Microsoft has poured over $100 billion into developing its Bing search engine over the past two decades but has little market share to show for it.
“The search engine industry has been impervious to any competitor entering,” attorney Kenneth Dintzer said.
Central to the government’s case against Google is the over $20 billion it says that Google pays Apple annually to be the default search engine on iPhones and the Safari browser across much of the world.
Google can afford to pay those sums and still enjoy enormous profits because it has the US market for search and search ads cornered, the government alleges.
Profit Boost Google’s deals with Apple date to 2002, when the Safari developer first gained the option to integrate Google search into the browser, according to court papers.
But in a deal struck that year, Google got something in exchange for agreeing to pay Apple half of its sales: Google search would be required to be the default in Safari.
Apple has avoided what it estimated at one point, according to court filings, would be $6 billion in annual costs to run its own search engine.
If Apple truly felt Google search wasn’t best, it can opt out of the deal, Google’s attorney Schmidtlein told Mehta.
Despite investing more than $100 billion in the development of its Bing search engine over the last 20 years, Microsoft has not gained much market share. In the US, Google is used for about nine out of ten web searches. Bing and a long list of lesser competitors split the remaining queries.
On Thursday the US government asked a federal judge in Washington, DC, to rule that Google maintains that lead illegally, by unfairly manipulating users to keep Microsoft and other competitors down.
Due to Google’s dominance, the US Department of Justice filed a lawsuit against the company in 2020, claiming that it had used exclusionary contracts to maintain a monopoly in violation of antitrust law. At the end of the previous year, the two sides began a covert trial, which lasted for almost five months while US Judge Amit Mehta considered the evidence.
On Thursday, Mehta heard closing arguments from government lawyers who contended that, in the absence of his intervention, Google’s hegemony would endure for years to come, despite emerging challenges from artificial intelligence chatbots such as ChatGPT. Attorney Kenneth Dintzer stated, “The search engine industry has been impervious to any competitor entering.”.
The government has filed a few lawsuits against the largest tech companies, but this is the first to go to trial since President Donald Trump increased antitrust scrutiny of the sector in 2019. The Biden administration is still going strong.
The government’s main argument against Google centers on the more than $20 billion that Google allegedly pays Apple each year to be the default search engine on iPhones and the Safari browser in most of the world. According to the government, Google pays wireless carriers, device manufacturers, and browsers an additional $1.5 billion annually for similar defaults in the US. The US search and search ad markets are allegedly all owned by Google, so the company can afford to pay those amounts and still make huge profits.
Google’s legal team responds that businesses like Apple pick Google as their default search engine not just for financial gain but also because it provides users with a better experience. According to the search company, browsers like Mozilla that have chosen to use alternatives to Google have lost users as a result of the move. John Schmidtlein, a lawyer, informed Mehta that “Google lawfully acquired monopoly power and scale.”. The boat was missed by Microsoft. “.
The question of whether Google gained its fame unfairly now stands before Mehta.
Increase in Profit.
In 2002, the Safari developer was given the opportunity to incorporate Google search into the browser, which is when Google first entered into agreements with Apple, according to court documents. According to court documents, the payments began when Sergey Brin, a cofounder of Google, proposed in 2005 that the company share a portion of its burgeoning search revenue or “help Apple out in other ways.”.
However, as part of an agreement made that year, Google agreed to give Apple half of its sales in exchange for Google search having to be the default in Safari. In the years since, more Apple services have been subject to the requirement, and the revenue share and associated incentive fees have changed.
Apple has escaped what it once calculated would have cost $6 billion a year to operate its own search engine, according to court documents. Rather, it has kept the excess profits for itself. In fiscal year 2020, Apple’s operating profit was estimated by the government to have been 170.5 percent due to payments made by Google.
Mehta questioned Google’s lawyers on Thursday regarding the payments. He questioned, calling the situation “odd,” and said, “If you’re talking about quality, why pay billions in revenue share?”. He questioned whether it was realistic to expect someone to invest billions of dollars not only to create a search engine but also billions of dollars to maintain Apple’s bank account in order to replace Google as the company’s default. Mehta questioned, “Don’t you think the authors of the Sherman Act would be worried?”. “What would it take for anyone to unseat Google?”.
According to the government, Google might be able to pay to be included as a search option on some phones and services, but it would not be allowed to do so if it meant that competitors would not be allowed to participate. According to the government, in that case, there would be more equal competition, and businesses like Apple should make more money overall.
Google’s lawyers admit that there would be significant and abrupt changes if Bing replaced Google as the default search engine on iPhones—just not in a way that users would prefer. Schmidtlein, an attorney for Google, informed Mehta that Apple had the option to back out of the agreement if it genuinely thought Google search wasn’t the best. He claims that Apple “has every incentive to make sure there is competition and that they are putting out the highest quality product.”.
On Friday, Mehta will hear closing arguments regarding Google’s hegemony in search advertising. It’s unclear when he will make his final decision; it might take months. After that, the case is likely to be delayed for several more years by appeals. To maintain its small search market share in the interim, Microsoft will need to continue investing in Bing.
Lauren Goode contributed additional reporting.
