Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Right now, in one
Speaker 1: federal courthouse in DC, two of the world's biggest tech
Speaker 1: companies are facing reckoning. On the second floor, Meta, the
Speaker 1: company behind Facebook, Instagram, and WhatsApp, is up against monopoly
Speaker 1: charges filed by the Federal Trade Commission. And two floors
Speaker 1: up is Google, which recently lost to anti trust cases
Speaker 1: and is now awaiting a judgment that could lead to
Speaker 1: a breakup of the company. Both cases are part of
Speaker 1: the US government's growing anti trust enforcement push that's been
Speaker 1: putting increasing pressure on big tech.
Speaker 2: It's kind of stunning that this is the one issue,
Speaker 2: this anti tech sentiment. We know they're powerful, we need
Speaker 2: to do something about it. That is like the most
Speaker 2: bipartisan topic now and in the past ten years.
Speaker 1: I want to say that's Sarah Fryer, a Bloomberg technology
Speaker 1: editor who's been following these cases.
Speaker 2: This is really driven a strange thread of collaboration between
Speaker 2: Republicans and Democrats over the years, from the first Trump
Speaker 2: administration to the Biden administration and now in the second
Speaker 2: Trump administration. Trying to tie it all up with a bow.
Speaker 1: Today on the show Big Tech Is on Trial, how
Speaker 1: the monopoly claims against Google and Meta could reshape the
Speaker 1: industry and the way we use the Internet for decades
Speaker 1: to come. I'm Sarah Holder, and this is the big
Speaker 1: take from Bloomberg News. I am thrilled to be sitting
Speaker 1: down with two of Bloomberg's eminent Sarah's. We have Sarah Fryer.
Speaker 1: She's a technology editor for Bloomberg and the author of
Speaker 1: No Filter, The Inside Story of Instagram. Welcome Sarah, Thanks
Speaker 1: for having me and Sarah Forden our second Sarah or
Speaker 1: our third, depending on how you're counting. She oversees legal
Speaker 1: news at Bloomberg, and she's been covering Google and its
Speaker 1: court battles since twenty ten. Thank you for being here.
Speaker 3: Thank you for having me.
Speaker 2: Sarah Fryer.
Speaker 1: You've been on the tech beat for a while, and
Speaker 1: you've traced how big tech companies have been under increasing
Speaker 1: scrutiny in recent years, including in the anti trust space.
Speaker 1: What led us to this moment? Why are Google and
Speaker 1: Meta in court facing monopoly lawsuits at roughly the same time.
Speaker 2: I think it's a combination of a few really important things.
Speaker 2: The government has gotten a lot smarter about the level
Speaker 2: of power that these companies have and how they're wielding it.
Speaker 2: A lot of the first awakening of these companies and
Speaker 2: what they've done was centered around the consumer experience. It
Speaker 2: was stuff around privacy, content moderation. You know, did they
Speaker 2: let Russia manipulate the twenty sixteen presidential election? But these
Speaker 2: anti trust trials over the years, the government's gotten really
Speaker 2: smart about exactly what makes these companies tech. For Meta,
Speaker 2: the trial centers around how Mark Zuckerberg built his empire,
Speaker 2: literally the secret sauce of like why his company got
Speaker 2: so big and powerful. The Google trial is centered around search,
Speaker 2: their power and search and what they can do to
Speaker 2: remedy what they've now declared to be an illegal monopoly power,
Speaker 2: as well as attech, which is how they make most
Speaker 2: of their revenues.
Speaker 3: Just just take a step back and follow on what
Speaker 3: Sarah Fryer said. Another reason it took a long time
Speaker 3: to get here was that these companies are primarily offering
Speaker 3: free services, and typically anti trust law had looked at
Speaker 3: price and are things getting more expensive for consumers? So
Speaker 3: they had to really revisit how they're looking at these companies.
