Speaker 1: This is Bloomberg Business Week with Carol Masser from Bloomberg Radio. So, Paul,
Speaker 1: no doubt about it. This was one of our big
Speaker 1: stories that hit earlier this morning, and we've been covering
Speaker 1: it all day, so we do want to get to
Speaker 1: the latest on this story. We're talking about the US
Speaker 1: Justice Department filing an antitrust lawsuit against Alphabet's Google, accusing
Speaker 1: it of abusing its monopoly in search and in the
Speaker 1: most significant antitrust action against an American company in more
Speaker 1: than two decades. So let's get to the legal and
Speaker 1: business sides of this story. We've got two great voices,
Speaker 1: Jennifer Ree, senior litigation analyst at Bloomberg Intelligence on the
Speaker 1: phone from Cleveland, and a voice very familiar to our
Speaker 1: Business Week audience, Michael Moe, co founder of gs V
Speaker 1: Asset Management, author of the Global Silicon Valley Handbook. Jed,
Speaker 1: Let's start with you. So, what's the legal case of
Speaker 1: this story. Well, the d o J finally filed this
Speaker 1: lawsuit that I think was no big surprise. We all
Speaker 1: knew this was coming um and and honestly it was
Speaker 1: a little bit more targeted and narrowed, and I expected
Speaker 1: it to be What essentially it accuses Google of doing
Speaker 1: is what we call an anti trust exclusive dealing. Now,
Speaker 1: it runs through a whole series of different kinds of
Speaker 1: agreements and payments that Google makes two device manufacturers and
Speaker 1: wireless carriers and browser developers like Mozilla to secure the
Speaker 1: default status for Google's general search engine and sometimes prohibit
Speaker 1: these third parties from dealing with some of Google's competitors.
Speaker 1: And in antitrust we'd call it exclusive dealing, which is
Speaker 1: sometimes illegal and sometimes not. But when a company that
Speaker 1: has monopoly status, and in this case, it's probably fairly
Speaker 1: easy to show that Google does of a monopoly at
Speaker 1: least in general online search, and they foreclose they close
Speaker 1: up more than about of the available outlets out there
Speaker 1: to its rivals through exclusive agreements, it can be anti competitive.
Speaker 1: So I think the trick here is going to be
Speaker 1: to show that foreclosure for the d o J, because
Speaker 1: even though Google enterst these agreements, it does really different
Speaker 1: users from changing the default through a tension. Hey, Michael,
Speaker 1: let's look at it from the business side. Here, Jen
Speaker 1: laid out some of the legal issues from the business side.
Speaker 1: I'm looking at the stock goes up one point four today,
Speaker 1: not exactly. The market kind of running for the hills here.
Speaker 1: What do you make of this, Well, it's it's a
Speaker 1: little bit from business standpoint um and from a traditional
Speaker 1: antitrust standpoint, it's sort of hard to figure out. You
Speaker 1: kind of scratch your head because you're saying, who's the
Speaker 1: victim here? I mean, consumers love Google. They vote with
Speaker 1: their feet, you know, that's the antitrust is about, uh,
Speaker 1: you know, protecting the consumer and promoting innovation. And Internet
Speaker 1: economics are about disproportion gained the leader in the category.
Speaker 1: That's true almost everywhere. And what that means for the
Speaker 1: consumer is they get better algorithms. The scale that they get,
Speaker 1: the AI that they have provides better search results, so
Speaker 1: you know, the search product is you know, it's hard
Speaker 1: to argue that, you know, the the economics of the
Speaker 1: marketplace don't benefit the consumer. I think what this ultimately
Speaker 1: really gets about as the data, because it's you know,
Speaker 1: the data is where the all the value is and
Speaker 1: the business model Google has has a really advantaged way
Speaker 1: to get very valuable data. So well, it's interesting, Jen,
Speaker 1: So Michael brings up a good point. I mean, who
Speaker 1: is the victim here? It's a very good point because
Speaker 1: Google could will likely claim here that look, the reason
Speaker 1: we have our position and everybody uses us as their
Speaker 1: search engine is because we're just better than everybody else,
Speaker 1: and users could switch over to being or to order
Speaker 1: one of the others as their default, and they don't
Speaker 1: because they like us better. Um, what the d J
Speaker 1: has claimed is that Google has secured this position and
Speaker 1: it hasn't really allowed any of these other search engines
Speaker 1: to get to a scale where they could be as
Speaker 1: good as Google, because you need to tale, you need access,
Speaker 1: and you need that size, and you need to users
Speaker 1: in order to be as good as Google is. And
Speaker 1: they claim the DMJ claims that what Google has done
Speaker 1: is reduced quality, innovation, and choice. And interestingly, they haven't
Speaker 1: talked about price because obviously search for consumers is free,
Speaker 1: we're not paying for it, and the typical anti trust harm,
Speaker 1: which is increased price, is not really in here. Um,
Speaker 1: it's sort of inn a side bar, but but really
Speaker 1: they're talking about quality, innovation, and choice, and that is
Speaker 1: another aspect that's going to make this case a bit
Speaker 1: challenging because those are not channelally typically anti trust harms
Speaker 1: without also some sort of an increase in price. Or
Speaker 1: they're harm to consumers. And and the point that Michael's
Speaker 1: made the consumers don't reappear, at least superficially to be
Speaker 1: harmed and have a great product, It's a very good
Speaker 1: one in terms of Google pretending to see So, Michael,
Speaker 1: this isn't Microsoft correct Soft you know, used its advantaged
Speaker 1: position on the desktop to basically keep innovation um away
Speaker 1: and you know, and and guage customers. I mean to
Speaker 1: be blunt, you know, this is a whole different dynamic,
Speaker 1: as I said, you know, for the custom of consumer.
