Antitrust

Mehta asks the question to the government. “I don’t think they’re interested in competing as a search engine qua search engine,” he says, elaborating. They “want to have better grounding in search” to have the best model in the world; is that sufficiently related? “It feels like to me the definition ought to be changed” of a general search engine if so, he says. The government disagrees, saying AI companies are clearly aiming to compete in the same areas. Mehta points out a contradiction: the government wanted to exclude a bunch of other search-engine-like services to establish Google had no meaningful search competitors during the liability trial, and now it wants to add new ones during remedies. “I’m not sure it quite fits,” Mehta says.

We’re still arguing about why data sharing is important, and whether Google’s “quality gap” of information compared with competitors is both significant and unfairly obtained. Data sharing and AI are emerging as two of the biggest elements of these arguments, which isn’t surprising: the former is something Google sees as potentially catastrophic, and the latter is where it sees the future of search.

We’re taking a 15-minute break before getting back to arguments — after a little chitchat, it’s near-silence on the teleconference line.

The DOJ’s lawyer is back up for rebuttal — arguing that Google might say its remedies are extreme, but a truly extreme remedy would be something like requiring it to sell search. The goal is denying Google the fruits of the monopoly it’s established and making sure there are “no practices” left to help it unfairly maintain it, he says.

“I don’t believe you have a factual basis to ... suggest there was a causal connection” between Google’s multibillion-dollar deal and Apple not developing a competing search engine, says Schmidtlein — and Google is still going to get the most traffic on Apple’s Safari browser even if it’s competing for placement on a non-exclusive basis. Yahoo catches a stray here: “Yahoo can’t even keep its own users” using its search engine, he says.

Mehta asks: what kind of legal framework should he be using to think about generative AI product remedies? “GenAI products are not in the relevant market ... there is no evidence that generative AI products were harmed” by any of Google’s conduct in this case, Schmidtlein says — they didn’t even exist during the period covered in the original trial. “The notion that these AI rivals have been harmed at all is... whatever,” he says. But Google is willing to address the question about forward-looking impact by avoiding bundling or exclusive deals like the ones it used for search. “You can rest assured that at least in that sense it can be addressed.”

Google’s attorney starts by emphasizing all the privacy and competitive problems he sees with the DOJ’s overall proposal, but concedes that some limited data syndication could be feasible. “None of this reverse-engineering” products or “feeding all of our data into an LLM”, Schmidtlein says, but the syndication could help improve search results marginally. (You may recall that Sundar Pichai claims unlimited data sharing could essentially kill Google search.)

Mehta and Schmidtlein are still arguing about what kind of hypothetical world would have existed without Google’s exclusionary deals, and how drastic a market intervention that would justify. Google, you may remember, is pushing hard to focus purely on ending the exclusivity requirements of its deals while scrapping other proposals like data-sharing with other search engines — but Mehta expresses concerns that this approach “sells the remedies portion of this short.”

Schmidtlein and Mehta are going back and forth over how much Google’s monopolistic conduct — particularly its exclusionary deals with companies like Apple — let it gather data that gave it an unfair leg up over other competitors, and whether without that conduct, other search engines would have become meaningful competitors. “We had witness after witness come in and say data helps improve search quality,” Mehta notes.

Google attorney John Schmidtlein is rebutting the government’s case — calling the proposed remedies “invasive and broad and market reengineering.”

Judge Amit Mehta just wrapped up a long line of questioning about how generative AI should play into the search trial. “We spent a lot of time in this remedies phase talking about AI,” Mehta began. “There’s an argument to be made perhaps that all that is not relevant because it’s not a market that was discussed during the liability phase.” Mehta asked Dahlquist to defend why a tool like Gemini should be considered part of the overall search market, not something separate and new. Dahlquist, in turn, emphasized that AI “is a new search access point. That is a gateway to search.”

DOJ attorney David Dahlquist is laying out the governments’ case for changes that would help “pry open the market to competition” in search. He’s accused Google of providing “milquetoast remedies that it knows will maintain the status quo,” instead mainly arguing in preparation for its appeal.

Closing arguments are starting in US v. Google, the antitrust trial that could determine whether Google is forced to sell its Chrome browser and dramatically change its search business. We’re not in court today, but we’re listening on a dial-in line for this final stage of the trial.

“The line between professional and personal is increasingly blurred,” says a LinkedIn document shown in a video deposition. Then-LinkedIn product executive Kumaresh Pattabiraman explains in the video that in the wake of the pandemic, “we observe that people are bringing their personal and their professional lives a lot closer together,” with people posting about everything from completing a marathon to their views on politics on LinkedIn. This seems to undermine the FTC’s claim that LinkedIn does not compete with Facebook and Instagram for personal social networking. He says friends and family have always been part of the LinkedIn experience, but even more so now.