Speaker 3: And so what you have now are you two behemoth
Speaker 3: tech platforms they're making goodzillions of dollars every year on
Speaker 3: people's data and information, and so that sort of became
Speaker 3: the new currency in these cases. And the government and
Speaker 3: a trust of forcers have taken a long time to
Speaker 3: study these markets, so both the search market and how
Speaker 3: advertising works in search, and the social networking market, and
Speaker 3: so it represents a longer term building of appreciating how
Speaker 3: big and powerful these companies came and how unfettered they were.
Speaker 1: Sarah Fordon, I want to take a closer look at
Speaker 1: the Google trial. Judges have already ruled in two separate
Speaker 1: cases that Google is a monopoly. One case involves Google Search,
Speaker 1: the other is tied to the company's ad technology. As
Speaker 1: you mentioned, we're now in the remedy stage of the
Speaker 1: first trial, the one that involved Google search monopoly. So
Speaker 1: what are the proposed remedies here?
Speaker 3: Yeah, so that trial is now in its final week.
Speaker 3: The judge's been hearing arguments from both sides, and the
Speaker 3: DOJ wants Google to sell off its Chrome browser. That
Speaker 3: is probably the most dramatic remedy proposal. And while Google
Speaker 3: argues that has nothing to do with the harms in
Speaker 3: this case and the monopoly over search, the government says
Speaker 3: that the browser is really the gateway to the Internet,
Speaker 3: and so that's vital for that to be opened up
Speaker 3: to competition. The other thing that the government wants is
Speaker 3: for Google to share data related to search queries. And
Speaker 3: then the third area is the government wants a judge
Speaker 3: to ban Google from doing any kind of exclusive search
Speaker 3: agreements the way it had with Apple and with Samsung,
Speaker 3: so that Google was the default browser and search engine
Speaker 3: on people's smartphones.
Speaker 1: So that's the search monopoly case, which is in its
Speaker 1: final week. Can you explain big picture why the DOJ
Speaker 1: believes Google has been anti competitive in its ad sales.
Speaker 3: Yeah. So this was a separate, a totally separate case
Speaker 3: that was brought under the Biden administration. And this case
Speaker 3: looks at the pipeline of technology that Google controls and
Speaker 3: underpins its ability to serve ads on the web. And
Speaker 3: over the years, it acquired a number of companies, including
Speaker 3: one called double Click and one called ad Mold, which
Speaker 3: allows it to control the whole transaction. And the issue
Speaker 3: there is that it's not transparent at all. It's a
Speaker 3: very opaque process, so nobody can actually see how the
Speaker 3: prices are formed and how the decisions about the cost
Speaker 3: of ads are made. It allows Google to collect what
Speaker 3: the government calls in a monopoly rents, and that means
Speaker 3: that publishers are making less money, and it means that
Speaker 3: advertisers are spending more money, and those costs ultimately get
Speaker 3: passed on to consumers. So the government is alleging that
Speaker 3: this system, because it's so powerfully controlled by Google, really
Speaker 3: is operating to the detriment of consumers.
Speaker 1: Very broadly, and Sarah fryar, these cases are ostensibly at
Speaker 1: their core about search and ad sales products and functions
Speaker 1: that have been Google's core offerings for years, but AI
Speaker 1: has also become a signific can factor here in these
Speaker 1: cases too. Can you talk about how this case has
Speaker 1: been looking at Google's investments in AI and how the
Speaker 1: company might have to shift its strategy in the AI
Speaker 1: space in the wake of these anti trust rulings.
Speaker 2: That's so key here, I mean in terms of AI.
Speaker 2: The judge in this search case says he wants to
Speaker 2: consider that in his remedy for this problem. And a
Speaker 2: couple of things have come up in the case that
Speaker 2: make Google look pretty bad. One is that they have
Speaker 2: these very expensive deals with Samsung. Google said this on
Speaker 2: the stand, they have these deals with Samsung to have
Speaker 2: their Gemini AAI pre installed on phones. Now judges have
Speaker 2: twice ruled those kinds of exclusive pre installed deals illegal.
