Google takes questions about advertising as U.S. court case draws to a close

(Bloomberg) — Judge Amit Mehta presided over two days of closing arguments in the U.S. antitrust case against Alphabet Inc., ending Friday. It will take weeks and months to consider the ruling, which could have significant implications for the entire technology industry. .

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But despite frequent pointed questioning of both sides, the Obama-appointed federal judges gave few hints about what they intended to decide.

Antitrust enforcement officials claim Alphabets Google illegally maintains a monopoly over online search and related advertising. Mr. Mehta on Thursday and Friday reviewed Google's multibillion-dollar exclusive deals with Apple Inc. and others to be the default search engine on mobile phones and browsers. The judge then turned to Google's lucrative advertising business, which places ads on search queries, but the government's view is that the company's dominance has allowed it to raise prices for advertisers without delivering results. showed that.

Closing arguments will be held six months after testimony ended last November to give the judge time to consider the evidence. The case is the first antitrust case pitting the federal government against a U.S. technology company in more than 20 years. Mehta is expected to rule later this year on whether Google broke the law, and the ruling will require the tech giant to separate Alphabet's search business from other products such as Android and Chrome. It may force a change in the way business is done.

In its defense, Google argued that search ads are just one way for advertisers to reach consumers, and that it is losing business to Amazon.com Inc. and ByteDance Inc.'s TikTok.

Mehta seemed skeptical.

Advertisers have consistently said they can't walk away from search advertising. They are unique, Mehta says.

there is no other choice

David Dahlquist, an attorney with the Department of Justice, said advertisers have other options besides using Google's search ads, such as text that appears at the top of results pages in response to a user's query and shopping promotions, to most consumers. He said there was no option to reach him.

Google sells search ads through automated auctions that occur within one second of a user starting a search. The Justice Department says Google is changing its auction rules to increase prices by up to 15% while limiting the information marketers can see about where their spending is going and making it harder to opt out of certain ad auctions. claims.

story continues

Dahlquist said Google kept secrets from advertisers about how its search ads worked and how their ad dollars were spent. Only monopolies can profit from making their products worse, he said.

In response, Google's lead litigator, John Schmidlein, argued that Google raised the price of search ads while improving the quality of the ads.

Mehta asked why Google wasn't more transparent about some of the changes it made to its ad auctions.

Isn't this proof that Google can change prices behind the scenes and that advertisers aren't that smart? He asked.

trade secret

Schmidlein said Google is in no position to tout its trade secrets or what it's doing to improve itself. We weren't running around promoting all the improvements we were making so Bing could copy it.

The Justice Department's Dahlquist said that even though Google is a monopoly, it still has an incentive to invest in improving its advertising technology. But it would be a mistake to think that improvements would inevitably lead to higher prices, he said, citing the television market as an analogy, noting that despite improvements in display quality, only 5. He said it was cheaper than the TV from a year ago. It has improved, he claimed.

Dahlquist said this scenario is an example of pricing being tied to healthy market competition, something that doesn't happen in search advertising.

To be clear, your argument is that advertisers will pay less in a more competitive environment? Mehta asked.

Yes, Dahlquist said.

chat destruction

Near the end of the hearing, Mehta accused Google of failing to preserve documents that should have been submitted to the Justice Department during an antitrust investigation, suggesting the company could be found at fault.

He said that Google's document retention policies still leave a lot to be desired, adding that it was shocking to me that the company was leaving it up to its employees to decide what to keep.

It is unclear whether there is a treasure trove of unsaved material, he added.

The Justice Department alleged that Google intentionally withheld critical evidence through its “Communicate with Care” program. The program instructed employees to have sensitive conversations in chats that were automatically deleted after 24 hours, and to copy in-house lawyers when not needed.

Google attorney Colette Connor said the company has made clear to investigators from the Texas Attorney General's Office and the Department of Justice that the chats were removed as part of the company's normal operations.

When the company first created its internal chat product, conversations were automatically archived. But in 2008, management announced a change that would cause conversations to disappear after 24 hours unless archive settings were changed.

Google changed its policy last year after the Justice Department and other antitrust plaintiffs accused the company of violating its legal obligation to preserve all records for use in litigation.

Justice Department Kenneth Dinzer said Google is engaging in a breathtaking policy of systematic document destruction to avoid giving antitrust enforcement officials evidence of illegal activity. Dinzer said it wasn't a “let's have lunch” kind of communication.

This was intended to hide the document, he said, showing a slide that simply read: “This is wrong.” The evidence is clear.

The Department of Justice asked Mehta to sanction Google in the form of a fine, assuming the destroyed evidence supported their case.

In subsequent comments, Mehta said Google's policy is unrealistic to expect employees to know in advance that they need to turn on chat history. The failure to preserve the chats could be interpreted as intentional, given other evidence that Google is sensitive to language that could raise antitrust concerns. he said.

Shouldn't there be some consequences? Mehta said. At least this wasn't a best practice.

(Updates sanction details starting in paragraph 19.)

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