Big Tech Lawyer Earns His Paycheck Arguing Google Doesn’t Dominate Search

Big Tech Lawyer Earns His Paycheck Arguing Google Doesn’t Dominate Search

Today is a big day in Silicon Valley because of a hearing happening in Washington, D.C.

Congress opened its long-awaited antitrust investigation of American tech giants on Tuesday with the first of several hearings. This one focused on the impact of companies like Google and Facebook on the U.S. press.

How did it go? Most of the time was taken up by people from the news media describing the decaying state of the industry, particularly the harms to local news outlets. There was only one representative of tech there and, at the risk of the understatement of the century, he was intent on playing hardcore defence.

When it was his turn to talk, Democratic Congressman David Cicilline from Rhode Island asked Matthew Schruers, vice president of the tech trade group Computer and Communications Industry Association and the tech industry’s man in the room, if they could agree on some baseline facts.

No, they could not.

Cicilline confronted Schruers with the numbers that told the tale of Google’s dominance in search. Schruers, intent on earning his paycheck, insisted up, down, and sideways that search is a competitive market.

As his first example of a competitor, Schruers offered Apple’s Siri. The thing is, Siri searches the web with Google by default.

Here’s the strange exchange in full:

Cicilline: “Mr. Schruers, I want to start with you. Google captures 88 per cent of the U.S. online search market, 94 per cent of all searches on smartphones, 78 per cent of the search ad tech market, and 59 per cent of the third-party display ad party market. I take it you agree that these at least on their face don’t appear to be competitive markets?”

Schruers: “Which precise market are we talking about?”

Cicilline: “Let’s start with searches on smart phones. Ninety-four per cent of the market controlled by one platform. You would agree that’s not competitive under any definition?”

Schruers: “Well, I think I would say 94 per cent of a relevant market would be something worthy of considering but…”

Cicilline: “You think mobile search ad market is not a relevant market?”

Schruers: “I think the relevant market in that case would be what economists tell us compete with that. I know that searching on the phone in browser, I can also search on my phone by asking Siri or search with a digital assistant, a smart speaker in my room. There are a lot of places a user can go to get answers that extent beyond the browser search experience. These are increasingly pageless tools that don’t require a search engine. So I think economists might not agree that desktop search is a discrete market…”

Cicilline: “I actually don’t know any economist that doesn’t agree that that is not a competitive market. I guess I’m asking you, do you agree that’s not a competitive market when it’s operating 94 per cent of the market share.”

Schruers: “I think 94 per cent of a relevant market is something that’s worth consideration. The question is whether that’s a market.”

Is mobile, the world’s most popular computing platform by far, a relevant market?

Relevant market” is a loaded legal term. In short, it’s the market in question as defined for antitrust purposes. For instance, is social media broadly the market in question or is social video the market? The answer could mean a great deal for YouTube in the antitrust battles to come.

Mobile search, however, is a different animal entirely: It accounts for nearly three-fourths of all search revenue and, as Cicilline illustrates above, Google is singularly dominant. Siri is not a competitor because it uses Google by default; Echo is hardly a competitor because it uses Microsoft’s Bing for search, and Bing has somewhere from 2 to more than 30 per cent market share, depending on whose numbers you believe. Either way, Bing is no Google.

And then there was the press.

The first witness to speak was David Chavern, president of the News Media Alliance, a group representing over 2,000 media organisations. The NMA came out with an eye-catching study this week saying that Google made $7 billion from the news industry in 2018.

That kind of number gets headlines, specifically in a newspaper like the New York Times (a member of the NMA), but the methodology beneath it is questionable. The big number appears to be based on an off-hand comment by Marissa Mayer, then a Google VP, in 2008 saying that Google News was then worth $144 million to Google. The $7 billion number is calculated, almost entirely, because Google is now worth more and, therefore, you can accurately calculate how much money it’s making from the news industry… Huh?

Here’s the report to read for yourself.

Anyway, having already earned a big New York Times headline, Chavern opened the hearing with this number that just raises more questions than answers. Maybe the real number is higher, maybe it’s lower, but the $7 billion is ultimately a big guess dressed up as a factual grievance. It was a bad way to start.

Even further away from Silicon Valley, U.S. Assistant Attorney General Makan Delrahim was in Tel Aviv on Tuesday where he delivered a speech that in no uncertain terms laid the antitrust crosshairs on American tech giants by citing the country’s long history of gargantuan industry breakups and laying out arguments the Justice Department could wield against big tech.

“The current landscape suggests there are only one or two significant players in important digital spaces, including internet search, social networks, mobile and desktop operating systems and electronic book sales,” Delrahim said.

Delrahim’s forceful speech, which you can read here, comes just one day after Senator Elizabeth Warren called on him to step down from his position as antitrust chief due to what she argues is a conflict of interest. A little over a decade ago, Delrahim was a paid lobbyist first for Apple and then Google in Washington, D.C.

“Your past work as a lobbyist for two of the largest and most scrutinised tech companies in the world creates the appearance of conflict of interest,” Warren wrote in a letter to Delrahim. “As the head of the antitrust division at the DOJ, you should not be supervising investigations into former clients who paid you tens of thousands of dollars to lobby the federal government.”

You can read Warren’s letter here and you can watch the full congressional hearing here: