The Curtain Rises on the Key Question: Does Google Have Rivals?

In the 'Rocket Docket' court, the Google trial starts with fights over market definition. If Google is a monopoly, why does it compete with a host of other platforms, like Meta, Amazon, and TikTok?

Yesterday, on a sunny and brisk September morning in Alexandria, VA, the latest antitrust case against Google kicked off.

Before getting into the legal happenings inside the courtroom, it’s important to set the scene, as the context in which high profile trials such as these play out, is quite simply a world unto its own.

The United States District Court for the Eastern District of Virginia in Alexandria sits in a series of clean and well-kept plazas containing office buildings, retail, the United States Patent and Trademark Office, and other businesses. Directly across from the courthouse is a towering Westin hotel, seemingly purpose built for its main function—temporarily housing a revolving door of big law attorneys jetted in from around the country to partake in what is known as the “Rocket Docket”—the nickname given to this court for its exceptionally speedy disposition of cases—its status further elevated by its close proximity to DC, and the fact it routinely plays host to high profile federal cases.

Outside the courtroom is the phrase characterizing the Eastern District of Virginia, “Justice Delayed Justice Denied.”

On this morning, the line of these attorneys stretched, literally, around the block, waiting for the court to open. Both Google and the government brought many attorneys in tow. Even more numerous were the lawyers representing the multifarious “interested party”—other businesses and powerful organizations who stand to be greatly affected by the precedent that will be set in this case.

Standing in line, the banter that could be overheard in this who’s who of big law was extraordinary— debates over Gucci vs. Louboutin heels, which Ritz Carlton is better to stay at, and tactical discussions over what snacks to bring in one’s bag that were the least sticky. There was talk over how to organize one’s “war room” in the hotel across the street (meaning the stay behind team of associates supporting the lawyers in the trial) and other strategic considerations.

To enter the courthouse, each person in line had to present their driver’s license—revealing, somewhat predictably, that almost all were lawyers from New York, with a handful from DC, and some from California—a testament to how issues of such broad national and international reach are presided over by legal elites from a small enclave of cities.

Google, by my count, had at least six attorneys (partners) sitting at counsel tables, with more attorneys, who looked to be associates, sitting in the back. This team is no doubt backed up by more attorneys operating out of their respective firm offices, and at their hotel. Partners at big law firms typically charge north of $2,000 per hour, with associates somewhere between there and $1,000 per hour, around the clock, for weeks on end of proceedings, following years of litigation to get to this point. Add it all up and trials like these cost Google hundreds of millions of dollars in legal fees.

Back in February I was talking to an antitrust defense lawyer from the Midwest in federal court in Boston, who told me about how many companies are forgoing acquisitions altogether, citing the high cost of a defense should they receive a legal challenge. Here though, with a $1.84 trillion market cap, Google can certainly afford it.

Inside the court, no electronics are allowed, a policy that is a main gripe of attendees of this case, and something that people could be overheard discussing more than any other topic. Judge Brinkema denied requests from corporate media, including The New York Times and The Washington Post, even Google’s own lawyers, to bring in phones and laptops. The effect of this policy, among others, is that it seriously stymies the flow of information and news reporting coming out of court, disincentivizes press coverage, significantly lessens public awareness, and makes participating in the trial, in any capacity, particularly as a media member but especially as a lawyer, a sort of bizarre and strenuous endurance sport.

A policy this aggressive is rare in federal court in the United States, and was called further into question upon the crowd being allowed up to the courtroom this morning, when a member of the press collapsed, suffering a cardiac event, which sent lawyers sprinting down seven floors to yell to as officer to call for help. The reporters that were with him were unable to contact his family or their editor, as all were without any electronics. Last we heard, he was conscious and on the way to the hospital.

This brings us to the start of the trial itself. The government, represented by Julia Tarver Wood, opened first, telling a convincing story of one firm dominating an industry, a story with which many of us by now are familiar.

“Over the next 30 minutes, 270m open web display ads will be shown, which is 240x more than the number of stocks that will be traded on the New York Stock Exchange,” Ms. Wood told the Court.

The government went on to talk about this being a case that “comes down to control,” where a firm—Google—"uses market power to control an entire marketplace, where prices go up, and innovation goes down.”

The government described its case as an effort to “remove the hold of the defendant over the adtech industry.”

In its opening statement, Ms. Wood made reference to Google’s infamous cutting of a cashier’s check to the Justice Department this year for an amount it claimed represented the government’s full damages—in order to avoid a jury trial:

“We’re not here to adjudicate damages, Google already paid to avoid a jury trial…,” the government said.

On screen in the courtroom were a number of exhibits that highlighted the most compromising discovery emails from Google, most notably the notorious “New York Stock Exchange” email I cited in my first post, where Google employee Jonathan Bellack compared Google’s dominance in the ad market to “Goldman or Citibank own[ing] the NYSE (New York Stock Exchange).”

The dominance Google has amassed in advertising through acquisitions played a central role in the government’s opening statement, with Ms. Wood noting that, “once again, with the power of the purse, a competition problem was resolved [by Google].”

