Speaker 1: The jurors in Donald Trump's hush money trial have heard
Speaker 1: the name Stormy Daniels countless times. Today they got to
Speaker 1: hear from her as she took the witness stand and
Speaker 1: offered a detailed and at times graphic account of a
Speaker 1: sexual encounter she says she had with Trump in two
Speaker 1: thousand and six that resulted in her being paid off
Speaker 1: to keep silent during the presidential race ten years later,
Speaker 1: and encounter Trump has denied. Joining me is former federal
Speaker 1: prosecutor Michael Zelden. Why is Stormy Daniels' testimony important to
Speaker 1: the prosecution.
Speaker 2: Stormy Daniels serves several purposes. One, Donald Trump has repeatedly
Speaker 2: said this never happened, and so to the extent that
Speaker 2: she can say this happened, then were Trump to testify,
Speaker 2: the jury has a basis to evaluate her testimony versus
Speaker 2: his testimony. She also, I think, plays the role of
Speaker 2: supporting the conversations that she had with Michael Cohen and
Speaker 2: her understanding that Donald Trump was the payre in this transaction,
Speaker 2: that Trump was intimately involved in it through her direct
Speaker 2: conversations with Cohen, which Cohen will then testify to. So
Speaker 2: I think she serves the purpose of helping the prosecution
Speaker 2: say this story happened, helping the prosecution say there was
Speaker 2: an imperative that Trump felt to get this story suppressed,
Speaker 2: and from her dealings with Michael Cohen, it was her
Speaker 2: complete understanding that Donald Trump was aware of this, involved
Speaker 2: in it, and was the ultimate payre of the hush money.
Speaker 1: So at different times she made Trump look almost ridiculous,
Speaker 1: saying he was rude, arrogant, didn't know how to have
Speaker 1: a conversation, and sleazy at many times. I mean, you know,
Speaker 1: his questions about her sex life, and she rolled up
Speaker 1: a magazine at one point and playfully spanked him. I mean,
Speaker 1: is this the prosecution's attempt to get this before the jury,
Speaker 1: to get in bad character.
Speaker 2: Evidence in a sense, And in fact, the defense attorney
Speaker 2: moved for a mistrial after lunch on the basis of
Speaker 2: this sort of evidence. Remember, she says she walks into
Speaker 2: his hotel suite, she thought that they were supposed to
Speaker 2: be having dinner downstairs, and he comes out in silk pajamas.
Speaker 2: Then later in the course of the evening, before they
Speaker 2: eat dinner, she's in the bathroom. She comes out and
Speaker 2: he's chained out of his clothes into boxer shorts and
Speaker 2: a T shirt. So yes, it does make him look
Speaker 2: like a predator. And remember he's sixty ish years old
Speaker 2: at the time. She's twenty seven years old at the time.
Speaker 2: It's on his turf. I think it really does make
Speaker 2: him look bad. And that's why the prosecution, I think,
Speaker 2: in part, wants it should he testify. They want to
Speaker 2: have a counterbalance against what he's going to say about himself.
Speaker 2: And that's also, of course why the defense move for
Speaker 2: a mistrial, because it is so damning as a character matter.
Speaker 1: So the judge said before her testimony, I agree that
Speaker 1: she's got credibility issues, so the people have to establish
Speaker 1: her credibility. Is he talking about the fact that she's
Speaker 1: a porn star, the fact that she denied this at
Speaker 1: one point.
Speaker 2: Yeah, I think all of those things. One, she is
Speaker 2: an adult actress, which is, you know, something that has
Speaker 2: some negative connotations to it too. She is selling a
Speaker 2: story which they're going to try to portray the defenses
Speaker 2: as extortion. She denies it, and then she admits it.
Speaker 2: Then she says she wants her story out, and then
Speaker 2: she says she wants her story suppressed as long as
Speaker 2: she gets paid for it. So there's a lot of
Speaker 2: stuff there that is damaging as a character matter, and
Speaker 2: the prosecutors want to say, look, there is stuff here
Speaker 2: that's not ideal. But at the very bottom line, what
Speaker 2: she's telling us is the truth, which can be corroborated
Speaker 2: by other witnesses. And again, if Trump were to testify,
Speaker 2: they have the counterweight against what he will say, presumably
Speaker 2: which is consistent with what he said in the public,
Speaker 2: which is this never happened.
Speaker 1: There was testimony about all these things that the judge
Speaker 1: at one point said that it wasn't necessary to go
Speaker 1: into detail here, and then she went into all this detail.
Speaker 1: Was she not prepped by the prosecution?
Speaker 2: Well, I think she was prepped by the prosecution. I
Speaker 2: think that she was probably nervous, and they're asking her
Speaker 2: to tell a story of what happened, and she, you know,
Speaker 2: in her mind's eye, is back in the moment reliving
Speaker 2: that story. And I don't think she purposefully tried to
Speaker 2: inject this so called salacious stuff in. But if you're
Speaker 2: telling a story to you of what happened, which was
Speaker 2: a traumatic story at age twenty seven, a sixty year
Speaker 2: old man engage in what was consensual, but with a
Speaker 2: really broad power dynamic between them. I think that, you know,
Speaker 2: her telling it as it happened actually makes it appear
Speaker 2: more believable than if it was very stylized in the
Speaker 2: telling of the story with look rehearsed, and I don't
Speaker 2: think that would have been helpful to her or the prosecution.