Speaker 1: You know, you basically you're getting an exceptional product for
Speaker 1: free and scale brings advantages to the consumer. And Google
Speaker 1: is innovating all the time. I think when in the
Speaker 1: world you're saying you need more choices, I don't think
Speaker 1: people want more choices. I think what we have is
Speaker 1: a problem of what I call infadecity. There's too much
Speaker 1: information and so being able to have that you know,
Speaker 1: great product at no cost. You know, who's losing here?
Speaker 1: I do think what the interesting part here? I think
Speaker 1: it is ultimately about the data and advantages that Google
Speaker 1: gets from that data. But that's not what the that's
Speaker 1: not what the you know, that's not what the anti
Speaker 1: trust the suit said. All right, Well, you know the
Speaker 1: one thing I do wonder, Michael, is it's Silicon Valley
Speaker 1: like just sitting up and taking notice and saying, Okay,
Speaker 1: maybe if it's not this one that becomes a problem,
Speaker 1: there is something else. Because there's more and more you
Speaker 1: know tech you know, exacts being hauled before Congress, and
Speaker 1: there's more discussions. I mean, I'm just curious, what if
Speaker 1: anything reverberating through Silicon Valley. Well, I think there's a reality.
Speaker 1: I think Silicon Valley needs to be hyper sensitive to
Speaker 1: the to the fact that a lot of the America,
Speaker 1: a lot of the world's hurting and yet digital you know,
Speaker 1: Silicon Valleys driving you know, Nazas up, which is basically tech,
Speaker 1: and the Dow Jones is down for the yearth So
Speaker 1: the bottom line is, I do think there's not a
Speaker 1: lot of sempathy towards technology, and so I think that
Speaker 1: you know, the strength of these businesses and the position
Speaker 1: they have in society, they've got to be extremely careful
Speaker 1: not to do things that are anti competitive or that
Speaker 1: take innovation or you know, hurt the consumer. And so
Speaker 1: I think that's the that's the delicate dance that we're
Speaker 1: dealing with, because I do think there is a negative
Speaker 1: sentiment about Silicon Valley just because of success. Hey, Jen,
Speaker 1: you are my favorite anti trust lawyer, and I must
Speaker 1: say you're the only anti trust lawyer I know. But still,
Speaker 1: how do you think this is going to play out?
Speaker 1: You sit there, You've seen these things for a long time.
Speaker 1: Have you expect this high profile case will play out? Well?
Speaker 1: The first thing is it's going to take a long time.
Speaker 1: I mean, you know, we're saying all this news today
Speaker 1: and there might be some for quite a while, but
Speaker 1: then it's just going to get quiet because this case
Speaker 1: is going to drag on um. You know, we saw
Speaker 1: the FTC's lawsuit against Qualcom from monopolizations that had some
Speaker 1: similarities to this one. Before we had a disrecord the
Speaker 1: decision um and uh, it was about three years and
Speaker 1: I think that's fast, and you know, and at that
Speaker 1: point either company can appeal and drag it on even further.
Speaker 1: So that's one thing. This is going to be a
Speaker 1: marathon and we aren't going to have any discernible impact
Speaker 1: um or outcomes for quite some time. And the second
Speaker 1: thing is, as an exclusive dealing case, I think the
Speaker 1: d o J has some hurdles here. There's some evidence
Speaker 1: that it looks like from the complaint and what they
Speaker 1: say that's on their side, But the these can be
Speaker 1: difficult cases to win. Historically, UM exclusive dealing arrangements have
Speaker 1: been challenged for many years under the anti trust laws,
Speaker 1: and you know, a plaintiffs can win, but it is
Speaker 1: also difficult. It's an uphill climb. UM. And one thing
Speaker 1: that makes this quite different from Microsoft, which might make
Speaker 1: it a little more difficult, is that Microsoft actually technically
Speaker 1: prevented users of the Microsoft operating system from being able
Speaker 1: to use Netscape or Java. UM. You couldn't change it
Speaker 1: as a default as the consumer if you wanted to,
Speaker 1: and Google hasn't gone that far. You know, Google might
Speaker 1: set itself in these agreements where it's the default search engine,
Speaker 1: but any consumer can go in and change that, and
Speaker 1: so it's not really technically forced foreclosing its rivals. UM.