In a video deposition Judge Boasberg watched a few weeks ago and the media is now being shown, former Morgan Stanley investment banker Ali Esfahani describes the whirlwind few days in which the $19 billion deal came together. The deal followed none of the usual steps Morgan Stanley would typically take contacting buyers and negotiating price on the company’s behalf, he says. Instead, after being called on a Saturday night, he showed up to a meeting to hammer out the deal, but “when we arrived, we realized the price had already been negotiated, the buyer had already been selected.” Esfahani says he felt like he was basically “being thrown a bone because of all the preemptive work that we had done.”

After six weeks, the FTC’s anti-monopoly trial against Meta is finally over. The parties will need to file post-trial briefs, including Meta’s argument to strike FTC expert Hemphill’s testimony, and then it will be up to Judge Boasberg to write his opinion. Boasberg says he plans to “take a welcome respite from thinking about this” until the first brief is due. He thanks everyone for their “hard work over the last four and a half years” — a stark reminder of how long this case has been in the works — and adds that the “issues are certainly interesting, and I’ll await final submissions and get you my decision as expeditiously as I can.”

The company plans to move to strike Hemphill’s testimony, saying he prejudged Meta’s antitrust liability even before he was retained as an expert witness by the FTC. Huff pulls up a more full version of the 2019 presentation that Hemphill and former Biden official Tim Wu gave to the agency urging an investigation into Meta’s potential monopoly power, just a week before it opened its probe. Huff suggests that the agency ultimately took Hemphill’s litigation strategy advice, though the expert disagrees that’s what he offered. Huff shows a slide suggesting the FTC interview many of the witnesses that appeared in this case, including the founders of Instagram and WhatsApp. Hemphill says “it’s hardly brain surgery to talk to all the founders.” Huff also pulls up a post Hemphill and Wu wrote after the FTC filed its case, calling Meta a monopolist.

When lower engagement correlates with users being served more ads, Meta suggests that might actually mean that users like the ads so much that they’re clicking them and spending their time on the advertiser’s site — not that they dislike ads so much that they leave. Hemphill concedes that he didn’t parse out how much of the decreased engagement was due to people liking or disliking ads, but says the distinction doesn’t seem important.

On cross examination, Meta attorney Kevin Huff pushes back on Hemphill’s argument that temporary changes in user behavior around an outage should not get much weight, in part because businesses don’t make decisions based on such a blip. He shows an excerpt of Instagram chief Adam Mosseri’s testimony, where he said Meta observed an increase in time spent on its platforms during a 2013 YouTube outage, and as a result invested in building out video products like Facebook Live, at one point investing a billion dollars a year on content.

The FTC has argued that Meta paid a premium for WhatsApp beyond its market value, which it was willing to do squelch a potential competitor. But Boasberg asks Hemphill to reconcile how that could be the case for Instagram as well, whose $1 billion price tag now looks quite low given its explosive growth and money-making ability. Hemphill says the price needs to be analyzed within the context of 2012. But the judge still wonders, “why can’t you think about it that Mark Zuckerberg is really smart,” and saw value where others didn’t?

Hemphill argues that Meta has reduced overall market output for consumers with its acquisitions of Instagram and WhatsApp, because consumers believe it’s reduced the quality of the services even if they’ve added users. But “users is a real concrete metric,” where quality is harder to quantify, Boasberg says, “so why shouldn’t we be focused on that?” Hemphill concedes it’s harder to measure, but says quality is an important aspect of the overall health of the market.

Meta has argued that sharing content with friends and family has become a much smaller portion of its business, as it competes aggressively with TikTok through its Reels video product, and that’s what the judge should focus on. But Hemphill says the fact that Meta has added products to its apps doesn’t mean its earlier products no longer matter. If a monopolist has power in one market, he says, that can give it a “leg up” in adding a new product, “even if it’s not as good as the competitors’.”

Boasberg wonders how big of a difference he’d need to see in how many ads Meta serves to certain groups of users versus others in order to determine it matters in assessing its monopoly power. As a hypothetical, he asks if offering a product for a cent higher to some users would be enough to constitute price discrimination. Basically, he asks, “in quantifying the amount of discrimination that Meta is imposing, is that something that you can do such that it is meaningful?” He’s also asked, “how compelling does the evidence have to be regarding ad load?” Hemphill says there’s no magic number, but Meta’s own documents show that executives thought it would be meaningful to reduce the number of ads younger users see to increase engagement.

Carlton’s approach to measuring where users go when Facebook and Instagram aren’t available paints a disingenuous picture of how the social media market works, Hemphill argues. This is in part because MeWe — which offers the very personal social networking services the FTC says Meta has monopolized — would be very far down the list of places users diverted their time to during the outages.