Speaker 1: Could the salacious details backfire with some of the jurors
Speaker 1: finding her account distasteful and that bleeds over into their
Speaker 1: opinion of her testimony.
Speaker 2: Well, they could, except I think she has basically come
Speaker 2: across as you read her testimony. You're not in the
Speaker 2: core rooms. I can't, you know, make eye contact with
Speaker 2: her and see her body language. But as you read it,
Speaker 2: she says, Look, I'm a seventeen year old kid. I
Speaker 2: leave home. I didn't have a great upbringing. I was
Speaker 2: sort of poor. I got involved in modeling and that
Speaker 2: led to adult filmmaking, and here I am. You know,
Speaker 2: this is who I am. You know I'm not apologizing
Speaker 2: for it. You might not like my profession, but this
Speaker 2: is who I am. That doesn't make me dishonest, that
Speaker 2: makes me just who I am. And if you're going
Speaker 2: to judge me for that, well you know, I can't
Speaker 2: help that.
Speaker 1: For about a year afterwards, he called her like once
Speaker 1: a week, and his pet name for her was honey bunch.
Speaker 1: How do you think the jury will see.
Speaker 2: That their encounter, which started out as a consensual adult relationship,
Speaker 2: a one night's stand, although I say the power differential
Speaker 2: between them is profound, But she said immediately afterwards she
Speaker 2: was completely embarrassed, embarrassed enough to not tell but her
Speaker 2: closest friends to not tell her boyfriend. She was embarrassed.
Speaker 2: He on the other hand, thought, well, this was good.
Speaker 2: Let's keep it up, you know, honey bunch. Let's get
Speaker 2: together when you're next in town. So I think he
Speaker 2: was seeing this as an ongoing opportunity, irrespective of the
Speaker 2: fact that he's married to Melania, and he didn't seem,
Speaker 2: according to her testimony, to be plussed at all by
Speaker 2: the fact that he was cheating on his wife. So
Speaker 2: I don't know that it's inconsistent with who many people
Speaker 2: believe Donald Trump is, as portrayed, perhaps best, on the
Speaker 2: Access Hollywood tape.
Speaker 1: How will the prosecution deal with the fact that she
Speaker 1: was paid off for this story?
Speaker 2: Well, they're gonna say that there's an arm length business
Speaker 2: deal that this occurs and that it may be unseemly,
Speaker 2: but as we heard from David Pecker, it occurs all
Speaker 2: the time with famous stars Hulk Hogan and the likes
Speaker 2: Karen McDougall. And she was just another person who was
Speaker 2: capitalizing on a story to sell. You might not like that,
Speaker 2: but look, people sell kiss and tell books all the time.
Speaker 2: People make a fortune, you know, coming out of government
Speaker 2: saying let me tell you the behind the scenes story,
Speaker 2: what I did to save the union sort of stuff.
Speaker 2: So how does she fit in differently than that?
Speaker 1: I was surprised that the defense didn't object that much
Speaker 1: while she was giving this testimony. Yet when it came
Speaker 1: time to make the motion for a mistrial, part of
Speaker 1: what they were objecting to were the salacious details in
Speaker 1: her testimony.
Speaker 2: Well, you can argue that they waved it, or that
Speaker 2: they made a strategic choice, and whether they've waived or
Speaker 2: made a strategic choice to allow this in somehow limits
Speaker 2: there after the fact argument that we were prejudiced by it,
Speaker 2: and we saw the judge denied it. So I think
Speaker 2: though that on this questions of missionary position and pajamas
Speaker 2: and boxer shorts and honeybunch and all that sort of stuff.
Speaker 2: Her testilony is going to boil down to the fact
Speaker 2: that it is credible that she had an affair with
Speaker 2: Donald Trump, and it is credible that Mike Cohen and
Speaker 2: she on behalf of Trump entered into a contract to
Speaker 2: suppress her story. That's the heart of what the prosecution
Speaker 2: needs to have the jury believe. All the other stuff
Speaker 2: is essentially collateral to the main argument that they will make.
Speaker 1: So the prosecution says they have about two more weeks
Speaker 1: of trial, which was surprising, I think to a lot
Speaker 1: of people. What do you think about the placement of
Speaker 1: her as a witness? Does it say that Michael Cohen
Speaker 1: is coming up next? Or can you see what they're
Speaker 1: doing with their witnesses.
Speaker 2: Yeah, they seem to be running a pattern of big
Speaker 2: name then document evidence, big name than document evidence, and
Speaker 2: so I'm not sure what the document evidence is that
Speaker 2: will follow Stormy Daniels, but I expect that there will
Speaker 2: be some additional low key people so that the jury
Speaker 2: can catch its breath before they bring on Cohen. My
Speaker 2: big question to myself is is Coen going to be
Speaker 2: their cleanup hitter? Is he the last Hurrah? Or are
Speaker 2: they going to put him on and then try to
Speaker 2: introduce additional financial documents to support what he has to say.