Speaker 1: It's more of a de facto exclusive greeling exclusive dealing
Speaker 1: than explicit and that makes it just a little bit
Speaker 1: tougher too. But but I think that the main thing
Speaker 1: is it's going to be some time before we really
Speaker 1: understand what direction this is going to go in So
Speaker 1: I gotta ask you guys, what about the timing? Is
Speaker 1: it kind of interesting that here we are just thirteen
Speaker 1: days out from an election? Michael, Mom, what do you
Speaker 1: make of that? And I do wonder, you know, does
Speaker 1: a new administration change anything when it comes to a
Speaker 1: case like this. Well, I don't think it's a coincidence,
Speaker 1: that's for sure. And you know, I think, uh, you know,
Speaker 1: California last time I checked, as in a battleground state. Um,
Speaker 1: I think I think it's pretty safe to say that
Speaker 1: California is gonna go for Biden. So yeah, I think
Speaker 1: that's you know, I think that's reality. Um, I think
Speaker 1: that's unfortunate. Again, I think this. You know, I'm not
Speaker 1: an anti trust lawyer, but I think just looking at
Speaker 1: sort of what a COmON sense, looking at sort of
Speaker 1: the allegations, to me, it just as nonsensical it makes
Speaker 1: it makes complete sense. I guess for the political standpoint,
Speaker 1: what why it was filed now? But it's it's, it's
Speaker 1: it's it seems a little bit um crazy to me. Jim,
Speaker 1: what do you make of the timing of this? I
Speaker 1: think the timing is interesting as well. Um, you know,
Speaker 1: look the dj has been investigating Google for more than
Speaker 1: a year now and off. Oftentimes that is the timing.
Speaker 1: I mean, these investigations go on for a year, sometimes
Speaker 1: two years, and then a lawsuit is brought. Um. But
Speaker 1: we did see some news reports that leaks coming from
Speaker 1: some d o J staffers saying that they didn't think
Speaker 1: they were quite ready and that they would have liked
Speaker 1: to have more have had more time to flesh out
Speaker 1: their case a little bit more, and they thought they'd
Speaker 1: have a stronger case if they had more time. So
Speaker 1: it does look it looks a little odd. So you know, Jen,
Speaker 1: what are next steps here? Um? You know, I think
Speaker 1: they they they've been served here that now what right?
Speaker 1: So the next step would be, you know, they'll get together,
Speaker 1: they'll get assigned to a judge. They'll get together to
Speaker 1: set up a schedule. And the schedule really is just
Speaker 1: a discovery schedule, meaning collecting of documents from each other,
Speaker 1: deposing witnesses um that will be used for trial. And
Speaker 1: that is a long process that can take about a year.
Speaker 1: But before you jump into that the heavy duty part
Speaker 1: of discovery, the defendant, Google has the opportunity to file
Speaker 1: what's called emotion to dismiss an emotion to dismiss this
Speaker 1: basically saying just based on the allegations in this complaint
Speaker 1: and not digging into the evidence, they haven't released, they
Speaker 1: haven't plausibly stated, and then she trust claim here. I
Speaker 1: think Google will do that and we could see that
Speaker 1: within the next couple of months. I don't see that
Speaker 1: being successful. So this is what's called a rule of
Speaker 1: reason case, which means a judge really has to weigh
Speaker 1: the evidence and dive into the evidence before they can
Speaker 1: make a determination. So so I think this will continue
Speaker 1: on past that, but it's likely Google with file something
Speaker 1: like that. And I think the other thing we may
Speaker 1: see is other states signing on to this case or
Speaker 1: another suit being filed by a different set of states
Speaker 1: that might contain additional allegations. Be honest, all right, We're
Speaker 1: gonna leave it on that note. Um, folks, thank you
Speaker 1: so much. Jennifer Ree, she's senior litigation analyst Hepp Limburg
Speaker 1: Intelligence on the phone from Cleveland. Michael Mouh, thank you
Speaker 1: as well, co founder gsb Asset Management, also author of
Speaker 1: the Global Silicon Valley Handbook. But really understand what's going
Speaker 1: on in Silicon Valley and as he said, you know,
Speaker 1: some of the issues about who owns our data, um,
Speaker 1: you know, and the free speech issues, issues in censorship
Speaker 1: are some of the things that you know, he thinks
Speaker 1: maybe big tech really needs to be looked at. Yeah,
Speaker 1: I think so, because that's something that Congress is looking at.
Speaker 1: And whenever you have Congress, they can look at your industry,
Speaker 1: your company. Uh, that's a big issue. VISA be just
Speaker 1: a typical regulator.