Opening Act: The stakes of the Google trial

Both sides agree the future of the internet is at stake. They disagreed about everything else.

Day 1 of the Google antitrust trial is in the books. After years of build-up — from the FTC declining to file suit in 2013 after investigating Google’s allegedly anti-competitive search’s practices to the DOJ filing this case days before the 2020 Presidential election — we finally saw lawyers for both the federal and many state governments go head to head with Google in court.

Google chief legal officer Kent Walker walks out of the courthouse after the first day of trial with someone dressed as Mr. Monopoly walking closely behind. Photo credit: Matt Stoller

We already knew the broad strokes of the arguments each side would make. The government claimed that Google unfairly maintained a monopoly in general search and search advertising by paying billions of dollars to device-makers and internet browsers to be the default search engine. Google argued these agreements weren’t anti-competitive — making Google the default search engine benefitted consumers because Google was the highest-quality search engine, and consumers could easily switch to a different search engine if they disagreed.

The parties’ opening statements presented these fundamentally conflicting views of Google’s conduct and focused Judge Mehta on specific disagreements between the parties. But they also framed the broader stakes of the case, recognizing that this was merely the opening act in a two-month-long morality play. Judge Mehta will make the final ruling in court, but legislators are also paying close attention; regardless of the legal outcome, the facts that come out at trial could motivate a renewed reckoning with whether existing antitrust laws are equipped to regulate Big Tech.

In the DOJ’s opening statement, DOJ lead lawyer Kenneth Dintzer began by stating that “this case is about the future of the internet,” which required looking at what Google has done in the past. Dintzer made multiple references to Google “rigging the game” and “flexing” its monopoly on competitors. He also took a shot at Google’s use of history-off chats, which went as high as Google CEO Sundar Pichai: “They turned history off, your Honor, so they could rewrite it in this courtroom.”

When Google’s trial-lead John Schmidtlein got his chance to deliver an opening statement, he emphasized the ease of switching to a different search engine. He contrasted that to the difficulty Microsoft users would have faced in the late 1990s trying to switch their internet browser from Internet Explorer to Netscape. Schmidtlein further noted that the government’s “supposed victim [is] Microsoft,” not some small innovative tech company.

Tons more went on today inside and outside of the courtroom as the DOJ also called Google’s chief economist Hal Varian as its first witness in the afternoon (who will continue his testimony tomorrow). Here are a few additional notes on the things that stood out to me:

Hal Varian takes the stand

DOJ began its presentation of evidence by calling Google’s chief economist Hal Varian to the stand. When I first heard that Varian would be the DOJ’s first witness, I have to admit I was a bit surprised. This was the government’s first opportunity to build its case through favorable testimony and it chose to call a current and long-time employee of the company. Within just a few minutes of testimony, though, it was clear why the government was starting its case with Varian. The very first document the DOJ asked about was a memo that Varian wrote in 2003. This memo not only stated that Google was “a dominant player in an industry” that was “trying to discourage entry by a potential competitor”, but also that Google employees should “be careful about what we say in both public and private.”

Who showed up

Not surprisingly, a lot of people showed up to watch the trial, apparently as early as 4:30 AM. I got there around 6:15 and didn’t see more than a couple of people waiting outside either entrance, but the point still stands: a lot of people wanted to watch the first day of this historic trial. So much so that in addition to the courtroom, the court opened up a public overflow room and two additional media rooms where the trial was broadcasted.

Among those who wanted to be there for the first day were DOJ Antitrust head Jonathan Kanter and Google’s chief legal officer Kent Walker. They both sat in the front rows of their respective sides of the courtroom. There was even an unconfirmed rumor being whispered in the media row that the two shook hands (which is notable in light of the recent contentions between Google and Kanter).

I didn’t personally see her, but I was also told by someone else that the recently-appointed D.C. District Court Judge Ana Reyes slipped into the courtroom to watch part of the trial in the afternoon. Judge Reyes is now a colleague of Judge Mehta, but she was watching her former colleagues too; before being appointed, Judge Reyes was a partner at Williams & Connolly, the firm that is representing Google in this trial.

There was also quite a scene outside the courthouse at the end of the day as photographers and video crews waited for the key players in the case to walk out. This scene is what ended up producing the photograph Matt took of Kent Walker being shadowed by a person dressed up as Mr. Monopoly.

Defining a relevant market

There are some interesting legal nuances to some of the key disagreements in the case. For Judge Mehta to find that Google was an illegal monopolist, he must first find that Google had monopoly power over a relevant market. Normally, antitrust lawyers define relevant markets through something called the “SSNIP” test, which asks whether a hypothetical monopolist in the market could profitably impose a small but significant non-transitory increase in price.

So as an example, if you were trying to determine whether bananas were a relevant market, you would ask whether a hypothetical monopolist in the banana market could raise the price of bananas without losing money because consumers choose to buy other fruits instead. If a price increase in bananas would be profitable for the hypothetical monopolist, then bananas are a relevant market; if consumers would respond to more expensive bananas by buying apples or oranges instead, then bananas aren’t a relevant market.

The problem with the SSNIP test in this case is that it doesn’t really work for free products like Google search — and Judge Mehta even asked Google during its opening statement how he should define a market when there is no price for the product. Google answered that the question should be whether another company’s actions force Google to take competitive action in response to remain profitable. Something that was not discussed — but may come up later on in the trial — is that Google search is in at least some sense a two-sided market that deals with both users and advertisers. While Google search is free for users, it costs money for advertisers; this means you could apply the typical SSNIP test by asking whether Google can profitably raise the price of its advertisements (which DOJ argues Google can).

“No default placement — no revenue share”

There was one other detail from DOJ’s opening statement that stood out to me, because it previewed some potentially pretty damaging evidence to Google that I don’t believe was publicly known before. According to the DOJ, Apple at one point in the 2000s told Google that it was considering making a choice screen for search engines so that users would be prompted to choose what search engine they wanted to use. Google’s alleged response: “No default placement — no revenue share.” In other words, Google made it explicit that it was only willing to pay Apple if Apple made Google its default browser.

That’s all for today. I’ll be there bright and early again tomorrow.