Speaker 2: That's I think a tricky decision for the prosecutors.
Speaker 1: Yeah, I mean, would you want to end with Michael
Speaker 1: Cohen because the defense is going to have a field
Speaker 1: day with him?
Speaker 2: Exactly. I wouldn't want to end with him. I would
Speaker 2: want him to be somewhere in like the seventh inning,
Speaker 2: if you will, and we can bring in Mariano Rivera.
Speaker 2: If Michael Cohen is a seventh inning witness, who is
Speaker 2: the Mariano Rivera? Who is their closer to make the
Speaker 2: case to the jury that before closing arguments that they've
Speaker 2: proved it beyond a reasonable doubt. And I just don't
Speaker 2: know who that is yet.
Speaker 1: It will be a while before that witness takes the
Speaker 1: stand though, Thanks so much, Michael. That's former federal prosecutor
Speaker 1: Michael Zelden. Coming up next on the Bloomberg Law Show.
Speaker 1: The government's landmark anti trust case against Google. It's the
Speaker 1: biggest anti trust challenge in more than two decades. The
Speaker 1: federal government's antitrust case against Google. The government claims that
Speaker 1: Google has illegally maintained a monopoly over online search and
Speaker 1: related advertising. Judge Ammett Meta heard from more than fifty
Speaker 1: witnesses in a ten week trial that wrapped up on
Speaker 1: May third. However, closing arguments didn't take place until last week.
Speaker 1: Joining me is Jennifer Reed, Bloomberg Intelligence Senior litigation analyst.
Speaker 1: Jen Why are the closing arguments taking place so long
Speaker 1: after the testimony?
Speaker 3: You know, I think in this case, there was a
Speaker 3: lot of evidence and complicated evidence, and I really think
Speaker 3: he wanted to be able to go through it all,
Speaker 3: to walk back through all the documents from the trial,
Speaker 3: maybe go back through transcripts from the experts, to really
Speaker 3: understand the case and understand the facts of the case
Speaker 3: and understand what both sides were alleging before the closing arguments.
Speaker 3: And I think that was really evident because he was
Speaker 3: so active. I mean, some closing are arguments are just
Speaker 3: the lawyers standing up making their case. There might be
Speaker 3: a few questions, but he was questioning all of the
Speaker 3: lawyers the entire way through, and it was very clear
Speaker 3: that he was very well acquainted with the evidence and
Speaker 3: very well acquainted with the precedent that both sides had cited.
Speaker 3: In their various papers or that just you know, he
Speaker 3: understood was relevant to the case, and I think that's
Speaker 3: why he took so much time.
Speaker 1: So he said, Judge Meta, the importance and significance of
Speaker 1: this case is not lost on me, not only for
Speaker 1: Google but for the public. Well, how important is this case?
Speaker 3: Well, I think that has a lot of importance. First,
Speaker 3: because it's actually the very first monopolization lawsuit the Department
Speaker 3: of Justice has brought against a tech company since the
Speaker 3: nineteen nineties. I mean, that's a long time.
Speaker 2: Now.
Speaker 3: I limit that to the Department of Justice because the
Speaker 3: Federal Trade Commission did sue Qualcomm for monopolization back in
Speaker 3: twenty seventeen, so we had that suit, But there was
Speaker 3: just this long period of time where we had very
Speaker 3: few government enforcement monopolization suits period, and nothing against the
Speaker 3: tech companies. And this is the very first one. So
Speaker 3: in some ways it kind of sets the tone. I
Speaker 3: don't want to say it sets any kind of a
Speaker 3: groundwork for the others to come, the trials to come
Speaker 3: against Amazon, Meta, Google for other conduct, and Apple, because
Speaker 3: we're talking about different markets, different companies, different kinds of conduct.
Speaker 3: Really each case is quite different, but it kind of
Speaker 3: sets the tone for going forward. And I think it's
Speaker 3: also important because it's likely we don't know yet, but
Speaker 3: it's likely that if the Department of Justice does win
Speaker 3: on liability, that they'll seek some sort of a structural remedy,
Speaker 3: some sort of a breakup of the company. And that
Speaker 3: is also something that hasn't happened in a long time
Speaker 3: and something that's very rarely tested out. And this judge
Speaker 3: is going to be put to the test and we'll
Speaker 3: have to see what happens with that. But it's important
Speaker 3: for presidential reasons, for historical reasons, and I think it's
Speaker 3: just the very first effort we're seeing in the US
Speaker 3: to try to contain the power and the dominance of
Speaker 3: a big tech platform.
Speaker 1: So is the first question defying the market? Yes, just
Speaker 1: to remind us why that's important.
Speaker 3: Right, So, for any monopolization suit, there are a series
Speaker 3: of steps that the plaintiff has to go through and
Speaker 3: if they fail at any of one of those steps,
Speaker 3: they lose the case. Right, So they have the burden
Speaker 3: of proving what the relevant antitrust market is and what
Speaker 3: that means is what is the sphere of competition? This
Speaker 3: is about Google Search, the search engine. So what other
Speaker 3: search services out there does Google compete with? And why
Speaker 3: is that important, June is because the next step they
Speaker 3: have to prove that Google has a monopoly in that market,
Speaker 3: and you have to know who else is in the
Speaker 3: market to determine the market shares and whether Google has monopoly.