Meta’s expert Professor Carlton argued last week that the court should consider which apps users turn to when Facebook and Instagram aren’t available, like during its 2021 outage. In that case and in his own experiment, users turned to TikTok and YouTube more than Snapchat, even though that’s the app included in the FTC’s market definition. Hemphill says this is a flawed argument against Meta’s monopoly power because it shows users diverted their time to apps that even its own experts would likely agree don’t “plausibly belong in the market,” like Google Chrome and Candy Crush. “This is an illustration of the problems that result when you pursue this kind of gotcha approach,” he says.

The FTC has brought back its expert economic witness Scott Hemphill to rebut arguments from Meta’s experts about the company’s alleged monopoly power. Hemphill begins his rebuttal testimony by arguing that Meta’s experts used flawed analyses that do not get at the relevant questions to determine whether the company has monopolized a market for personal social networks.

The Justice Department is investigating whether Google crafted its agreement to skirt regulatory scrutiny, Bloomberg reports. The deal brought Character.AI’s co-founders back to Google and didn’t technically involve an exchange of shares, though investors were set to receive a payout, The Verge previously reported. Google spokesperson Peter Schottenfels told Bloomberg that Google is “always happy to answer any questions from regulators,” and added that Character.AI remains separate, with no ownership stake by Google.

After about four days of witness testimony in its case-in-chief, and on the sixth week of trial, Meta concludes its defense. The FTC plans to put on its rebuttal case on Tuesday, where it plans to call back its economic expert Scott Hemphill to respond to Meta’s experts.

Even though Carlton says Instagram has been such a “grand slam home run” that it’s hard to imagine it doing even better without Meta, the FTC points to past markets where output increased even while plagued by a monopolist. It pulls up a slide used by the Justice Department in its antitrust case against Google, showing that global PC shipments increased while Microsoft dominated, with similar trends for long distance calls during AT&T’s monopoly, and global crude oil production at the height of Standard Oil’s power. Carlton says that anything is possible and “the moon could fall out of the sky tomorrow, but if you’re asking me if its likely that output would be higher in the but-for world, the answer would be no.”

If market players knew what Instagram would come to be worth in the years after Meta’s acquisition, the deal could have fetched a price at least 40 times more than the $1 billion it got at the time, Carlton testifies. “I just see no basis for making this assumption that Instagram in the but-for world would have been even better,” he says.

Carlton performed a regression analysis to show that the FTC’s theory that Meta charges users interested in friend content a higher price through ads does not bear out. There’s “no systematic positive relationship between ad load and number of friends,” he concludes. In fact, he found, younger users who spend a larger percentage of time on Facebook ad Instagram on friends and family sharing receive fewer ads than older users who spend a smaller portion of their time on such content.

In the past two years, Carlton says the amount of time US users spend on “friend” content on Instagram has declined from 11 percent to 7 percent. As of January, US Instagram users spent 51 percent of their time on the app on Reels. When Instagram has experimented with reducing users’ access to Reels, he says, time spent on the app goes down. Those who had full access to the short-form videos overall spent less time on Feed and Stories, which the FTC has said is associated with friend content that doesn’t compete with TikTok and YouTube.

Competition from TikTok and YouTube is really what keeps it at bay, Carlton testifies. He points to a chart Meta showed in its opening arguments demonstrating that a greater portion of Meta users went to those two apps than Snapchat during its 2021 outage. Ignoring this reality, Carlton says, “that’s just missing the boat. It’s just understating the importance of these very important influences on Meta’s behavior.”

Carlton is baffled how FTC expert Hemphill could say users would have been better off had Meta never bought Instagram in WhatsApp. Instagram, he says, “exceeded the expectations that people had at the time of acquisition, so to say that it would have been even better — how can you say that?” With WhatsApp, he adds, Meta actually lowered the price users had to pay for the service, from a dollar a year in some cases, to zero.

University of Chicago professor Dennis Carlton is up next. Carlton’s testimony will attempt to take down the analysis by the FTC’s expert witness Scott Hemphill by pulling apart his theory about the relevant market and competitors to Meta’s alleged dominance. Carlton calls Hemphill’s claims “confusing” and says he generally prefers to see “what people actually do than what people hypothesize they could do” when it comes to consumer behavior.

Boasberg ruled from the bench Tuesday denying Meta’s motion asking him to rule against the FTC even before it launched its defense case. It was something of a long-shot since the trial is already so close to the end, and Boasberg had already said he wouldn’t pause the case while weighing the motion. But the filing outlined some of the key reasons Meta thinks it should win the case, and we’re hearing these in more detail as it continues with its case-in-chief.