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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Right now, in one

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Speaker 1: federal courthouse in DC, two of the world's biggest tech

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Speaker 1: companies are facing reckoning. On the second floor, Meta, the

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Speaker 1: company behind Facebook, Instagram, and WhatsApp, is up against monopoly

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Speaker 1: charges filed by the Federal Trade Commission. And two floors

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Speaker 1: up is Google, which recently lost to anti trust cases

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Speaker 1: and is now awaiting a judgment that could lead to

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Speaker 1: a breakup of the company. Both cases are part of

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Speaker 1: the US government's growing anti trust enforcement push that's been

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Speaker 1: putting increasing pressure on big tech.

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Speaker 2: It's kind of stunning that this is the one issue,

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Speaker 2: this anti tech sentiment. We know they're powerful, we need

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Speaker 2: to do something about it. That is like the most

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Speaker 2: bipartisan topic now and in the past ten years.

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Speaker 1: I want to say that's Sarah Fryer, a Bloomberg technology

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Speaker 1: editor who's been following these cases.

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Speaker 2: This is really driven a strange thread of collaboration between

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Speaker 2: Republicans and Democrats over the years, from the first Trump

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Speaker 2: administration to the Biden administration and now in the second

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Speaker 2: Trump administration. Trying to tie it all up with a bow.

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Speaker 1: Today on the show Big Tech Is on Trial, how

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Speaker 1: the monopoly claims against Google and Meta could reshape the

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Speaker 1: industry and the way we use the Internet for decades

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Speaker 1: to come. I'm Sarah Holder, and this is the big

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Speaker 1: take from Bloomberg News. I am thrilled to be sitting

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Speaker 1: down with two of Bloomberg's eminent Sarah's. We have Sarah Fryer.

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Speaker 1: She's a technology editor for Bloomberg and the author of

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Speaker 1: No Filter, The Inside Story of Instagram. Welcome Sarah, Thanks

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Speaker 1: for having me and Sarah Forden our second Sarah or

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Speaker 1: our third, depending on how you're counting. She oversees legal

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Speaker 1: news at Bloomberg, and she's been covering Google and its

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Speaker 1: court battles since twenty ten. Thank you for being here.

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Speaker 3: Thank you for having me.

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Speaker 2: Sarah Fryer.

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Speaker 1: You've been on the tech beat for a while, and

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Speaker 1: you've traced how big tech companies have been under increasing

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Speaker 1: scrutiny in recent years, including in the anti trust space.

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Speaker 1: What led us to this moment? Why are Google and

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Speaker 1: Meta in court facing monopoly lawsuits at roughly the same time.

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Speaker 2: I think it's a combination of a few really important things.

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Speaker 2: The government has gotten a lot smarter about the level

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Speaker 2: of power that these companies have and how they're wielding it.

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Speaker 2: A lot of the first awakening of these companies and

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Speaker 2: what they've done was centered around the consumer experience. It

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Speaker 2: was stuff around privacy, content moderation. You know, did they

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Speaker 2: let Russia manipulate the twenty sixteen presidential election? But these

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Speaker 2: anti trust trials over the years, the government's gotten really

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Speaker 2: smart about exactly what makes these companies tech. For Meta,

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Speaker 2: the trial centers around how Mark Zuckerberg built his empire,

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Speaker 2: literally the secret sauce of like why his company got

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Speaker 2: so big and powerful. The Google trial is centered around search,

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Speaker 2: their power and search and what they can do to

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Speaker 2: remedy what they've now declared to be an illegal monopoly power,

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Speaker 2: as well as attech, which is how they make most

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Speaker 2: of their revenues.

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Speaker 3: Just just take a step back and follow on what

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Speaker 3: Sarah Fryer said. Another reason it took a long time

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Speaker 3: to get here was that these companies are primarily offering

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Speaker 3: free services, and typically anti trust law had looked at

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Speaker 3: price and are things getting more expensive for consumers? So

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Speaker 3: they had to really revisit how they're looking at these companies.

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Speaker 3: And so what you have now are you two behemoth

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Speaker 3: tech platforms they're making goodzillions of dollars every year on

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Speaker 3: people's data and information, and so that sort of became

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Speaker 3: the new currency in these cases. And the government and

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Speaker 3: a trust of forcers have taken a long time to

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Speaker 3: study these markets, so both the search market and how

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Speaker 3: advertising works in search, and the social networking market, and

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Speaker 3: so it represents a longer term building of appreciating how

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Speaker 3: big and powerful these companies came and how unfettered they were.