Speaker 3: So you start there and on that one, obviously, you
Speaker 3: know the lawyers will disagree across everything contended by the plaintiffs,
Speaker 3: but at least on this one, the Department of Justice
Speaker 3: alleges that the market is general search services, and you
Speaker 3: see very few competitors there. That's Google, it's being it's Duck,
Speaker 3: duc Go. There was another entrant called Neba that has
Speaker 3: exited the market. And these are the search engines where
Speaker 3: you can go and ask them anything, Right, They're going
Speaker 3: to scan the entire Internet, so you can go in
Speaker 3: and look for anything. And what Google's argue here is
Speaker 3: that no, no, no, no, no, the market's a lot broader
Speaker 3: because some of the searches you can do on Google
Speaker 3: you can also do elsewhere. You can search for items
Speaker 3: you might want to shop or on Amazon. You can
Speaker 3: search for travel deals on Kayak or any other number
Speaker 3: of travel websites. So you have to consider those companies
Speaker 3: our competitors too. So there's this argument about how broad
Speaker 3: the market is, and that's important because the broader it is,
Speaker 3: the lower Google's market share is, and DOJ has to
Speaker 3: prove that that market share is somewhere up over sixty
Speaker 3: or seventy percent in order to establish that it has
Speaker 3: a monopoly.
Speaker 1: Said, certainly, I don't think the average person would say, yeah,
Speaker 1: Google and Amazon are the same. Is that a signal
Speaker 1: that he's accepting the Justice Department's definition of the market?
Speaker 3: I think for everything, for anything that they discussed at
Speaker 3: this trial, this is the one area where I think
Speaker 3: it's pretty clear where the judge is going to come out.
Speaker 3: I think that you just highlighted I think one of
Speaker 3: the most important statements that he made with respect to
Speaker 3: the relevant market that suggests he's going to align with
Speaker 3: the DOJ on this. He also ruled in a merger
Speaker 3: trial when US Food Srancisco tried to merge that had
Speaker 3: some similar concepts that were being discussed with respect to
Speaker 3: the relevant market, whether some of the niche players that
Speaker 3: could substitute were part of what the companies did, whether
Speaker 3: they were in the market, and in that case, he
Speaker 3: decided they were not, and so that would be aligned
Speaker 3: with the judge siding with the DOJ on market here.
Speaker 3: And I think, look, you and I can think about
Speaker 3: this as consumers, and in my opinion, really Google doesn't
Speaker 3: compete with Amazon for search. You know, even if I'm
Speaker 3: searching to buy some item of clothing, I probably would
Speaker 3: actually start on Google, even though I think some would
Speaker 3: start on Amazon. But the fact of the matter is
Speaker 3: you can't do on Amazon everything you can do on Google.
Speaker 3: I agree, right, So I think the DJA wins on that.
Speaker 1: The advertising part of this is that part of the
Speaker 1: marketers at a different question.
Speaker 3: So that's the second market. They've argued that Google's causing
Speaker 3: harm in two different markets. So the first market is
Speaker 3: this general search engine services market, and that was the
Speaker 3: first day they talked about that. And the second market
Speaker 3: is search advertising. Now, search advertising is different from other
Speaker 3: advertising on the Internet. These are the ads that come
Speaker 3: up when I do a search on Google, right, So
Speaker 3: that's a specific kind of advertising because the advertiser has
Speaker 3: an indication of what that user is interested in. I'm
Speaker 3: doing a search, and let's say I'm searching for pickleball clothes,
Speaker 3: you know, and I don't even know why. I hope
Speaker 3: not because I don't play pickleball, so I don't even
Speaker 3: know why I said that, but all my friends do.
Speaker 3: But anyway, then the advertiser understands the user has this
Speaker 3: interest in pickleball, right, so they can send this targeted
Speaker 3: ad because there's this search, that kind of search. And
Speaker 3: there was some evidence that advertisers view these general search
Speaker 3: ads as different from putting ads elsewhere. Let's say I
Speaker 3: OPENCNN dot com to read some news. There would be
Speaker 3: different ads there. They view that as a different kind
Speaker 3: of a target, right, and not substitutable. So what the
Speaker 3: DJ's arguing is that general search ads are also that
Speaker 3: is a relevant market.
Speaker 1: So explain this comment to me. The judge said, unlike
Speaker 1: wrapping a sandwich in newspaper instead of sell a faith,
Speaker 1: if you move your ad money from Google to Amazon,
Speaker 1: you're not wrapping your ad in newspaper, right.
