(Bloomberg) -- Alphabet Inc.’s Chief Executive Officer Sundar Pichai sought to portray Google’s position as the dominant internet search engine as constantly challenged by the whims of rivals such as Apple Inc., as he took the witness stand Monday to defend his company against the US government’s antitrust charges.
The Justice Department argues that by paying as much as $26 billion in 2021 to be the default on mobile phones, PCs and other devices, Google has unfairly choked off potential competitors such as Microsoft Corp. and DuckDuckGo. Even Apple has opted not to create its own search engine or give priority to other options because of the lucrative, multibillion-dollar deal it has with Google, the government has argued.
Despite having about 90% of the market for search, Google has tried to show over the course of seven weeks that it’s increasingly at the mercy of new ways people are looking for information online. Previous Google witnesses have described how people now are likely to look for items to buy on TikTok or Amazon.com Inc. or travel advice on Expedia Group Inc.
In his first appearance at the trial, Pichai said when Google’s longtime contract with Apple was renegotiated in 2016, he wanted to make sure that the default was “preserved” as it had been for years. He was concerned Apple might otherwise start to send queries from its Safari web browser to Amazon or others “and do additional deals,” for instance, instead of routing the query through Google search.
An email from 2018, written ahead of a meeting between Pichai and Apple CEO Tim Cook and presented at the trial, showed that Google was concerned about Apple’s “query cannibalization.”
Apple’s default agreement with Google is by far the most significant because of the market share enjoyed by the iPhone. The exact amount of the deal isn’t public, though the Justice Department previously said Google pays Apple between $4 billion and $8 billion a year. In 2016, Pichai was Google’s lead negotiator with Apple and helped hammer out their partnership, which included a provision that the two would “support and defend” the deal against antitrust scrutiny, a top Apple executive testified earlier at the trial.
“We pay a proportion of our money based on the value that we see,” Pichai said, including “enhanced promotion of Google search.”
In one email from Apple executive Eddy Cue to Pichai during the 2016 negotiations, the pair discussed a potential agreement not to promote Google Chrome to Safari users on Mac computers. Pichai said Google didn’t ultimately agree to that, noting that browsers are one area along with maps where Google and Apple compete.
In the cross-examination of Pichai, a lawyer for the Justice Department sought to demonstrate how hard Google worked to appease Apple in its search partnership. In 2018, Pichai and Cook met to address Apple’s concerns that its share of revenue from Google search was not growing as quickly Google’s publicly reported search revenues.
Notes from that meeting shown in court read, “Sundar also strongly stated that you send us queries and we do our best to answer these (and monetize) — always in good faith and because our incentives are aligned.” Another bullet point from the notes showed Google’s collaboration with Apple on search: “Our vision is that we work as if we are one company.”
“I don’t recall myself saying that line,” Pichai testified.
The Justice Department argues that Google knows that most people don’t change their default settings even if other options are available. Earlier in the trial, lead Google litigator John Schmidtlein said the company’s default deals were based strictly on merit and that users can change their settings and opt for another search engine in “a matter of seconds.”
Pichai said Google built its Chrome browser and Android smartphone operating system to help consumers more easily access the web — and use the company’s search engine “more seamlessly.” Android “has helped bring hundreds of millions of people online,” he said. Google realized “the better you make the web experience, they would use the web more. They would search the web more.”
The 51-year-old CEO has a long history at Google, where he has held several roles, including helping to engineer the Android strategy and helming development of the Chrome browser. Wearing a black suit and standing behind a podium in lieu of sitting, Pichai said Google allows other companies to use the underlying technology for the Chrome browser and Android for free. Microsoft’s Edge browser is based on Google’s technology and hundreds of products use Android, from phones to computers to fitness equipment made by Peloton Interactive Inc., he said.
The government has grilled previous witnesses on why Google, with its substantial lead in market share, needs to pay Apple and others billions of dollars for default status if its product is so good that people would chose it over other offers anyway. The answer, the government has so far suggested, is that Google has used its prime position to extract more money from advertisers — often by making opaque changes to the rules that control the ad auctions in which companies participate.
In emails disclosed as part of the government’s case so far, Pichai was shown to have expressed concern about making Google the default, and favored offering a choice. In 2007, Pichai wrote in internal emails to colleagues that Google’s exclusive deal with Apple had bad “optics” and that they should encourage Apple to offer Yahoo as an option in a pull-down menu. “I don’t think it is a good user experience nor the optics is great for us to be the only provider in the browser,” he wrote, according to an email presented at trial.
Judge Amit Mehta isn’t expected to issue a decision until next year, and any resolution to the case is likely to be years away. There will be appeals and a possible second trial to establish a remedy if the Justice Department wins.
(Updates with additional details in eighth paragraph.)
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