US regulators: Google pays US$10b a year to maintain search dominance

Google has exploited its dominance of the internet search market to lock out competitors and smother innovation, the United States Department of Justice charged Tuesday at the opening of the biggest American antitrust trial in a quarter century.

“This case is about the future of the internet and whether Google’s search engine will ever face meaningful competition,” said Kenneth Dintzer, the Justice Department’s lead litigator.

Over the next 10 weeks, federal lawyers and state attorneys general will try to prove Google rigged the market in its favour by locking its search engine in as the default choice in a plethora of places and devices. US District Judge Amit Mehta likely won’t issue a ruling until early next year. If he decides Google broke the law, another trial will decide what steps should be taken to rein in the Mountain View, California-based company.

Top executives at Google and its corporate parent Alphabet Inc, as well as those from other powerful technology companies are expected to testify. Among them is likely to be Alphabet CEO Sundar Pichai, who succeeded Google co-founder Larry Page four years ago. Court documents also suggest that Eddy Cue, a high ranking Apple executive, might be called to the stand.

The Justice Department filed its antitrust lawsuit against Google nearly three years ago during the Trump administration, charging that the company has used its internet search dominance to gain an unfair advantage against competitors. Government lawyers allege that Google protects its franchise through a form of payola, shelling out billions of dollars annually to be the default search engine on the iPhone and on web browsers such as Apple’s Safari and Mozilla’s Firefox.

“Google pays more than US$10 billion per year for these privileged positions,’’ Dintzer said.

“Google’s contracts ensure that rivals cannot match the search quality ad monetisation, especially on phones,” Dintzer said. “Through this feedback loop, this wheel has been turning for more than 12 years. It always turns to Google’s advantage.”

Dintzer said the more searches Google processes, the more data it collects – data that can be used to improve future searches and give it an even bigger advantage over its rivals. “User data is the oxygen for a search engine,” he said. Because of its market dominance, “Google search and ad products are better than its rivals can hope to be”. That is why, he said, Google pays so much for its search engine to be the default option on products from Apple and other companies.

Dintzer said the Google “began weaponising defaults” more than 15 years ago and charged that it strong-armed Apple into giving its search engine a default position on their devices as a condition for getting revenue sharing payments. Dintzer accused Google of deleting documents to keep them out of court proceedings and sought to hide others under attorney-client privilege. “They destroyed documents for years,’’ Dintzer said. “They turned history off, your honour, so they could rewrite it in this court.’’

Google counters that it faces a wide range of competition despite commanding about 90 per cent of the internet search market. Its rivals, Google argues, range from search engines such as Microsoft’s Bing to websites like Amazon and Yelp, where consumers can post questions about what to buy or where to go. “There are lots of way users access the web other than default search engines, and people use them all the time,’’ said attorney John Schmidtlein, a partner at the law firm Williams & Connolly who is representing Google.

From Google’s perspective, perpetual improvements to its search engine explain why people almost reflexively keep coming back to it, a habit that long ago made “Googling” synonymous with looking things up on the internet. Schmidtlein said, for instance, the tweaks made Google’s search simply better than key rival Bing. “At every critical juncture,” he said, “they were beaten in the market.”

Google’s corporate parent, Alphabet, is worth US$1.7 trillion and employs 182,000 people, with most of the money coming from $224 billion in annual ad sales flowing through a network of digital services anchored by a search engine that fields billions of queries a day.

AP