WASHINGTON (CN) — In the fourth week of the federal government’s antitrust trial against Google, Justice Department attorneys focused on the tech giant’s level of control over its online search advertising business during questioning of a Google executive on Wednesday.
The bench trial centers on whether the so-called “gatekeeper of the internet” has grown into a monopoly, and so far Justice Department attorneys have focused on Google’s domination as the primary search engine by way of exclusive agreements with companies like Apple, Android and Mozilla.
Proceedings in front of U.S. District Judge Amit Mehta, a Barack Obama appointee, are expected to continue with testimony for another five to six weeks.
Mehta will then determine whether Google indeed broke the law, and if so, hold a second lengthy trial to determine the remedy, which could include forcing Google to sell off parts of the company.
In its October 2020 lawsuit, the Justice Department characterized Google’s domination over search advertising and internet search as creating a flywheel effect, where the tech company gathers information from users’ searches and uses it to improve, in turn, the effectiveness of search ads for advertisers, gaining more information with each click.
That loop makes search advertising particularly lucrative for Google. Advertisers pay some $40 billion each year to place ads on Google, according to the Justice Department’s complaint. Google shares some of its revenue with advertisers who commit to favor its search engine, creating a high barrier to entry for rivals who can’t pay a “multi-billion-dollar entry fee.”
Due to its dominance over search ads, the Justice Department argues that the tech giant can manipulate ad auctions and charge advertisers higher prices.
Justice Department attorney David Dahlquist pressed the point during testimony from Adam Juda, Google's vice president of product management. He presented a document Google had made for the European Union, which said the tech company can “directly affect pricing through tunings of our auction mechanisms,” and asked whether Juda agreed with that assertion.
Juda said he did not, but he did agree that "tuning" in general can have an impact on pricing.
As the 16-year Google veteran further explained, one can tune the rough formula used to estimate an ad's long-term value based on factors like the maximum bid an advertiser will pay for a click; the potential ratio of clicks to appearances on a page; and the quality of the ad and website it leads to.
Dahlquist likened the formula tweaks to “knobs” that Google can turn as it pleases to “extract more value” from the search ad process.
According to the testimony of Google ads chief Jerry Dischler during the second week of the trial, Google has quietly tuned its auction process before, raising prices by as much as 10% for typical advertisers.
Dischler said the company had also increased prices during dry spells. He read from an email he'd written to fellow Google executive Anil Sabharwal, quipping they were “shaking the cushions” on ad launches.
Another trial exhibit revealed that in 2019, Google made $98 billion from search ads.
The search ad business was so lucrative for Google that it factored into other business decisions within the company, Juda testified. Dahlquist asked him about a project referred to as “Incognito” — separate from the private browsing method — which would have added privacy features similar to those used by rival search engine DuckDuckGo.
Juda said the project was scrapped in part because it would affect Google’s revenue from search advertising. Dahlquist, looking to an internal Google document, pointed out that while it would have cost the company billions, its revenue would have stayed in the billions all the same.
When Dahlquist sought to make that document public, Google attorney Wendy Waszmer, of Wilson Sonsini Goodrich & Rosati, protested, arguing that it included trade secrets “at the core of product design.”
Mehta overruled the objection and allowed in a specific information box comparing features between DuckDuckGo and Google. The box revealed that Google had weighed whether it should adopt DuckDuckGo’s practices of letting user data expire, instead of saving it, including IP addresses, technical information about users' devices and cookies data.
The heated exchange is only the most recent example of an excess amount of secrecy requested, and even demanded, by Google and other tech companies like Apple and Microsoft as their executives have been called to testify at trial.
Since trial began on Sept. 12, closed-door testimony has become a regular occurrence, forcing members of the media and the public to sit outside Mehta’s courtroom and resort to observing who enters and exits to get a sense of the day’s testimony.
Google has filed 41 sealed motions or documents, the most recent on Tuesday.
Apple also filed a motion to quash subpoenas for the testimony of three of its executives, arguing the company had been “the subject of uncharacteristically overbroad and burdensome demands.”
The high level of secrecy has pushed outside trade associations like Digital Content Next to file a motion to “maximize public access to trial materials.” Even ruled that the government can post exhibits online after they’ve been shown in court, so long as Google does not protest before 9 p.m. the same day.
At the end of Wednesday’s proceedings, Mehta moved to unseal transcripts of testimony provided by Apple executives Eddy Cue and John Giannandrea and DuckDuckGo founder Gabriel Weinberg, with partial redactions.
The judge offered the strong public interest in the case as part of his reason for doing so.
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