Speaker 2: Google's doing it anyway for the next big market. The
Speaker 2: other thing that's really become clear in this remedies trial
Speaker 2: is how Google already has such extreme step ahead in
Speaker 2: the AI realm because of the data it has on
Speaker 2: the search. If you are a website that has your
Speaker 2: content index by Google Search, you are opting into being
Speaker 2: used in Google's AI training. There's no way to opt
Speaker 2: out of that, besides opting out of being discoverable on
Speaker 2: Google Search, which is the government argue is basically equivalent
Speaker 2: with the Internet, right.
Speaker 3: Yeah, And if I can just jump in here, I mean,
Speaker 3: the dj is extremely concerned that the advent of AI
Speaker 3: could quickly allow Google to further entrench its monopoly. On
Speaker 3: the other hand, they're trying to walk a very fine line.
Speaker 3: They don't want to hold back like emerging technology either,
Speaker 3: and so for example, they decided not to ban Google
Speaker 3: from acting as an investor in new AI enterprises. So
Speaker 3: Google as a VC investor to help start up new
Speaker 3: AI ventures. They're going to let that go ahead because
Speaker 3: they want Google to compete with Microsoft and Apple and
Speaker 3: the others who are quickly developing.
Speaker 1: Well, Sarah, I want to switch gears to talk about Meta.
Speaker 1: While the US government has already won twice against Google,
Speaker 1: the case against Meta is still ongoing right now, we're
Speaker 1: about halfway through. Can you just help us understand what
Speaker 1: landed Meta in court and what's been litigated so far.
Speaker 2: There is a strategy that the FTC is highlighting here
Speaker 2: from Mark Zuckerberg and his way of growing companies. They're
Speaker 2: concerned that he is seeing a competitor to his business
Speaker 2: crop up, get traction, build their network effect, and out
Speaker 2: of fear that his company will get overtaken by them
Speaker 2: or lose some users to them, he just acquires them
Speaker 2: or tries to copy them. And he's done this over
Speaker 2: and over and over. So the two acquisitions that are
Speaker 2: most in focus in this trial or the Instagram acquisition
Speaker 2: in twenty twelve and then What's acquisition in twenty fourteen,
Speaker 2: which was pretty much inspired by the success of the
Speaker 2: Instagram acquisition. This is complicated for the FTC because at
Speaker 2: the time, the FTC was given an opportunity to give
Speaker 2: a stamp of approval on these acquisitions, and they said,
Speaker 2: go forth, we you know, we're not going to challenge this,
Speaker 2: And so Meta's trying to say, you know, you're trying
Speaker 2: to speak has passed?
Speaker 1: Does Meta still seem like it's going to win this case?
Speaker 1: Have the dynamic shifted?
Speaker 3: Well?
Speaker 2: Meta would would say they're pretty confident. But I think
Speaker 2: that the emails that have surfaced, it is true that
Speaker 2: Zuckerberg and his leaders were constantly looking behind their shoulders
Speaker 2: to see if anyone was catching up with them in
Speaker 2: the race, and constantly trying to think, how can we
Speaker 2: either crush them, buy them, build our own version of this.
Speaker 2: So the FTC has been very good at showing that
Speaker 2: the problem is their market definition for what they consider
Speaker 2: to be metas monopoly. It's this kind of made up
Speaker 2: category personal social networking. They say that in their market definition,
Speaker 2: the social networks that Meta owns only compete with snap,
Speaker 2: which makes Snapchat in MIUI, which is I don't even
Speaker 2: I don't even know, I haven't heard of that one.
Speaker 2: And if you're a modern user of social media, that's
Speaker 2: kind of ridiculous.
Speaker 1: Sarah Forden, what's your take?
Speaker 3: So the case all of these anti trust cases will
Speaker 3: ultimately turn on what the judge accepts as the market definition,
Speaker 3: and so here the FTC is arguing that meta occupies
Speaker 3: dominates the space for personal social networking that's basically sharing
Speaker 3: with friends and family. So when you want to share
Speaker 3: something with friends and family, you'll go to Facebook. And
Speaker 3: the key thing is going to be also what the competitors,
Speaker 3: so medicaying, well, we compete with TikTok, we compete with
Speaker 3: all these other platforms. The key thing is and be
Speaker 3: what those competitors say about who they perceive as competition.