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Speaker 1: Sarah Fordon, I want to take a closer look at

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Speaker 1: the Google trial. Judges have already ruled in two separate

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Speaker 1: cases that Google is a monopoly. One case involves Google Search,

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Speaker 1: the other is tied to the company's ad technology. As

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Speaker 1: you mentioned, we're now in the remedy stage of the

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Speaker 1: first trial, the one that involved Google search monopoly. So

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Speaker 1: what are the proposed remedies here?

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Speaker 3: Yeah, so that trial is now in its final week.

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Speaker 3: The judge's been hearing arguments from both sides, and the

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Speaker 3: DOJ wants Google to sell off its Chrome browser. That

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Speaker 3: is probably the most dramatic remedy proposal. And while Google

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Speaker 3: argues that has nothing to do with the harms in

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Speaker 3: this case and the monopoly over search, the government says

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Speaker 3: that the browser is really the gateway to the Internet,

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Speaker 3: and so that's vital for that to be opened up

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Speaker 3: to competition. The other thing that the government wants is

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Speaker 3: for Google to share data related to search queries. And

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Speaker 3: then the third area is the government wants a judge

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Speaker 3: to ban Google from doing any kind of exclusive search

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Speaker 3: agreements the way it had with Apple and with Samsung,

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Speaker 3: so that Google was the default browser and search engine

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Speaker 3: on people's smartphones.

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Speaker 1: So that's the search monopoly case, which is in its

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Speaker 1: final week. Can you explain big picture why the DOJ

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Speaker 1: believes Google has been anti competitive in its ad sales.

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Speaker 3: Yeah. So this was a separate, a totally separate case

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Speaker 3: that was brought under the Biden administration. And this case

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Speaker 3: looks at the pipeline of technology that Google controls and

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Speaker 3: underpins its ability to serve ads on the web. And

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Speaker 3: over the years, it acquired a number of companies, including

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Speaker 3: one called double Click and one called ad Mold, which

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Speaker 3: allows it to control the whole transaction. And the issue

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Speaker 3: there is that it's not transparent at all. It's a

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Speaker 3: very opaque process, so nobody can actually see how the

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Speaker 3: prices are formed and how the decisions about the cost

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Speaker 3: of ads are made. It allows Google to collect what

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Speaker 3: the government calls in a monopoly rents, and that means

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Speaker 3: that publishers are making less money, and it means that

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Speaker 3: advertisers are spending more money, and those costs ultimately get

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Speaker 3: passed on to consumers. So the government is alleging that

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Speaker 3: this system, because it's so powerfully controlled by Google, really

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Speaker 3: is operating to the detriment of consumers.

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Speaker 1: Very broadly, and Sarah fryar, these cases are ostensibly at

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Speaker 1: their core about search and ad sales products and functions

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Speaker 1: that have been Google's core offerings for years, but AI

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Speaker 1: has also become a signific can factor here in these

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Speaker 1: cases too. Can you talk about how this case has

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Speaker 1: been looking at Google's investments in AI and how the

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Speaker 1: company might have to shift its strategy in the AI

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Speaker 1: space in the wake of these anti trust rulings.

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Speaker 2: That's so key here, I mean in terms of AI.

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Speaker 2: The judge in this search case says he wants to

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Speaker 2: consider that in his remedy for this problem. And a

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Speaker 2: couple of things have come up in the case that

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Speaker 2: make Google look pretty bad. One is that they have

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Speaker 2: these very expensive deals with Samsung. Google said this on

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Speaker 2: the stand, they have these deals with Samsung to have

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Speaker 2: their Gemini AAI pre installed on phones. Now judges have

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Speaker 2: twice ruled those kinds of exclusive pre installed deals illegal.

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Speaker 2: Google's doing it anyway for the next big market. The

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Speaker 2: other thing that's really become clear in this remedies trial

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Speaker 2: is how Google already has such extreme step ahead in

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Speaker 2: the AI realm because of the data it has on

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Speaker 2: the search. If you are a website that has your

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Speaker 2: content index by Google Search, you are opting into being

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Speaker 2: used in Google's AI training. There's no way to opt

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Speaker 2: out of that, besides opting out of being discoverable on

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Speaker 2: Google Search, which is the government argue is basically equivalent

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Speaker 2: with the Internet, right.