Speaker 3: So, in other words, when the Department of Justice is
Speaker 3: trying to argue that no, no, no, no, no, you know,
Speaker 3: advertisers can't substitute. They don't get the return on investment,
Speaker 3: they can't substitute to some other website, he's saying, oh no, no, No,
Speaker 3: Amazon is a great website, you know, Yelp a great website, Facebook,
Speaker 3: you know, huge dominant social networking company that's hugely valuable
Speaker 3: to the advertisers to advertise there. So what he's saying
Speaker 3: is that it's not jump change as compared to advertising
Speaker 3: on a Google search page. That it's very good and
Speaker 3: it's almost equivalent. So it's less clear for that market
Speaker 3: June whether or not the judge is going to accept
Speaker 3: the DJ's market definition.
Speaker 1: In twenty seventeen, Google ran an experiment over several weeks
Speaker 1: and found it could increase prices five to fifteen percent
Speaker 1: while still growing revenue. And he said that's something that
Speaker 1: only a monopolist could.
Speaker 3: Do, right, right, because in the precedent, the definition of
Speaker 3: a monopolist is a company that has the power to
Speaker 3: basically control price or reduce output without losing any profitability.
Speaker 3: So this is evidence that Google can's the sort of
Speaker 3: price anyway they want to for these search ads and
Speaker 3: not lose profit by doing it, not have advertisers flee
Speaker 3: go place their ads somewhere else. And that suggests that
Speaker 3: they do have monopoly power and that that is a
Speaker 3: relevant market because it suggests that the advertisers say, well,
Speaker 3: I'm just going to accept that price increase because I
Speaker 3: have to advertise here. There isn't some other substitute where
Speaker 3: I'm going to get, you know, the return for my
Speaker 3: investment that I will hear.
Speaker 1: So what were some of the other questions that went
Speaker 1: to whether Google is a monopolist?
Speaker 3: So two different markets, so we're sort of talking about
Speaker 3: two different things. But let's if we start with the
Speaker 3: search engine market. You know, basically they just said, hey,
Speaker 3: you know, if this is the market, they had evidence
Speaker 3: that Google shares anywhere, you know, over eighty percent, And
Speaker 3: I think, to us, that's not a big surprise, right
Speaker 3: because your other options in the US are being inductucco
Speaker 3: And I think I use Google all the time. Most
Speaker 3: of the people I know use Google all the time,
Speaker 3: so that's not a surprise. So I think they get
Speaker 3: there there, you know, on the search advertising. If he
Speaker 3: accepts that market and doesn't broaden the market out to
Speaker 3: advertising elsewhere digitally and not just through a firstal that
Speaker 3: cut the results page for search, then I think the
Speaker 3: evidence that the DOJ presented that they have monopoly power
Speaker 3: there was about this ability to kind of willing nearly
Speaker 3: raise the price anytime they wanted, and any percentage that
Speaker 3: they wanted without losing business or at least without losing
Speaker 3: the profitability. So these are their ways of showing that
Speaker 3: in these relevant markets, Google has monopoly power. Those are
Speaker 3: the first two steps. That's not the end of the inquiry,
Speaker 3: but those are the first two steps the dj has
Speaker 3: to get through to get to the next step.
Speaker 1: And the next step is have.
Speaker 3: They engaged in an anti competitive conduct? Because June, it's
Speaker 3: not illegal to have a monopoly, you know, it's not
Speaker 3: illegal to have a monopoly positioned. So just proving that
Speaker 3: Google has a monopoly position in these two markets is
Speaker 3: not enough. There has to be exclusionary anti competitive conduct
Speaker 3: intended to hold on to that monopoly. So it really
Speaker 3: means conduct that has no other reason. There's no justification
Speaker 3: for the conduct, but for to hold back my rivals
Speaker 3: and hold on to my position. That's really what that is.
Speaker 3: And so at the end of the day, if the
Speaker 3: DOJ can get through those two steps, and I think
Speaker 3: it can, it's going to be all about conduct. And
Speaker 3: that's the most difficult question the judge is going to
Speaker 3: have to answer, and very clearly the one he's struggling
Speaker 3: with the most based on his questions and the closing arguments.
Speaker 3: And I'm not surprised by that, because there's a very
Speaker 3: fine line in any monopolization suit between conduct that is
Speaker 3: anti competitive and conduct that's very highly competitive. And courts
Speaker 3: across the country, you know, are very mixed on this.
Speaker 3: The one set of facts for one judge might be
Speaker 3: viewed as anti competitive conduct, while the same set of
Speaker 3: facts by another might be viewed as not crossing that line.
Speaker 3: And so it's a very difficult determination to make. And
Speaker 3: here it's about the agreements or payments that Google makes.
Speaker 3: Agreements plus payments to Apple and to OEMs, I think
Speaker 3: into telecoms too, So to place Google Search as the
Speaker 3: default behind Safari, let's say, or to place the Google
Speaker 3: Search app on the phone as a condition that Samsung's
Speaker 3: making the Android phone as a condition to getting the
Speaker 3: other Google apps that really must be on the phone,
Speaker 3: like YouTube and play Store and things like that.
Speaker 1: Coming up next on the Bloomberg Law Show, I'll continue
Speaker 1: this conversation with Bloomberg Intelligence Senior litigation analyst Jenniferree. We'll
Speaker 1: talk about which way the judge may be leaning and
Speaker 1: what the remedies might be if he finds against Google.
