Google antitrust trial: Pichai concedes that default search boosts market share

As the defense phase of the US government’s antitrust case against Google gets into full swing, the search giant brought out its biggest star, CEO Sundar Pichai, to back up the company’s arguments and defend Google’s business practices and market share in the search business.

The US has argued that Google has cornered the search market through default search engine contracts with phone, hardware, and platform providers, thereby boosting its market share to a level that prevents rivals from competing. Google says its success comes not through default search contracts but from its ongoing efforts to innovate a product that users consistently prefer over rival search options.

Although Pichai, who joined the company as a product manager in 2004, portrayed Google as an innovator, producing, among other things, a state-of-the-art browser in Chrome (the development of which Pichai oversaw), some of his testimony appeared to reinforce the government’s contentions. Pichai revealed new details about its default search contract with Apple and underscored that gaining default search status via contracts is a significant driver of the company’s commanding market share.

Integration with Chrome was a significant driver of search

Under questioning Monday by Google’s defense counsel, John Schmidtlein, Pichai recounted the early development of Chrome and how Google began to realize how important the browser could be to the search market. “It became very clear early on the better you make the user’s web experience, they would use the web more, they enjoyed using the web more, and they would search more in Google as well,” he said.

One key to the success of Chrome, which uses Google as its default browser, was the combined URL and search box that enabled users to type anything and navigate to websites responsive to their queries. “That seamless integration, people really enjoyed it, people valued it, and people used the web more and searched more,” Pichai said in response to Judge Amit Mehta’s question about how Chrome boosted search activity.

Google worried about Apple using third-parties

Pichai also delved into his negotiations with Eddy Cue, Apple’s senior vice president of services, that led to the 2016 renewal of the internet services agreement (ISA) between the two companies under which Google has paid billions for default search engine status on iOS devices. During those negotiations, Cue sought a greater share of the revenue that Google generated from Apple users, particularly given that Apple believed Google’s search revenue from its users were rising more rapidly than Apple’s share. Google did not agree to increase Apple’s share, Pichai said.

Cue was also interested in getting its ISA extended as long as possible. Pichai resisted the idea but ultimately compromised. “The longer the timeframe, there can be uncertainties. But we eventually ended up doing it in a way in which Apple has the right to extend the deal to a longer term if they choose to do so,” he said.

One of Google’s primary goals in these negotiations was to preserve its default status, making it the sole underlying search engine appearing on Apple products. “So, we wanted to make sure, as we contemplated a longer-term deal, that the notion of default was reasonably preserved in a similar way, particularly with respect to Apple being able to send queries to rival providers,” Pichai testified.

Google was concerned that Apple might send some search queries to third-party providers, such as Amazon. “It’s perfectly within Apple’s right to do. But for us, the rev share and how we structured the current deal didn’t take that into account, so we wanted to make sure it was substantially similar to the current deal we had structured,” Pichai said.

Nevertheless, in its 2016 agreement, Google stopped short of barring Apple from turning to other sources when answering users’ queries. Pichai said, “I think the agreement captures that clearly so that Apple can continue to improve their services the way they see fit, and they’ve continued to do that,”

Default status drives market share

Under cross-examination by DOJ prosecutor Meagan Bellshaw, Pichai begrudgingly underscored the government’s arguments about the importance of gaining default status in its contracts to capture market share. Bellshaw asked Pichai about the first product he worked on at Google in 2004, the Google toolbar, which allowed users to download a browser extension and install a search engine in their browser.

In 2005, Microsoft announced a new version of its Internet Explorer IE7 that had an integrated search box that relied on Microsoft’s default search engine. Google sent a letter to Microsoft complaining about this integration. Google was concerned because the new IE7 “didn’t reflect what pretty much any user wanted from their browser,” Pichai said, mainly referring to Google’s toolbar.

But in a July 2005 letter, David Drummond, chief legal officer at Google, wrote a letter to Microsoft’s General Counsel Brad Smith, saying, “As you know, most end users do not change defaults.” According to Drummond, the inherent leverage Microsoft would have by including its own search engine in IE7 would harm competition. “We are deeply concerned about the potential for harm to the competitive process from Microsoft’s actions,” he wrote in the letter.

Later in the letter, Drummond wrote, “By pushing out an update of IE with a new search box that will default to Microsoft’s own search product in the vast majority of cases, Microsoft would gain a large number of search users for reasons having nothing to do with the merits of Microsoft’s search offering.”

Under cross-examination, Pichai conceded the critical focus on gaining default search status. “We’ve always valued the importance of defaults. As I said earlier, again, it depends on the context. It depends on the implementation. It depends on the product. It depends on the merit of what you’re offering to users. It depends on user likelihood. But, yes, there are scenarios in which defaults are very valuable.”

Disappearing Google messages

Bellshaw also questioned Pichai about some of his internal communications labeled attorney-client privilege, which she implied weren’t relevant to legal advice. She also pressed Pichai on why he had, at least once, requested turning off the history of his in-house Google chats, meaning they were deleted after 24 hours.

She drew his attention to an October 12, 2021, chat with his communications director, Emily Singer, in which Pichai asked, “Can we change the setting of this group to history off?” This chat occurred approximately one year after the US filed suit against Google, which was on document retaining hold.

“This had nothing even close remotely to anything covered by this litigation,” Pichai told Bellshaw. “I don’t recall the specifics, but normally, I would do this if I were about to comment on something of a personal nature about some person.”

Pichai emphasized, “I take great care to comply with all litigation holds. I never use chat in the context of discussing substantive discussions about any of these material topics.”