot), and Arjan Dijk (a former Google employee who is now the Chief Marketing Officer at Booking.com). So far, the parties’ examinations of these witnesses have seemed to focus Judge Mehta on a couple of key disputes.

Namely, why has it taken so long for important features on SA360 like auction-time bidding to be supported for Microsoft Ads? Two different pictures have begun to emerge from the testimony and evidence we have seen so far.

On one hand, the States have suggested that Google strung Microsoft and advertisers along while it continuously and intentionally delayed SA360’s implementation of auction-time bidding for Microsoft ads. According to the States’ complaint, this delay has presented advertisers with an “apples-to-oranges comparison” when using SA360 as a tool for managing their advertising campaigns across both Google and Bing. The States asserted the “inevitable result” of this delayed implementation “is that SA360 steers ad spend away from Bing and towards Google.”

On the other hand, Google has highlighted the technical difficulty of supporting such a feature, which requires significant time and resources. Google has pointed out that it even took several years to develop auction-time bidding capabilities on SA360 for Google Ads itself. Thus, according to Google, the delay in rolling out such a feature for Microsoft was not the result of any attempt to hamper Microsoft Ads — instead, it reflected the challenge of doing so despite Google’s good-faith efforts.

I expect both sides to continue to try to develop their competing narratives during the next couple of weeks, and I’ll also be paying attention to what other significant disagreements emerge as the States’ case unfolds.

Professor Jerath’s expert testimony

While the focus of the case has begun shifting towards SA360 and away from the default deals, today’s testimony from digital marketing expert Kinshuk Jerath was part of the DOJ’s case. The same will be true for the additional expert testimony we hear on Monday from Professor Whinston.²

Professor Jerath’s testimony got pretty technical at times — and he faced a lengthy cross-examination from Google that sought to challenge the bases for his conclusions — but he provided four high-level opinions that support the DOJ’s case:

1. General Search Text Ads are a distinct product category.

2. Search Ads more broadly are a distinct product category.

3. Effectively providing Text Ads and other Search Ads requires significant resources, and advertisers have few alternatives apart from Google.

4. Google harms advertisers through its withholding of information and control of the ad actions.

What happened yesterday?

I wasn’t able to write an article yesterday, but the majority of yesterday’s testimony was from two witnesses called by the States: Ryan Booth from Home Depot and Arjan Dijk from Booking.com.

Booth is the Senior Manager of Paid Media at Home Depot where he oversees the “hundreds of millions of dollars” Home Depot spends on Google Ads. During direct examination from the States, Booth explained that his team’s focus “tend[s] to be lower funnel…We’re spending money to try to drive transactions.”

He also testified about how Home Depot recently began using a search engine marketing tool called Skai in addition to SA360, which allows Home Depot to use auction-time bidding for Microsoft Ads as well as Google Ads. Booth said the use of auction-time bidding on Skai has “dramatically” improved the performance of Home Depot’s ads on Bing.

On cross, Google tried to undermine the usefulness of the purchase/marketing funnel construct by highlighting the focus Home Depot places on return on ad spend (“ROAS”) when deciding which ads to place and on what channels.

The parties’ disagreement about the relevance of the purchase funnel construct was further highlighted during the testimony of Dijk. Dijk explained that “high intent” — i.e., the bottom of the purchase funnel — “is really the name of the game” for Booking.com because the average consumer makes travel purchases only 1-2 times a year. That means it’s hard for Booking.com’s brand to always be top of mind for consumers, so instead, it’s critical that Booking.com shows up when a consumer is demonstrating high consumer intent such as entering a search query for “hotels in Waikiki.”

Google’s cross-examination pushed back against Dijk’s reliance on the purchase funnel in familiar ways, but it also produced some contentious moments as Google’s lawyer sought to establish that Dijk was biased against Google.

Dijk worked at Google for more than a decade until 2019, but his previous affiliation with the company didn’t cause him to pull any punches during his testimony. He described Booking.com’s relationship with Google as “friendly” but “one-sided,” in which Google acted as a “benevolent dictator” that left Booking.com with no choice but to accept any changes it imposed.

During a dramatic portion of Google’s cross examination, Google’s lawyer asked Dijk about his refusal to answer a question during his deposition because he found it “condescending and stupid.”

The question Dijk refused to answer was whether he was saying that a company is not allowed to try to make a profit. When Google’s deposition lawyer pressed Dijk for an answer to the question, Dijk responded: “What will you do? What will you do, Chul? I'm curious.”

After reading the deposition exchange aloud, Google’s trial lawyer followed up by asking: “Are you so bitter at your former employer that you were actually challenging Google’s lawyer to a fight at your deposition?” Judge Mehta intervened to move things along before Dijk could provide much of an answer.

All of this made me think there might have been some ugly ending to Dijk’s tenure at Google that I was waiting to hear Google ask Dijk about. These questions never came, and Dijk concluded his testimony by clearing up the matter on re-direct examination from the DOJ: “I worked myself 11 years at Google. I had the best professional time of my life….I left in very high standing….I know most of the senior people very, very well and deeply respect them. So there’s no issues with that and I would characterize that as a very good relationship.”

One additional moment to note from Dijk’s testimony: after Google’s lawyer unintentionally referenced a number that Booking.com had claimed was confidential, he made a passing comment about it being “very difficult to make a record with all these confidential documents.” The comment wasn’t dwelled on, but I noticed a couple of the DOJ lawyers share a glancing laugh with each other.

That’s all for this week as Judge Mehta scheduled an off-day in the trial for tomorrow. Things will pick back up again on Monday with more testimony from Professor Whinston.

1. Just as the States have conducted their own direct examinations for many of the DOJ’s witnesses, it is possible that the DOJ will also conduct their own direct examinations for some of the States’ witnesses.

2. I believe the initial plan was for the DOJ to complete its case before the States presented their case, but scheduling and logistical issues have caused certain witnesses to be called out of order. Next week, in fact, Google will call one witness as part of its defense because it’s the only date the witness is available. The States will not rest their case until the following week, though. Judge Mehta is likely allowing more flexibility in the order of the witnesses because it’s a bench trial rather than a jury trial.