Speaker 1: I'm June Grosso and this is Bloomberg in its biggest
Speaker 1: anti trust challenge yet. Google is being sued by the
Speaker 1: Justice Department and state attorneys general. It's a case that
Speaker 1: could result in the breakup of the twenty five year
Speaker 1: old company. I've been talking to Bloomberg Intelligence senior litigation
Speaker 1: analyst Jennifer ree. So, Jen, what's Google's answer to the
Speaker 1: question of whether they engaged in anti competitive conduct?
Speaker 3: While Google's answer, and it's a good one, honestly, is that, well,
Speaker 3: this isn't true. Foreclosure be just because we're set let's
Speaker 3: say Safari. Let's say let's use Apple as the example.
Speaker 3: Just because we're set as the default behind Safari, any
Speaker 3: user can go in and change that at any time.
Speaker 3: We have done nothing, We have put no conditions on
Speaker 3: Apple to get their payment, to do anything through technological
Speaker 3: means to prevent a user from changing that default. They
Speaker 3: can change it to duc dot Goo, they can change
Speaker 3: it to Bing. And in fact, you see people who
Speaker 3: have Microsoft devices where Bing is set as the default
Speaker 3: actually going in and changing that default to Google. This
Speaker 3: is interchangeable. We're not blocking anybody if we had set
Speaker 3: to Apple, you won't get your payment unless you block
Speaker 3: users from changing that default. That might have been different.
Speaker 3: That's a little bit more like the old Microsoft case
Speaker 3: where Microsoft was blocking out Netscape and Java. It really
Speaker 3: made it technologically impossible for somebody to use Netscape or
Speaker 3: Java on an Intel based Windows operating System computer. So
Speaker 3: that's where things diverge a little bit from Microsoft in
Speaker 3: it starts to get tricky. And really what the DJ
Speaker 3: has to prove is that these other search engines have
Speaker 3: been for closed from the market, therefore harming them and
Speaker 3: therefore harming consumers because consumers have lack of choice, a
Speaker 3: lack of innovation, a lack of quality, maybe you know,
Speaker 3: a lack of ability to have better privacy through searches,
Speaker 3: things like that.
Speaker 1: Judge Meta said he didn't see how an upstart could
Speaker 1: entice Apple away from that lucrative partnership. I can't conceive
Speaker 1: of a world in which some other competitor, particularly a
Speaker 1: new competitor, could do that if Microsoft couldn't do it right.
Speaker 3: So Microsoft tried hard to get that default position, to
Speaker 3: negotiate with Apple to take that default position and pay Apple.
Speaker 3: I mean Apple's getting paid about twenty billion dollars a year,
Speaker 3: we understand from Google for this default positioning, and Microsoft
Speaker 3: tried and they failed. And Apple would say, well, it's
Speaker 3: because we want our users to have the best experience
Speaker 3: when they open up that new iPhone and they go
Speaker 3: into search and safari, we want them to have the
Speaker 3: best search results, and we think Google Search is the best,
Speaker 3: and that's why we've gone that route. I'm sure it
Speaker 3: doesn't hurt that Google saying Apple twenty million dollars a
Speaker 3: year for that. This is the issue when the judge
Speaker 3: is basically pointing out, he's asking querying in his own head,
Speaker 3: is this foreclosing or not right? Because it isn't technologically foreclosing.
Speaker 3: People can go in and make the change, But does
Speaker 3: it actually operate that way? Is it defacto exclusive? Does
Speaker 3: it operate in an exclusionary way? And he's saying that one.
Speaker 3: You know, if these defaults do operate that way in
Speaker 3: g you're paying twenty billion for it, so it must
Speaker 3: get you something, right, It's valuable to you for some reason.
Speaker 3: It's blocking nascent competition because new competitors are simply not
Speaker 3: going to try to enter the market when they know
Speaker 3: they've got that huge barrier when they know they've got
Speaker 3: to come in and try to be a really great
Speaker 3: search engine to start, but then also pay Apple twenty
Speaker 3: billion dollars to try to supplant Google Search as that default.
Speaker 1: And where does it fit in that Google says, you know,
Speaker 1: we're just better. And wasn't there something about a big
Speaker 1: search on being is for Google something like that?
Speaker 3: Yes, there was that the most often searched item on
Speaker 3: being is Google Google Search.
Speaker 1: So I mean, you know I've use both, You've used both.
Speaker 1: A lot of people have, and they tend to go
Speaker 1: back to Google.
Speaker 2: Right.
Speaker 3: So the argument is Google would say, obviously, we've put
Speaker 3: in massive, massive amounts of R and D. We hire
Speaker 3: the best people, we put a lot of money into it,
Speaker 3: we are constantly innovating, we have great engineers. We've done
Speaker 3: the best we can to make this a great product,
Speaker 3: and we've succeeded. And there's nothing wrong with that. It's
Speaker 3: perfectly legal, it's pro competitive. What the Department of Justice
Speaker 3: has argued, and there was quite a bit of evidence
Speaker 3: presented on this, is that the issue is though that
Speaker 3: the default agreements that Google has has prevented the others
Speaker 3: from getting better because his search learns. It's the old
Speaker 3: artificial intelligence, not the newer generative AI. But each search
Speaker 3: teaches the search engine, and each search makes the search
Speaker 3: engine better. And so a search engine needs scale. They
Speaker 3: need a high volume of searches in order to improve.
