Google answers ad questions as US test comes to an end

(Bloomberg) — Judge Amit Mehta presided over two days of closing arguments, concluding Friday, in the U.S. antitrust challenge to Alphabet Inc.’s technology industry.

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However, despite frequent questions directed at both sides, the Obama-appointed federal judge gave few clues about what he plans to rule.

Antitrust authorities allege that Alphabet’s Google illegally maintained a monopoly over online search and related advertising. On Thursday and Friday, Mehta looked at the exclusive multibillion-dollar deals Google has struck with Apple Inc. and others to be the default search engine on cell phones and browsers. The judge then turned to the lucrative advertising business that Google runs, placing ads in search, and the government’s view that the company’s dominance allowed it to raise prices on advertisers without consequence.

Closing arguments come six months after testimony ended last November in order to give the judge time to review the evidence. The case is the first antitrust trial pitting the federal government against a U.S. technology company in more than two decades. Mehta is expected to issue a ruling later this year on whether Google broke the law and whether his decision could force the tech giant to change the way it does business, requiring it to separate Alphabet’s search business from other products such as Android and Chrome.

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 Ltd.’s TikTok.

Mehta looked skeptical.

“Advertisers have come in and consistently said, ‘We can’t move away from search ads. They are unique,’” Mehta said.

No other options

Justice Department attorney David Dahlquist said advertisers have no choice to reach the largest number of consumers other than through Google’s search ad product — the text and shopping promotions that appear at the top of a results page in response to user queries.

Google sells search ads through automated auctions that occur less than a second after a person starts a search. The Justice Department alleges that Google made changes to its auction rules to increase prices by up to 15%, while limiting the information marketers have about where their spending goes and making it harder to opt out of advertising auctions specific.

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“Google has kept advertisers in the dark about how search advertising works and how their advertising dollars are spent,” Dahlquist said. “Only a monopolist can make a product worse and still make money,” he said.

In response, Google’s lead litigator, John Schmidtlein, argued that Google raised search ad prices in conjunction with improving the quality of its ads.

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

“Isn’t this proof that Google is capable of changing prices behind the scenes and advertisers don’t notice?” he asked.

Trade secrets

Schmidtlein said Google is “not in a position to announce its trade secrets, all the things it’s doing to improve. We’re not announcing every improvement we’re making so Bing can copy them.”

DOJ’s Dahlquist said that Google, even though it is a monopolist, still has some incentive to invest in improving its advertising technology. But it’s a mistake to assume that improvements would necessarily lead to higher prices, he said, using the television market as an analogy: a TV bought today is cheaper than one from five years ago, even though the quality of the screen has been improved. improved, he said.

Dahlquist said such a scenario is an example of prices being constrained by healthy competition in the market – something that isn’t happening in search advertising.

“Just to be clear, is your claim that in a more competitive environment, advertisers would be paying less?” Mehta asked.

“Yes,” said Dahlquist.

Chat destruction

Near the end of the hearing, Mehta chided Google for failing to preserve documents that should have been turned over to the Justice Department during the antitrust investigation, suggesting he might conclude the company was negligent.

“Google’s document retention policy leaves a lot to be desired,” he said, adding that it was “shocking to me that a company would leave it up to its employees” to decide what would be retained.

“We won’t know if there was a treasure trove of unsaved material,” he added.

The Justice Department alleged that Google intentionally withheld important evidence through its “Communicate Carefully” program, in which employees were instructed to have sensitive conversations in chats that would be automatically deleted after 24 hours, as well as copy the company’s lawyers when they did. I dont need.

Colette Connor, a lawyer for Google, said the company made clear to investigators from the Texas attorney general’s office and the Department of Justice that the chats were deleted as part of the company’s regular practices.

When the company created its internal chat product, conversations were automatically archived. But in 2008, top executives announced a change so that conversations would disappear after 24 hours unless someone changed the file settings.

Google changed the policy last year after the Justice Department and other antitrust plaintiffs complained that the company was violating its legal obligations to retain all records for use in litigation.

The Justice Department’s Kenneth Dintzer said Google engaged in a “breathtaking” policy of “systemic document destruction” to avoid providing antitrust authorities with evidence of illegal behavior. It involved “communications that weren’t like, ‘Let’s have lunch,’” Dintzer said.

“The intention was to hide documents,” he said, showing a slide that simply said: “This is wrong.” “The evidence is unequivocal.”

The Justice Department asked Mehta to assume that the destroyed evidence would have supported his case and to sanction Google, which could take the form of a fine.

In subsequent comments, Mehta said Google’s policy was “unrealistic” in expecting employees to know in advance that they should turn on chat history. Given other evidence that Google was sensitive to words that could raise antitrust concerns, the failure to preserve the chat “could be interpreted as intentional,” he said.

“Shouldn’t there be some consequence?” Mehta said. “At the very least, these were not best practices.”

(Updates with details on sanctions starting in paragraph 19.)

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