Attention then turned to tying, specifically Google’s software used by publishers, DoubleClick for Publishers (DFP), and Google’s exchange, AdX. The government let linger on the screen a while an exhibit showing a system of header bidding in which Google would “bid” a penny more than the highest bid, after being able to see competing bids through the ad exchange—akin to being able to look inside the envelope of bids in an auction.

Next up, Google’s opening statement was delivered by Karen Dunn of Paul Weiss, who is also in the news lately for her simultaneous role in Kamala Harris’ presidential debate preparation.

“This is a case about transformative innovation,” Ms. Dunn declared.

The theme of technological evolution played a central role in Google’s framing of the case, with Ms. Dunn speaking to how “it used to be” that publishers like the New York Times and The Washington Post would sell ads themselves for their print newspapers.

 “This is what funds the world’s innovation,” Ms. Dunn said, apparently referring to Google’s ad business. Google also touted the benefits of its services to small businesses. “The ad tech industry is intensely competitive, with new entrants all the time,” she added.

Google claimed that the plaintiffs will not be able to prove their relevant market, and displayed a thought-provoking exhibit showing that over the years, Google’s ad revenue has increased while its approximate share in a single 2-sided market for US display ads decreased, arguing this was evidence for the competitive nature of its industry, and that is has a smaller “piece of the pie.”

Over time, it became clear that while the government’s opening was strong in its narrative and its presentation of the big picture, Google’s opening statement was taking advantage of the fact this trial is a bench trial, and frequently cited to and distinguished case law, something that to my recollection and notes, the government did not do.

Ms. Dunn also hit upon certain legal constructions that courts like to embrace, like pointing to “absurd results” that would ensue when embracing the government’s argument, showing that the government “gerrymandered,” or put differently, selectively included and excluded facts that helped or did not help the government’s case, and at every turn, seemed to cite to authority on point.

Google’s lawyering was sharp and focused mostly market definition and pounded the existence of competitors in every instance it could. Market definition is going to be the fulcrum for the case. The government alleged three different markets, a market for publisher ad servers, a market for ad exchanges, and a market for ad networks, trying to limit questions of competition to Google’s control over slices of the advertising world. Google would prefer to have a comparison of its advertising products to all other online advertising platforms (from Amazon to TikTok to Snap), which would lead the judge to conclude it’s not a monopolist.

While the government bears the burden of building a foundation upon which to make its case, in informal discussions during the morning break, many legal observers in the hall said they thought Google had a superior opening, or at the very least, were impressed with the lawyering. It’s hard to say how meaningful such chatter is, as the courtroom crowd is generally sympathetic to defendants. But I thought Google did a good job.

After opening statements, the government called Tim Wolfe, Vice President of Revenue Operations at media giant Gannett to the stand. The government’s objective in calling Mr. Wolfe was to show the harms of Google’s market dominance over online display advertising. Mr. Wolfe said that $10 million out of $15 million that Gannett spends on ads, it is spending with Google. It’s a bit confusing, since Gannett both pays Google and gets revenue from Google’s programmatic ad services. Wolfe spoke to a reduction from 33,000 employees to 10-11,000 employees over a span of recent years due a reduction in ad revenue.

Asked bluntly whether there is realistically any Google alternative ad servers to Google, Mr. Wolfe said no.

However, upon being asked if Gannett could develop its own ad server, Mr. Wolfe said Gannett does not have the “technical resources or core competencies” to develop this capability.

Notably, Mr. Wolfe shortly thereafter said that “Gannett performs well with Google.”

Following this comment, and upon the government lawyers conferring with each other, the government ended its direct examination of Mr. Wolfe.

On cross examination, Google focused heavily on a file called “ads.txt,” which is embedded in many websites that use display ads, and shows what ad networks a publisher is using.

In this file, which essentially looks like HTML code, Google highlighted a series of other ad networks Gannett publications were using—the point obviously being to demonstrate that not only does Google have competition, but that publications such as those under Gannett are in fact doing business with them.

Next up was Andrew Casale, the president and CEO of Index Exchange.

Mr. Casale testified that it was not common for publishers to create their own ad servers, citing the complexities and expertise involved, and that in today’s day and age a publisher would likely also need to itself be a tech company in order to do so. He also testified that it is not common for publishers to switch ad servers, describing how entrenched ad servers become in a publisher at a business level, making it onerous to switch, creating high switching costs and structural disincentives.

Mr. Casale was then cross examined by Bill Isaacson of Paul Weiss. Disputes over objections and questions asked and answered began to dominate, with Judge Brinkema, apparently frustrated with repetitive questioning, frequently began instructing counsel to move along, and instructing Ms. Wood to address her objections on redirect. Judge Brinkema also showed frustration with collateral testimony being solicited by the government.

Mr. Casale, a government witness, had a few remarks that stood out for the fact they may not help the government’s case—claiming that “companies can compete with us in a second” and that header bidding “lead to hyper competition.”

Finally, the Court heard from Joshua Lowcock, President of Media at Quad, described as a marketing expertise company, and James Avery, founder and CEO of Kevel. The government attempted to reinforce its market definition, as well as the fact that programmatic display ads cannot be easily switched away from Google to any viable alternative. Once again, Google sought to show it has rivals, and that ad buyers have different meaningful options.

Well, that’s it for Day 1! I’ll be back to update you on what happens next.