Speaker 3: And by having those default positions, they kept being induct
Speaker 3: Dutgo and any other smaller competitors that might have tried
Speaker 3: to enter the market from getting the scale they needed
Speaker 3: to actually improve and be as good as Google Search,
Speaker 3: each over being search page, or at least making it
Speaker 3: easier for them to advertise that way.
Speaker 1: So in the summary, the attorney for the DOJ said
Speaker 1: that the last tech monopoly decision Microsoft fits like a glove.
Speaker 1: Google's lead litigator disagreed, of course right. He said, manufacturers
Speaker 1: were coerced into deals and customers were spoon fed and
Speaker 1: inferior product they didn't want. Google has one with a
Speaker 1: superior product. I mean, how much does Microsoft that case
Speaker 1: hang over this?
Speaker 2: Oh?
Speaker 3: I think it hangs over it enormously. I mean, first,
Speaker 3: the judge made clear that it hangs over it enormously.
Speaker 3: He made it clear that he has read that case
Speaker 3: one in any case he's ever read, and that he
Speaker 3: sees that as the precedent that he will follow and
Speaker 3: needs to follow. I mean, there isn't very much out
Speaker 3: there for him, so this is an important case for him.
Speaker 3: There are similarities, There are absolutely similarities. There were many
Speaker 3: many different types of conduct that Microsoft was accused of
Speaker 3: in that case to try to maintain its monopoly and
Speaker 3: operating systems, its Windows operating system. At the time, Apple
Speaker 3: wasn't very big in computers, and amongst the many different
Speaker 3: things it was doing was agreements that operated in an
Speaker 3: exclusionary manner because they were paying Internet service providers a
Speaker 3: lot of money to use Internet Explorer as the browser.
Speaker 3: This was about browsers, not about search engines. To use
Speaker 3: Internet Explorer and to install Internet Explorer and to block
Speaker 3: out Netscape. Netscape and Java were a threat to Microsoft's
Speaker 3: operating system monopoly, so in order to protect its operating
Speaker 3: systems monopoly, it was trying to push out these other
Speaker 3: two entities, which are considered middleware. So the judge said
Speaker 3: those payments to these companies to install Internet Explore as
Speaker 3: the default found similar were illegal, but that was deemed
Speaker 3: to be illegal, and Microsoft's pro competitive justifications were deemed
Speaker 3: to be a sham or pretextual or at least didn't
Speaker 3: outweigh the harm from the agreements, and they were ordered,
Speaker 3: at least originally because they ended up settling, but they
Speaker 3: were ordered to drop those payments. They could not offer
Speaker 3: anything of value to these Internet service providers and other
Speaker 3: companies like AOL to install Internet Explorer as the default.
Speaker 3: So that is a similarity, and so both sides are right,
Speaker 3: but again there is a difference in that at the
Speaker 3: time Netscape was actually considered a better product, Internet Explorer
Speaker 3: was the inferior or at least many thought was the
Speaker 3: inferior browser. And so it was Microsoft kind of forcing
Speaker 3: this inferior product on the makers of these computers or
Speaker 3: the entities that provided people access to the Internet on
Speaker 3: the computers to block out a better product and really
Speaker 3: forcing them because at the time it had this monopoly
Speaker 3: for operating systems, and if you wanted the Windows operating
Speaker 3: system and you wanted to install that in the computer
Speaker 3: you're building, asn't noem yet you had to abide by
Speaker 3: Microsoft's rules.
Speaker 1: I know it's difficult, but do you have a feeling
Speaker 1: I always ask you this. Yes, it's hard, because he
Speaker 1: asked hard questions of both sides.
Speaker 3: He really did. He played the devil's advocate across the board.
Speaker 3: Outside of what we've talked about that it seemed pretty
Speaker 3: clear he's going to align with the Department of Justice
Speaker 3: on their market definition that very first step at least
Speaker 3: on general search. Not as clear on advertising, but I
Speaker 3: tend to think for both, he's probably going to align
Speaker 3: with the DJ. It was really hard to say. So
Speaker 3: what I did is I went back to the way
Speaker 3: I felt at the end of trial. You know, after
Speaker 3: observing the trial and listening to the evidence. I attended
Speaker 3: some I read transcripts for some My gut there was
Speaker 3: that the DOJ had the edge, that it's close because
Speaker 3: it's a hard call to make on whether this conduct
Speaker 3: is anti competitive or not, but that I lean toward
Speaker 3: the DJ, and I'm sticking with that because the closing
Speaker 3: arguments didn't really change that viewpoint after I'd seen all
Speaker 3: the evidence, and I think June, it's because there was
Speaker 3: a lot of fairly credible and strong evidence that defaults
Speaker 3: are very important, that they're sticky, that most people don't
Speaker 3: really know they can change them, or don't know how
Speaker 3: to change them, or wouldn't bother to change them, And
Speaker 3: then there was never a very good answer by Google
Speaker 3: as to why, if you're just better and that's why
Speaker 3: you have this strong market share, why you need to
Speaker 3: pay that twenty billion for that default position more than
Speaker 3: twenty billion because they're paying others beyond Apple, So the
Speaker 3: twenty two twenty five whatever it is they're paying a year,
Speaker 3: Why are you paying that for this default position? If
Speaker 3: you can be dominant simply because you're just desired, consumers
Speaker 3: want to use you and not the others, that you
Speaker 3: don't need to pay that kind of money. And I
Speaker 3: don't really feel like they ever had a very good
Speaker 3: answer to that question. And that speaks volumes. And then
Speaker 3: agreement doesn't have to be overtly exclusive to be illegal.