Speaker 3: So are they competing with Facebook or are they just
Speaker 3: doing their own thing?
Speaker 1: After the break the political jockeying behind the scenes of
Speaker 1: these anti trust trials and what the case's outcomes could
Speaker 1: mean for social media and search, I want to talk
Speaker 1: about the politics and I want to talk about the
Speaker 1: implications of these trials, Sarah Fordan anti trust enforcement of
Speaker 1: big tech, as you both talked about, has been a
Speaker 1: rare example of continuity across both the Biden and Trump administrations.
Speaker 1: Can you explain the politics at play here?
Speaker 3: Yeah, what we're seeing is really a sea change in
Speaker 3: antitrust enforcement that's built up over at least the last
Speaker 3: ten plus years, and it's a shift whereby both Republicans
Speaker 3: and Democrats have started to see corporate solidation broadly and
Speaker 3: corporate power in the tech sector specifically really grow to
Speaker 3: be very powerful. So the Democrats will look at consumer harm,
Speaker 3: whereas the Republican started to see that these companies were
Speaker 3: so powerful they felt they were a suppressing conservative speech.
Speaker 3: And yet, even though they're coming from very different perspectives,
Speaker 3: the one thing they agree on is that these companies
Speaker 3: have gotten too big and too powerful, and it's time
Speaker 3: to put some guardrails in place.
Speaker 1: Sarah Friar, You've been tracking Mark Zuckerberg's relationship with Trump
Speaker 1: and his lobbying efforts. Can you talk about whether they've failed.
Speaker 2: Well. I think a lot of the big tech leaders
Speaker 2: thought of Trump as a transactional president. They have been
Speaker 2: to dinner with Trump, They've been to his inauguration, They've
Speaker 2: donated to initiatives he cares about, and so that is
Speaker 2: something that they hoped, especially Mark Zuckerberg, HOTE would help
Speaker 2: them have an audience. Zuckerberg has had some luck in
Speaker 2: getting Trump and JD Vance to talk about what Europe's
Speaker 2: doing and saying that Europe shouldn't be holding back our
Speaker 2: American tech companies. They have had some success in getting
Speaker 2: the administration to agree that big tech in America should
Speaker 2: be the winner of the global AI race, not those
Speaker 2: companies in China, right, But it really hasn't worked on
Speaker 2: anti trusts Google, Meta, Apple, Amazon, like, they're still all
Speaker 2: completely in the crosshairs on that topic. And Zuckerberg personally
Speaker 2: tried to get Trump to let Meta settle this case
Speaker 2: and the FTC and Trump weren't willing to go for it.
Speaker 1: Well, I want to talk about what the outcomes of
Speaker 1: these trials could mean for people who use the Internet
Speaker 1: or use these social media and tech platforms. If Google
Speaker 1: had to sell off Chrome, for example, or if the
Speaker 1: metatrial doesn't go its way, what would that mean for
Speaker 1: someone trying to make a search going on Instagram.
Speaker 2: I think that first of all, whatever happens is going
Speaker 2: to take a long time to happen, because the resolution
Speaker 2: of the trial will come and then Google will likely
Speaker 2: appeal it, and then there's going to be some back
Speaker 2: and forth. But Apple last week was forced to allow
Speaker 2: app creators in its app store to receive payments in
Speaker 2: other ways than through iPhones, and notoriously Apple takes a
Speaker 2: large cut of the payments that go through the app store,
Speaker 2: So this is going to hit them in terms of
Speaker 2: their revenue. So I think we might see more things
Speaker 2: like that, like little parts of their operations that seem
Speaker 2: kind of, Oh, this is just the way it's always worked.
Speaker 2: I'm used to this as a consumer, realizing that it
Speaker 2: doesn't have to be that way. We don't have to
Speaker 2: have our Chrome browser following us around the entire Internet
Speaker 2: and tracking everything we do in every other website to
Speaker 2: personalize our results. And with the FTC case, the most
Speaker 2: dramatic possible outcome is a spin off of Instagram and
Speaker 2: WhatsApp from Meta. That would be like, absolutely unheard of
Speaker 2: in the history of the Internet that a deal that's
Speaker 2: more than ten years old gets undone. I just can't
Speaker 2: even imagine, because they have done so much on the
Speaker 2: back end to integrate those products. Certainly they could disentangle them,
Speaker 2: but they'd both fight very hard.