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Speaker 3: Yeah, And if I can just jump in here, I mean,

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Speaker 3: the dj is extremely concerned that the advent of AI

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Speaker 3: could quickly allow Google to further entrench its monopoly. On

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Speaker 3: the other hand, they're trying to walk a very fine line.

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Speaker 3: They don't want to hold back like emerging technology either,

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Speaker 3: and so for example, they decided not to ban Google

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Speaker 3: from acting as an investor in new AI enterprises. So

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Speaker 3: Google as a VC investor to help start up new

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Speaker 3: AI ventures. They're going to let that go ahead because

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Speaker 3: they want Google to compete with Microsoft and Apple and

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Speaker 3: the others who are quickly developing.

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Speaker 1: Well, Sarah, I want to switch gears to talk about Meta.

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Speaker 1: While the US government has already won twice against Google,

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Speaker 1: the case against Meta is still ongoing right now, we're

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Speaker 1: about halfway through. Can you just help us understand what

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Speaker 1: landed Meta in court and what's been litigated so far.

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Speaker 2: There is a strategy that the FTC is highlighting here

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Speaker 2: from Mark Zuckerberg and his way of growing companies. They're

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Speaker 2: concerned that he is seeing a competitor to his business

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Speaker 2: crop up, get traction, build their network effect, and out

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Speaker 2: of fear that his company will get overtaken by them

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Speaker 2: or lose some users to them, he just acquires them

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Speaker 2: or tries to copy them. And he's done this over

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Speaker 2: and over and over. So the two acquisitions that are

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Speaker 2: most in focus in this trial or the Instagram acquisition

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Speaker 2: in twenty twelve and then What's acquisition in twenty fourteen,

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Speaker 2: which was pretty much inspired by the success of the

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Speaker 2: Instagram acquisition. This is complicated for the FTC because at

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Speaker 2: the time, the FTC was given an opportunity to give

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Speaker 2: a stamp of approval on these acquisitions, and they said,

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Speaker 2: go forth, we you know, we're not going to challenge this,

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Speaker 2: And so Meta's trying to say, you know, you're trying

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Speaker 2: to speak has passed?

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Speaker 1: Does Meta still seem like it's going to win this case?

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Speaker 1: Have the dynamic shifted?

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Speaker 3: Well?

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Speaker 2: Meta would would say they're pretty confident. But I think

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Speaker 2: that the emails that have surfaced, it is true that

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Speaker 2: Zuckerberg and his leaders were constantly looking behind their shoulders

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Speaker 2: to see if anyone was catching up with them in

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Speaker 2: the race, and constantly trying to think, how can we

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Speaker 2: either crush them, buy them, build our own version of this.

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Speaker 2: So the FTC has been very good at showing that

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Speaker 2: the problem is their market definition for what they consider

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Speaker 2: to be metas monopoly. It's this kind of made up

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Speaker 2: category personal social networking. They say that in their market definition,

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Speaker 2: the social networks that Meta owns only compete with snap,

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Speaker 2: which makes Snapchat in MIUI, which is I don't even

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Speaker 2: I don't even know, I haven't heard of that one.

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Speaker 2: And if you're a modern user of social media, that's

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Speaker 2: kind of ridiculous.

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Speaker 1: Sarah Forden, what's your take?

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Speaker 3: So the case all of these anti trust cases will

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Speaker 3: ultimately turn on what the judge accepts as the market definition,

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Speaker 3: and so here the FTC is arguing that meta occupies

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Speaker 3: dominates the space for personal social networking that's basically sharing

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Speaker 3: with friends and family. So when you want to share

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Speaker 3: something with friends and family, you'll go to Facebook. And

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Speaker 3: the key thing is going to be also what the competitors,

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Speaker 3: so medicaying, well, we compete with TikTok, we compete with

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Speaker 3: all these other platforms. The key thing is and be

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Speaker 3: what those competitors say about who they perceive as competition.

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Speaker 3: So are they competing with Facebook or are they just

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Speaker 3: doing their own thing?