Speaker 3: There is de facto exclusivity that we've seen in the
Speaker 3: law that we've seen in precedent, where if it operates
Speaker 3: in an exclusive manner right, even if it's not overtly exclusive,
Speaker 3: as these are not, that can also be illegal. And
Speaker 3: I think that's basically what that evidence showed with respect
Speaker 3: to how sticky these are and the fact that Google's
Speaker 3: paying so much for those positions, they are important for
Speaker 3: some reason.
Speaker 1: So Jen, if the judge decides in the Justice Department's favor,
Speaker 1: the government's favor. Then there'll be another sort of mini trial.
Speaker 3: Yeah, another hearing, probably a few days, I'm assuming down
Speaker 3: the road with experts to discuss what the remedy should be,
Speaker 3: and I think briefing before that, they'll probably ask the DOJ, well,
Speaker 3: here's what we decided. What remedy do you think is appropriate?
Speaker 3: And the DOJ will then advocate we don't know yet.
Speaker 3: The DJ has been very vague. There's really no talk
Speaker 3: about what the remedy should be. The DOJ has said
Speaker 3: very little. So we'll get better clarity at that point
Speaker 3: from the briefing on what the DOJ is looking for,
Speaker 3: and then Google will probably oppose that, probably lay out
Speaker 3: something they think would work and would be better, and
Speaker 3: then the judge will have a hearing and have to
Speaker 3: decide on that. That'll be yet another very difficult decision
Speaker 3: to make.
Speaker 1: What would some possible remedies be. I mean to get
Speaker 1: rid of the deal with Apple.
Speaker 3: When exclusive agreements are illegal, the most straightforward solution is
Speaker 3: to get rid of the exclusive agreements, so that would
Speaker 3: be straightforward. It is an odd solution in this case, though,
Speaker 3: because it's basically saying the Google, which is already entrenched. Okay, hey,
Speaker 3: you don't have to pay twenty two or twenty three
Speaker 3: or whatever it is billion a year. You're going to
Speaker 3: profit from that. And you know what, Apple's going to
Speaker 3: get hurt, and Mozilla is going to get hurt. They
Speaker 3: have Firefox and they have an agreement also, and maybe
Speaker 3: even the OEMs like Samsung will get hurt. And maybe
Speaker 3: maybe if you're going to hurt all those other companies,
Speaker 3: that's going to trickle down to consumers and higher prices
Speaker 3: for their iPhone or higher prices for their Android phone.
Speaker 3: Like who knows, you know, you don't know what that
Speaker 3: trickle down effect is going to be. So I think
Speaker 3: that would be an odd solution. It is the most
Speaker 3: typical we've seen exclusive dealing cases in the past where
Speaker 3: the plaintiffs of one that's usually been the solution. And
Speaker 3: when Microsoft finally settled, and so Microsoft in that case
Speaker 3: voluntarily through the settlement, agreed to drop these payments it
Speaker 3: was making to Internet service providers to set Internet Explore
Speaker 3: as the default. So we don't have even you know,
Speaker 3: other examples, the very few other cases where plaintiffs of
Speaker 3: one that's been the answer to drop the agreements. This
Speaker 3: would be a bit of an odd case. And other
Speaker 3: option June might be what they've done in Europe, which
Speaker 3: are these choice screens. So for a new Android phone,
Speaker 3: if you open up a new Android phone, they would
Speaker 3: give you a choice what do you want to set
Speaker 3: is your default search engine? Do you want being duc
Speaker 3: dot go, do you want Google or any other small
Speaker 3: entities that may be out there, and then the user
Speaker 3: picks as they set up their phone. That's another option
Speaker 3: that the judge could impose here. We haven't seen it
Speaker 3: do very much in Europe in terms of cutting into
Speaker 3: Google's share, but again that could align with what Google
Speaker 3: is saying that we're just better in consumers prefer us.
Speaker 2: You know.
Speaker 3: Another option could be sharing of data. That's one other
Speaker 3: thing that's possible. There could be some privacy concerns there,
Speaker 3: but it could be all this data you've collected through
Speaker 3: all the millions of searches that have been done to
Speaker 3: make you a better search engine. Share that with being
Speaker 3: induc dot go, so they have the opportunity to try
Speaker 3: to use that data to get better too.
Speaker 1: It's always wonderful to hear your insights. Jen, That's Bloomberg
Speaker 1: Intelligence Senior litigation analyst Jenniferree. I'm June Grosso. Stay with US.
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