The spiciest parts of the Google antitrust ruling have to do with Microsoft paying Apple for Bing
A 96-page ruling from Google on search antitrust: Findings of fact and more of law in a two-day bench trial
“The trial evidence firmly established that Google’s monopoly power, maintained by the exclusive distribution agreements, has enabled Google to increase text ads prices without any meaningful competitive constraint,” Mehta wrote in a 286-page ruling. “Unconstrained price increases have fueled Google’s dramatic revenue growth and allowed it to maintain high and remarkably stable operating profits.”
In 2020, a study was conducted to see what would happen to the bottom line if it was to reduce the quality of its search product. Even if the company made search worse it would not affect the revenues from Search.
The decision was called a historic win by the United States Attorney General. The path for innovation will beaves it for generations to come according to the assistant attorney general.
The case before Mehta traced back to increased supervision of the tech industry under Donald Trump. Before Donald Trump left office, the Justice Department filed a lawsuit against Google, making it the first of several against Big Tech companies to go to trial.
The opinion in the search antitrust case is very long. Because this was a bench trial, Judge Amit Mehta was on the hook to make factual findings as well as legal findings. So, there are over a hundred pages of findings of fact and even more of conclusions of law, adding up to a 286-page document replete with footnotes, redactions, and even an illustrative graphic of a search result for “golf-shorts” (which, apparently, came up a lot at trial).
In addition to Apple, Google also has contracts with cell carriers and device manufacturers to be the default search engine on Android devices (these contracts operate a little differently since they hinge on Google’s control of the Google Play Store).
The Apple/Google Co-Omega Agreement Does not Preserve the Future of Search and Search: Commentary on a 2016 Google-Apple Agreement
“I don’t believe there’s a price in the world that Microsoft could offer us,” Cue said at another point. They offered to let us use Bing for free. They could give us the entire company.
Google and Apple entered into their present contract in 2016. Their dealings date way further back, but around then, Apple rolled out Suggestions. (Think, for example, when you type something out into Spotlight and Apple suggests a website to you — that’s not the same as Google Search.)
The opinion of Cue doesn’t mean that Bing is bad. The opinion notes that Bing does not fare as well online as it does on mobile, but that is due to its different search quality.
It’s not just Bing that is refused the time of day, it’s also the other companies that don’t want to give Bing the time of day. None of these “Fortune 500 companies” have a real choice in the matter.
According to the opinion, in addition to the return for exclusive and non-exclusive default places, Google pays Apple a percentage of its net ad revenue.
This was significant. A traffic loss of 10 to 15% and a revenue loss of 4% to 10% were estimated by one analysis. The new 2016 contract includes a specification that “Apple’s implementation of the Safari default must ‘remain substantially similar’ to prior implementations” so that Apple “could not expand farther than what they were doing,” lest Apple “bleed off traffic.”
The terms of the contract seem to have worked out for both companies. Google and Apple extended the agreement in 2021: the contract will expire in 2026. Apple is able to extend the agreement by 2 years, if both parties agree, then they can prolong it for another 31 years. The contract requires both Apple and GOOGLE to defend this agreement in response to regulatory actions.
It would cost $6 billion a year to operate a GSE, and Apple has calculated what it costs to develop search capabilities. Meanwhile, in “late 2020, Google estimated how much it would cost Apple to create and maintain a GSE that could compete with Google.” Apple would have to spend something “in the rough order of” $20 billion in order “to reproduce [Google’s technical] infrastructure dedicated to search.”
In United States v. Google, there was a distinction between general search engines and specialized vertical providers. The heavy use of technical acronyms may make your eyes water, but the gist is actually pretty simple. A GSE is a search engine in the sense that everyone understands it — Google, Bing, DuckDuckGo, and so on.
There are several thousand boxes on the internet if you get really brainy about it. Sometimes you even use them in a similar way to Google Search — say, for example, to look for cheap flights to a specific destination or to buy a pair of black flared leggings. Booking.com is not the same as a general search engine that makes use of the World Wide Web. Do you, an ordinary person, need to logically justify this gut reaction? No. A court of law has done it for you already, in an outpouring of words you probably don’t need to read.
Nevertheless, says Judge Amit Mehta, social media platforms are distinct — they’re walled gardens of content. And more importantly, “there is little evidence that they actually compete with GSEs for search queries.” The TikTok study, he says, doesn’t get into whether the platform’s search quality results are competitive with Google’s — just because kids like TikTok doesn’t mean it’s in the same relevant market as Google Search. And TikTok is not the only social platform. One study suggests that an increase in searches on the internet could be due to a rise in use of Facebook.
The internet habits of zoomers are not relevant for Mehta when it comes to antitrust analysis. He writes thatImagine if the search quality was degraded by neglect or purposely. Imagine. Who. Could. Imagine. That.) “Would SVPs or social media platforms be able to shift resources to put out a product that resembles a GSE and thereby capture a significant number of dissatisfied Google users? The answer is no. It would take “extraordinary cost and expense” for even a juggernaut like Amazon or Meta to fill that hole in the market.
Maybe AI search is the future, but the future is not here yet — at least, not in a way that’s relevant to antitrust law. The judge says that an artificial intelligence may someday change search, but not anytime soon. Elsewhere, he writes that “[c]urrently, AI cannot replace the fundamental building blocks of search, including web crawling, indexing, and ranking.”
He has found that the need for user data to deliver quality search results has not been eliminated by generative artificial intelligence. The opinion’s findings of fact quote Neeva’s cofounder Sridhar Ramaswamy, saying that “the middle problem of figuring out what are the most relevant pages for a given query in a given context still benefits enormously from query click information. It is absolutely not the case that the models eliminate the need.
When you find golf-shorts, you don’t only get served with relevant results, you also get important information about what you think the results are. That feedback loop isn’t happening with AI chatbots.
The opinion quotes Pandu Nayak, the VP of search for the company, who said that it was important for them to have an infrastructure that understood the traditional ranking system. There is no sense in turning over our ranking to these systems. We still have total control over what is happening.