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Speaker 1: After the break the political jockeying behind the scenes of

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Speaker 1: these anti trust trials and what the case's outcomes could

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Speaker 1: mean for social media and search, I want to talk

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Speaker 1: about the politics and I want to talk about the

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Speaker 1: implications of these trials, Sarah Fordan anti trust enforcement of

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Speaker 1: big tech, as you both talked about, has been a

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Speaker 1: rare example of continuity across both the Biden and Trump administrations.

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Speaker 1: Can you explain the politics at play here?

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Speaker 3: Yeah, what we're seeing is really a sea change in

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Speaker 3: antitrust enforcement that's built up over at least the last

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Speaker 3: ten plus years, and it's a shift whereby both Republicans

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Speaker 3: and Democrats have started to see corporate solidation broadly and

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Speaker 3: corporate power in the tech sector specifically really grow to

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Speaker 3: be very powerful. So the Democrats will look at consumer harm,

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Speaker 3: whereas the Republican started to see that these companies were

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Speaker 3: so powerful they felt they were a suppressing conservative speech.

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Speaker 3: And yet, even though they're coming from very different perspectives,

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Speaker 3: the one thing they agree on is that these companies

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Speaker 3: have gotten too big and too powerful, and it's time

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Speaker 3: to put some guardrails in place.

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Speaker 1: Sarah Friar, You've been tracking Mark Zuckerberg's relationship with Trump

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Speaker 1: and his lobbying efforts. Can you talk about whether they've failed.

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Speaker 2: Well. I think a lot of the big tech leaders

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Speaker 2: thought of Trump as a transactional president. They have been

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Speaker 2: to dinner with Trump, They've been to his inauguration, They've

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Speaker 2: donated to initiatives he cares about, and so that is

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Speaker 2: something that they hoped, especially Mark Zuckerberg, HOTE would help

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Speaker 2: them have an audience. Zuckerberg has had some luck in

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Speaker 2: getting Trump and JD Vance to talk about what Europe's

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Speaker 2: doing and saying that Europe shouldn't be holding back our

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Speaker 2: American tech companies. They have had some success in getting

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Speaker 2: the administration to agree that big tech in America should

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Speaker 2: be the winner of the global AI race, not those

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Speaker 2: companies in China, right, But it really hasn't worked on

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Speaker 2: anti trusts Google, Meta, Apple, Amazon, like, they're still all

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Speaker 2: completely in the crosshairs on that topic. And Zuckerberg personally

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Speaker 2: tried to get Trump to let Meta settle this case

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Speaker 2: and the FTC and Trump weren't willing to go for it.

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Speaker 1: Well, I want to talk about what the outcomes of

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Speaker 1: these trials could mean for people who use the Internet

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Speaker 1: or use these social media and tech platforms. If Google

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Speaker 1: had to sell off Chrome, for example, or if the

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Speaker 1: metatrial doesn't go its way, what would that mean for

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Speaker 1: someone trying to make a search going on Instagram.

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Speaker 2: I think that first of all, whatever happens is going

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Speaker 2: to take a long time to happen, because the resolution

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Speaker 2: of the trial will come and then Google will likely

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Speaker 2: appeal it, and then there's going to be some back

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Speaker 2: and forth. But Apple last week was forced to allow

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Speaker 2: app creators in its app store to receive payments in

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Speaker 2: other ways than through iPhones, and notoriously Apple takes a

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Speaker 2: large cut of the payments that go through the app store,

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Speaker 2: So this is going to hit them in terms of

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Speaker 2: their revenue. So I think we might see more things

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Speaker 2: like that, like little parts of their operations that seem

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Speaker 2: kind of, Oh, this is just the way it's always worked.

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Speaker 2: I'm used to this as a consumer, realizing that it

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Speaker 2: doesn't have to be that way. We don't have to

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Speaker 2: have our Chrome browser following us around the entire Internet

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Speaker 2: and tracking everything we do in every other website to

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Speaker 2: personalize our results. And with the FTC case, the most

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Speaker 2: dramatic possible outcome is a spin off of Instagram and

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Speaker 2: WhatsApp from Meta. That would be like, absolutely unheard of

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Speaker 2: in the history of the Internet that a deal that's

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Speaker 2: more than ten years old gets undone. I just can't

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Speaker 2: even imagine, because they have done so much on the

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Speaker 2: back end to integrate those products. Certainly they could disentangle them,

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Speaker 2: but they'd both fight very hard.

