Monday, January 16, 2023

Redacted versions of summary judgment motions shed light on Google's litigation strategy against DOJ and state AG antitrust lawsuits

One of the candidates for "Antitrust Trial of the Year 2023" is the upcoming United States et al. v. Google trial in the District of Columbia. The DOJ and three dozen U.S. states are suing Google over its search engine practices, such as the agreement with Apple that makes Google the default search engine on iOS (for an amount well north of $10B per year). There is also the possibility of another DOJ v. Google lawsuit, which would focus on ad tech. Politico and other media have reported that the Assistant Attorney General in charge of the Antitrust Division, Jonathan Kanter, has been cleared to oversee any Google cases. Google requested his recusal in late 2021, and now, in early 2023, the DOJ's decision may pave the way for the federal government's next enforcement action against Google.

There was a deadline for summary judgment motions in mid-December, and the parties then had about a month to file public redacted versions. Last week, the public versions of Google's summary judgment motions--one against the DOJ's claims and one against the additional claims brought only by the State of Colorado and other states--became available.

First, here's the motion against the complaint that has the most broadbased support:

United States of America, et al, v. Google LLC (case no. 1:20-cv-03010, District of Columbia): Defendant Google LLC's Memorandum of Points and Authorities in Support of Its Motion Motion for Summary Judgment

This case has three parts: Google's agreements to make its search engine the default one in various browsers; Google's Android licensing terms that have the same effect on Android devices; and the last part is about IoT devices (such as smart speakers and TVs) as well as Google's practice of making key features and functionality available only as part of proprietary Android applications while allegedly removing key features from the open-source Android code base.

The largest one of Google's exclusive agreements is the one with Apple. As Google's motion explains, that partnership predates the iPhone and the iPad. 20 years ago, Apple launched the first version of its Safari browser, which provided access to Google via a search box.

What Google cannot deny, however, is that Apple was a niche player at the time ("When Google and Apple entered their first revenue share agreement in 2005, the Safari browser accounted for an estimated 1.3% of worldwide browser usage"), and that's why the amount that Google pays now to be the default search engine on Apple's products dwarfs what it paid early on.

Other important agreements include the one with Mozilla, which for a long time was the primary funding source for the development of the Firefox browser. By now, Chrome has way more market share--and it belongs to Google.

The motion also makes reference to deals with Opera and UCWeb, but says none of those "has garnered more than about 1% of browser usage in the U.S. since 2009."

Google argues that

  • partners such as Apple choose Google's search engine because it's the best,

  • end users want Google because it's the best,

  • third-party browsers and Google's Chrome make it very easy for users to switch the default search engine if they want,

  • Google's agreements with Apple and others allegedly don't even prevent them from promoting other search engines (some of Google's partners actually do promote other search engines according to Google), and

  • if one wanted to argue that any kind of foreclosure happened, the market share impacted by it would have been less than 1%.

I have a plausibility problem with this: if everyone (browser makers and users alike) chooses Google anyway, if Google didn't even have a guarantee that it would be the default search engine, and if this had practically no effect in terms of monopoly maintenance, why did Google spend so much money on it? Last time I checked, Google was not a charity. Tens of billions for nothing? I don't buy that.

Still, the governmental plaintiffs will have to overcome all of those defenses, and the fact that Google monopolizes from an incredible position of strength may up the ante.

Google's Android agreements in question are

  • the Android Compatibility Commitment (ACC), formerly known as Anti-Fragmentation Agreement (AFA),

  • the Mobile Application Distribution Agreement (MADA) (which OEMs need to sign so they can distribute Google's proprietary apps, such as the Google Play Store app), and

  • revenue-sharing agreements (RSAs), some of which have different names (such as Mobile Incentive Agreements, or MIAs).

Google argues that all those contracts serve legitimate purposes and that end users remain free to select different search engines. Also, Android competes with Apple's iOS.

The motion stresses that the legal standard is high: in order to be anticompetitive, the challenged conduct must be "exclusionary, rather than merely a form of vigorous competition." And even a monopolist "remains free to compete and to maintain its monopoly through 'competition on the merits.'" Google then tends to conflate the merits with making the highest bid, benefiting from economies of scale. As the Competition Commission of India explained in its recent decision, Google's competitors simply can't match those bids.

Google points to its rights to define its products in accordance with Allied Orthopedic and Microsoft precedent.

The State of Colorado's complaint (together with three dozen other states) incorporates the DOJ's claims, but adds some others on top:

State of Colorado, et al., v. Google LLC (case no. 1:20-cv-03010, District of Columbia): Defendant Google LLC's Memorandum of Points and Authorities in Support of Its Motion Motion for Summary Judgment

Google describes the states' allegations as follows:

(1) designing certain units appearing on its search engine results page in a way that allegedly discriminates against companies that Plaintiffs call “Specialized Vertical Providers” (“SVPs”), as well as entering into certain data contracts with these SVPs that improve search results; (2) designing and operating Google’s search advertising tool, Search Ads 360 (“SA360”), in a way that provides incomplete interoperability with certain Microsoft advertising platform functionality; and (3) entering distribution agreements involving Google Search that Plaintiffs claim are exclusionary.

To an even greater extent than in the DOJ case, Google emphasizes that its "product design decisions" don't violate the antitrust laws. It's all just for the user experience, Google suggests. Google also argues that the plaintiff states "place [SVPs] outside the alleged relevant markets."

Google describes the SA360 interoperability part of the case as a duty-to-deal issue.

I'll go into more detail when the opposition briefs have been made public.