Microsoft CEO Satya Nadella testified on Oct. 2 in the Department of Justice’s (DOJ) antitrust trial against Google, and took a stand that there is an uneven playing field in the online search industry.
The trial is the part of an ongoing civil antitrust suit against Google filed in 2020 by the DOJJ alleging Google for monopolizing search and search advertising. Mr. Nadella said in the courtroom that Google has created significant challenges for Microsoft and other tech players, hindering its ability to compete effectively in the search engine industry, according to multiple media reports.
“Everybody talks about the open web, but there is really the Google web,” Mr. Nadella said at the Washington, D.C., District Court. He was referring to how publishers apparently tailor their content and advertising strategies to align with Google’s products, such as optimizing their web pages to conform to Google’s search result ranking criteria.
Google’s market cap is $1.7 trillion, and the company controls around 90.68 percent of the U.S. search engine market, while Microsoft-owned Bing claims only a 3.23 percent market share in the same segment.
No Level Playing Field in AI
The Microsoft CEO also pointed out that Google is likely to gain from its size in terms of dominating emerging artificial intelligence (AI) space. Microsoft has been betting big on AI as the tech giant has invested billions in OpenAI, the ChatGPT parent company and has incorporated ChatGPT tools into Microsoft products. In January this year, Microsoft and OpenAI announced a “long-term partnership to accelerate AI breakthroughs.However, Mr. Nadella is worried about Google’s dominance, and said that as publishers and platforms become more aware of how their data is used to train AI systems, they may start to sign exclusive deals that would allow only Google to use their data, according to reports of his Monday testimony.
“Despite my enthusiasm that there is a new angle with AI, I worry a lot that this vicious cycle that I’m trapped in could get even more vicious,” said Mr. Nadella. “What is publicly available today, will it be publicly available tomorrow? That’s the issue,” he added, according to The Verge.
Exclusive Deal with Apple
As to a question by the DOJ on Google’s billion-dollar deal to be the exclusive search provider on Apple devices, and what it would mean if such a deal was with Microsoft, Mr. Nadella responded that it would be a “game-changer” and explained that it wouldn’t be directly about the money but more about the competition. “We needed to be less greedy and more competitive,” he added.
People walk past an Apple store in Beijing, on Dec. 11, 2018. Greg Baker/AFP via Getty Images
Mr. Nadella also reportedly spoke at the trial about the reason Apple did not go with Microsoft for this deal, which was because the economic terms of the Google deal are highly favorable for Apple. He opined that Apple might be apprehensive about potential actions from Google if it lost default status. Google’s widespread services, such as Gmail and YouTube, could be used to aggressively promote downloading Chrome, potentially leading users to bypass the Safari browser entirely and that this fear is a significant factor keeping Apple and Google closely aligned, according to the Microsoft chief.
One of the DOJ’s accusation on Google is also that Google is stifling competition by allegedly paying companies like Apple and Verizon to feature its search engine prominently when users open their devices. However, Google contends that these agreements are not anti-competitive and asserts that users have the ability to readily switch to an alternative search engine. But Mr. Nadella calls the argument “bogus,” as users are very unlikely to change their default search engine. “You get up in the morning, you brush teeth and you search on Google,” he testified.
Is Google the Best Search Engine?
In cross-examination, John Schmidtlein, a lawyer representing Google, said that Microsoft’s Bing is not an inferior search engine because it was deprived of oxygen by Google, but it is inferior because Microsoft has mismanaged its search and mobile products and that it is not illegal on Google’s part to build the best search engine. He was implying that defaults are ineffective. In response, Mr. Nadella pointed out that Bing’s market share on Windows, though in the teens compared to “low, low single digits” on mobile, demonstrates the effectiveness of defaults. The higher usage of Bing contributed to its improvement, reducing the inclination for users to switch. While not everyone would instantly switch from Google, Mr. Nadella stated that controlling defaults has enabled Microsoft to make progress.
A Google sign at the company's office in San Francisco, Calif., on April 12, 2023. Jeff Chiu/AP Photo
Overall, Google has been rebutting the government’s allegations that the search giant is maintaining an illegal monopoly. Moreover, Google on Aug. 31 made accusations of bias against the DOJ’s top antitrust prosecutor, Jonathan Kanter, concerning the ongoing antitrust cases involving the tech company. Google requested information about Mr. Kanter’s prior work and advocacy, arguing that his alleged bias against the company infringes upon Google’s entitlement to a neutral prosecutor. Google argued that the DOJ’s investigation has concentrated on two specific groups: notable publishers and Google’s competitors within the ad tech industry. The company emphasizes that several of these entities were clients of Mr. Kanter during his tenure in private legal practice.