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Speaker 1: But I guess the government's argument in all of these

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Speaker 1: cases is that it's better for consumers if there's more competition,

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Speaker 1: if there's less monopoly activity. That's kind of the core

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Speaker 1: of these arguments, right, Yeah, the.

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Speaker 3: Goal of these remedies exactly as Sarah said, is to

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Speaker 3: make a better experience for consumers. So imagine if you

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Speaker 3: could choose from four or five browsers, and maybe there's

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Speaker 3: one that really protects your data, maybe there's one that

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Speaker 3: gives you a better experience. If they're competing, then there

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Speaker 3: they've got more incentive to try to get your eyeballs

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Speaker 3: and get you to use them. So they're going to

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Speaker 3: be more creative and more innovative.

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Speaker 1: Right, Well, we're already kind of getting a sense of

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Speaker 1: how the search landscape could be changing. On Wednesday, Apple's

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Speaker 1: senior vice president of Services testified at the Google trial

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Speaker 1: and he said that while he believes Google should remain

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Speaker 1: the default in their browser Safari, he also said that

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Speaker 1: the company is looking at revamping Safari to focus on

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Speaker 1: AI powered search engines. So for what did you make

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Speaker 1: of that? What does it say about Google's future as

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Speaker 1: sort of this dominant search player.

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Speaker 2: Well, it was concerning enough to send Google stock down.

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Speaker 2: The market is recognizing that if Apple thinks that there's

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Speaker 2: a threat to Google's dominance, then there probably is one.

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Speaker 2: You know, the Apple is looking at other options including

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Speaker 2: they said Perplexity, Open Ai, these other chatbots that if

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Speaker 2: people have turned to you as their gateweight information on

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Speaker 2: the web. That said, we have to consider that Apple

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Speaker 2: has skin in the game here. They get twenty billion

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Speaker 2: dollars a year from Google to have Google be the

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Speaker 2: default on its search and on iPhones. And by framing

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Speaker 2: this Google deal as part of this very competitive landscape

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Speaker 2: where you know, it makes sense for Google to pay

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Speaker 2: Apple twenty billion dollars to be the default search on iPhones,

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Speaker 2: they're preserving that twenty billion in their balance sheet.

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Speaker 1: What about the government, what are they taking away from

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Speaker 1: how these trials are going so far, and how might

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Speaker 1: it influence the future cases they might bring.

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Speaker 3: I mean, we've already seen these two landmark decisions against Google,

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Speaker 3: so that's already on precedent. We haven't seen this level

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Speaker 3: of a case since they tried to break up Microsoft.

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Speaker 3: What we have here potentially is a real game changer.

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Speaker 3: So if the government wins, they're going to be emboldened

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Speaker 3: and they're going to, you know, feel more confident about

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Speaker 3: pursuing other complex cases. And they have a ticket Master

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Speaker 3: case out there, they have the Apple case that's in progress,

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Speaker 3: they have an Amazon case, and they're also looking at

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Speaker 3: other sectors like healthcare, So there potentially could really be

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Speaker 3: a wave of more antitrust enforcement. If they lose, that

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Speaker 3: could probably have a chilling effect because these cases are long,

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Speaker 3: they're difficult, they're complex, they're costly, so we could really

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Speaker 3: see a sea change in either direction depending how these

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Speaker 3: cases go. Well.

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Speaker 1: Sarah, Sarah, thank you so much for being.

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Speaker 3: Here, Thanks for having me, Thanks for having us.

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Speaker 1: This is the Big Take from Bloomberg News. I'm Sarah Holder.

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Speaker 1: This episode was produced by Alex tie. It was edited

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Speaker 1: by Tracy Samuelson and Joshua Brustein. It was fact checked

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Speaker 1: by Rachel Lewis Chrisky and mixed and sound designed by

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Speaker 1: Alex Sugia. Our senior producer is Naomi Shaven. Our senior

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Speaker 1: editor is Elizabeth Conso. Our deputy executive producer is Julia Weaver.

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Speaker 1: Our executive producer is Nicole beemsterbor Sage Bauman is Bloomberg's

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Speaker 1: head of Podcasts. If you liked this episode, make sure

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Speaker 1: to subscribe and review The Big Take wherever you listen

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Speaker 1: to podcasts. It helps people find the show. Thanks for listening.

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Speaker 1: We'll be back tomorrow.