What we can learn from one of Judge Mehta's past antitrust decisions

On Day 24, Google began its defense with an out-of-order witness: Google VP of Search Pandu Nayak

The Google case isn’t the first major antitrust case Judge Mehta has presided over. In 2015, he granted the FTC’s motion for a preliminary injunction against Sysco’s proposed merger with US Foods.(Photo by Robert Alexander/Getty Images).

Before I report on the testimony we heard today, I want to offer a note on what might be one of our best windows into how Judge Mehta views one of the key issues in this case.

As Bloomberg Law highlighted in a profile of Judge Mehta published this morning, Judge Mehta has ruled on a major government antitrust enforcement action before: Federal Trade Commission v. Sysco Corp. In that 2015 decision, Judge Mehta granted the FTC’s motion for a preliminary injunction against Sysco’s proposed $8.2 billion merger with competitor US Foods.

Judge Mehta’s order to halt the deal until it could receive full administrative review from the FTC caused Syco and US Foods to abandon the combination entirely. In the Bloomberg article, former FTC general counsel Stephen Calkins described portions of Judge Mehta’s opinion as a “hymn to the Biden administration’s views” and contrary to the “words that a conservative law and economics judge would be writing.”

To be sure, there are plenty of important differences between the Sysco case and the Google case, so the relevance of Judge Mehta’s reasoning and ruling in that case shouldn’t be overstated. But just as the DOJ and Google have argued over the relevant market definitions in this trial, the government and defendants also sharply disagreed about the relevant market in the Sysco case with Judge Mehta’s opinion describing the issue as the “parties’ primary battlefield.”

I won’t get into the weeds of Judge Mehta’s discussion of the relevant food service distribution market — much of it is applying specific facts about the proposed Sysco-US Foods merger to the legal framework for defining an antitrust market — but I will flag a couple of noteworthy excerpts from his analysis.¹ These may or may not have been part of what Calkins was referring to when he told Bloomberg Law that Biden administration enforcers would be “smiling” if they read the opinion.

As a reminder, one of the disputes in the Google trial has been over whether general search is a relevant market. In its complaint, DOJ alleged that general search engines are unique because they are “one-stop shops” for answers to all kinds of queries; according to the DOJ, “other search tools, platforms, and sources of information are not reasonable substitutes for general search services.”

Google has countered that internet users obtain information from all kinds of digital platforms in addition to general search engines. The argument is that Google doesn’t compete to be a one-stop shop for information, but rather it competes with a number of other “vertical search providers” like Yelp, Amazon, TikTok, and many others depending on the nature of the specific query.

This disagreement between DOJ and Google parallels a key issue in the Sysco case: whether specific modes of food service distribution were reasonable substitutes for the “product breadth and diversity” of broadline food service distribution. With that parallel in mind, here are some interesting excerpts from Judge Mehta’s decision:

• “The most distinguishing feature of broadline distribution is its product breadth and diversity….This product breadth and diversity enables broadliners to serve a wide variety of customers and to be a one-stop shop, if the customer wishes….The other distribution channels pale in comparison to broadline in terms of product breadth and diversity.”

• “Overwhelmingly, the evidence shows that players in the foodservice distribution industry—both its suppliers and customers—recognize broadline, systems, specialty, and cash-and-carry to be distinct modes of distribution….In short, the industry widely recognizes that broadline distributors offer a unique cluster of products and services that is not functionally interchangeable with other modes of distribution.”

• “Defendants are indisputably correct that customers buy across channels, especially independent restaurants. They are also unquestionably correct that some customers, particularly quick service and fast food restaurant chains, are capable of moving large segments of business from broadline to systems. But the fact that Defendants sometimes compete against other channels of distribution in the larger marketplace does not mean that those alternative channels belong in the relevant product market for purposes of merger analysis….”

Though Judge Mehta is addressing a very different industry, these quotes indicate a receptiveness towards the theory underlying the DOJ’s relevant market definition: that the breadth of products or services offered by “one-stop shops” meaningfully distinguish them from distributors that specialize in a narrower range of business.

One aspect of the Sysco case may bode less well for the DOJ, however. In that case, Judge Mehta weighed the competing economic expert witness testimonies and specifically found the FTC expert’s analysis and conclusion to be “more persuasive than that advanced by Defendants’ expert.”

Who was the FTC’s expert witness that Judge Mehta found to be compelling? Dr. Mark Israel, an experienced economic expert witness with a PhD from Stanford, who has provided live testimony more than 50 times. That’s significant because Dr. Israel submitted an expert report on behalf of Google in this case and I would expect him to be called to the stand to testify during Google’s defense

To the extent that the credibility of expert witnesses is important — which I discussed in my post yesterday — Google’s expert witness has already proven himself to be credible in the eyes of Judge Mehta.

What happened in court today?

As for today’s action in court: to accommodate scheduling issues, we had a brief hiatus from the Plaintiffs’ presentation of evidence as Google presented the first witness in its defense: Google VP of Search Pandu Nayak.

Nayak, who also has a PhD from Stanford, joined Google in 2004. As one of Google’s four VPs of Search, his primary focus is on search quality.

Google’s direct examination of Nayak asked him about the various innovations Google has made to improve the quality of its search results over the years. The general thrust of the testimony pushed back against the DOJ’s theory that scale is critical to Google’s higher quality. As The New York Times article headline put it: “In Antitrust Trial, Google Argues That Smart Employees Explain Its Success.”

Nayak’s testimony didn’t fully refute that user data played a role in the quality of Google’s search results — but he emphasized Google’s development of machine learning technology like BERT and MUM, which have decreased the importance of user data in providing relevant search results. He further explained that by their very nature, “long tail queries” produce very few clicks, so “language understanding becomes the crucial element” in returning useful search results for them.

Some of Nayak’s testimony also touched on the market definition issue I discussed above as he testified that Google measures itself against all kinds of places on the internet where “people to go to get information.” On cross-examination, though, DOJ asked him if Google does latency or Information Satisfaction score comparisons with TikTok like it does with Bing. Nayak said they couldn’t do such comparisons because TikTok is a “different experience” than a general search engine.

Nayak was the only witness we heard from today, but Judge Mehta started the day with more discussion of The New York Times’ motion to intervene. I summarized it on X/Twitter (embedded below), but it seems like there will be more follow-up on it with NYT’s counsel present in the courtroom tomorrow. Overall, Judge Mehta seemed skeptical of most of the NYT’s requests, but said the filings persuaded him he was wrong about what the process should be for closing the courtroom. From here on out, he is instructing the parties to notify him a day ahead of time if they anticipate needing any closed session so that he can give a representative of the media an opportunity to object and argue the courtroom should remain open.

That’s all for today. I’ll be back in the courtroom tomorrow to hear testimony from two witnesses called by the States before the trial pauses for a long weekend until next Tuesday.

1. Full disclosure: I haven’t yet read the full 88-page opinion Judge Mehta wrote in the Sysco case. I am drawing here only from his 28-page-long discussion of the relevant market.