Speaker 1: But I guess the government's argument in all of these
Speaker 1: cases is that it's better for consumers if there's more competition,
Speaker 1: if there's less monopoly activity. That's kind of the core
Speaker 1: of these arguments, right, Yeah, the.
Speaker 3: Goal of these remedies exactly as Sarah said, is to
Speaker 3: make a better experience for consumers. So imagine if you
Speaker 3: could choose from four or five browsers, and maybe there's
Speaker 3: one that really protects your data, maybe there's one that
Speaker 3: gives you a better experience. If they're competing, then there
Speaker 3: they've got more incentive to try to get your eyeballs
Speaker 3: and get you to use them. So they're going to
Speaker 3: be more creative and more innovative.
Speaker 1: Right, Well, we're already kind of getting a sense of
Speaker 1: how the search landscape could be changing. On Wednesday, Apple's
Speaker 1: senior vice president of Services testified at the Google trial
Speaker 1: and he said that while he believes Google should remain
Speaker 1: the default in their browser Safari, he also said that
Speaker 1: the company is looking at revamping Safari to focus on
Speaker 1: AI powered search engines. So for what did you make
Speaker 1: of that? What does it say about Google's future as
Speaker 1: sort of this dominant search player.
Speaker 2: Well, it was concerning enough to send Google stock down.
Speaker 2: The market is recognizing that if Apple thinks that there's
Speaker 2: a threat to Google's dominance, then there probably is one.
Speaker 2: You know, the Apple is looking at other options including
Speaker 2: they said Perplexity, Open Ai, these other chatbots that if
Speaker 2: people have turned to you as their gateweight information on
Speaker 2: the web. That said, we have to consider that Apple
Speaker 2: has skin in the game here. They get twenty billion
Speaker 2: dollars a year from Google to have Google be the
Speaker 2: default on its search and on iPhones. And by framing
Speaker 2: this Google deal as part of this very competitive landscape
Speaker 2: where you know, it makes sense for Google to pay
Speaker 2: Apple twenty billion dollars to be the default search on iPhones,
Speaker 2: they're preserving that twenty billion in their balance sheet.
Speaker 1: What about the government, what are they taking away from
Speaker 1: how these trials are going so far, and how might
Speaker 1: it influence the future cases they might bring.
Speaker 3: I mean, we've already seen these two landmark decisions against Google,
Speaker 3: so that's already on precedent. We haven't seen this level
Speaker 3: of a case since they tried to break up Microsoft.
Speaker 3: What we have here potentially is a real game changer.
Speaker 3: So if the government wins, they're going to be emboldened
Speaker 3: and they're going to, you know, feel more confident about
Speaker 3: pursuing other complex cases. And they have a ticket Master
Speaker 3: case out there, they have the Apple case that's in progress,
Speaker 3: they have an Amazon case, and they're also looking at
Speaker 3: other sectors like healthcare, So there potentially could really be
Speaker 3: a wave of more antitrust enforcement. If they lose, that
Speaker 3: could probably have a chilling effect because these cases are long,
Speaker 3: they're difficult, they're complex, they're costly, so we could really
Speaker 3: see a sea change in either direction depending how these
Speaker 3: cases go. Well.
Speaker 1: Sarah, Sarah, thank you so much for being.
Speaker 3: Here, Thanks for having me, Thanks for having us.
Speaker 1: This is the Big Take from Bloomberg News. I'm Sarah Holder.
Speaker 1: This episode was produced by Alex tie. It was edited
Speaker 1: by Tracy Samuelson and Joshua Brustein. It was fact checked
Speaker 1: by Rachel Lewis Chrisky and mixed and sound designed by
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Speaker 1: editor is Elizabeth Conso. Our deputy executive producer is Julia Weaver.
Speaker 1: Our executive producer is Nicole beemsterbor Sage Bauman is Bloomberg's
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