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The Monopoly Report
Episode 63: Why are publishers and adtechs privately suing Google on antitrust grounds?
00:53:59
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Alan Chappelle
Welcome to the Monopoly Report the Monopoly Report is dedicated to chronicling and analyzing the impact of antitrust and other regulations on the global advertising economy. I'm Alan Chappelle. I'm a privacy and regulatory attorney and have worked with hundreds of digital media and ad tech companies over the years and have guided a bunch of them to successful exits. I publish a monthly regulatory outlook for digital media worldwide called the Chappelle Regulatory Insider. You can find a link to a sample copy of the Chappelle Regulatory Insider in the Show Notes this week. My guest is Brendan Benedict. Brendan is a litigator with the focus on antitrust and Commercial Litigation. I put Brendan's bio in the Show Notes as well. Brendan's here to discuss the civil antitrust cases being brought by publishers and ad tech companies against Google for their practices in ad tech. It might be a bit early for this type of discussion given that we're still waiting for both the Judge Brigham of Remedies decision and the EU Commission's remedies decision, but I'm getting questions about all this in light of the lawsuits filed in mid January by penske, the Atlantic, McClatchkey, Conde Nast and Vox Media. If you add in the ad tech cases, There are currently 17 private antitrust lawsuits, so I'm hoping we can shed some light. Anyway, let's get to it. Hey Brendan, welcome back to the pod.
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Brendan Benedict
How are you I'm doing well, Alan. Thanks for having me back.
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Alan Chappelle
You are now joining a very elite group of people who are multiple appearance on the Monopoly report pod. And you're back because we had so much fun last time.
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Brendan Benedict
Well, I'm honored.
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Alan Chappelle
Well, where are we finding you? Are you in D.C. i'm in D.C.
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Brendan Benedict
Right now, hunkered down for the snow that's on its way.
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Alan Chappelle
So there's, there's a couple of very big differences between New Yorkers and people who live in D.C. and one of them is how we deal with snow. We're going to get a foot here, people are going to shrug. The kids are going to go out onto their stoops or onto the streets and we're going to make snowmen and it's going to be wonderful. And in D.C. if I'm understanding correctly, the entire world is going to come to an end.
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Brendan Benedict
All the grocery store shelves are empty and everyone's stocking up on toilet paper like we're never going to get out again. So we're prepared.
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Alan Chappelle
So we wanted to talk a little bit today, today about some of the private or civil lawsuits that are taking place against Google in, in relation to their ad tech stack. We've had a couple just over the last week or so that were filed a couple of additional cases. But before we dive into the civil antitrust lawsuits against Google, I want to at least acknowledge that we're still waiting on a remedies decision from Judge BRINKA in the DOJ AdTech antitrust case. And the question around whether Judge Brinkva will ultimately push for divestiture or whether she'll rule that behavioral remedies are sufficient is really the thing that everybody has been waiting anxiously for. So based on where the remedies phase landed, I think there's a number of what I'll call, and I'm using air quotes here, commercial realities that make divestiture less of a practical option and seemingly much less likely. So looking at the ad tech market and the facts of the case, here are some themes. You've got rapid marketplace change. You've got an inevitable and lengthy appeals process which is going to impact the market one way or another. You've got timing concerns. You've got the benefit of the doubt that is owed to monopolists, at least how antitrust law has been interpreted in the US over the last 50 or so years. You've got the lack of concrete divestiture plan from the doj. Then you've got fear of unintended consequences. And I'm not here to imply that Judge Brinkham is a fearful judge. But my read, based on Judge Brinkham statements during the tail end of the remedies phase, is that any judge would recognize that this is a complicated market, and the idea of blowing it all up into smithereens might give a judge pause. So, Brendan, now that I've started this episode by filibustering for three or four minutes, I would love your take on, you know, Judge Brinkoma, where you think this is going to land in terms of behavioral versus divestiture. Because I think that that question has a pretty significant bearing on the future of some of these private litigations, though.
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Brendan Benedict
Yeah, potentially. I think, you know, a lot of the private litigations, they are seeking injunctive relief, but the focus is on damages. So it's, you know, a little bit different than the DOJ led case, but definitely will change the landscape going forward. You know, I tend to agree that. I think there's judicial reluctance or modesty in terms of racing to divestiture is the first remedy. And it creates, you know, a longer timeline with, you know, probably more grounds for appeals and a longer time horizon to get to a conclusion. You know, the consensus kind of of the various monopolization cases against Google, thinking about Google Play and Android and Google Search and Google Ad tech, that this had the strongest case for a potential divestiture. But, you know, I think the court's liability decision was really focused on tying. And like in Google Search, where there's sort of a commercial arrangement or a contractual term, that's the. The overall thrust of the case. You know, kind of the first step to address that is to. To change a term and to enjoin a tie going forward in the future. You know, in the search case, the DOJ had this kind of optionality built in to say, you know, we'll seek a divestiture of Chrome in the event that the behavioral remedies don't work. It's not the craziest idea to see that Judge Brinkerman could build in some sort of optionality in this case where, you know, let's say stopping the tie doesn't work in the future, maybe they can come back, modify the injunction and get a divestiture at that point, but we'll have to stay tuned. And I think, you know, she kept her cards close to the. The vest there on. On what she's thinking and seems to be open to sort of all possibilities.
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Alan Chappelle
Yeah, I would agree with that. But, boy, if I was going to place a bet right now, my bet would not be on structural changes.
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Brendan Benedict
I think that's probably right.
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Alan Chappelle
So let's talk a bit about the private civil lawsuits against Google. There are a bunch of publishers and I probably don't even have a complete list here. You've got Daily Mail, Gannett, People Inc. Bank, Business Insider, slate, Rautive, Penske, McClatchy, advance, the Atlantic, and you've got a bunch of ad tech companies like OpenX, Index, Exchange, Cargo, Magnite, Pubmatic, Equative, and I think there's even one more there that I'm not quite remembering. But okay, let's start with the publisher side. What are the publishers alleging and what is it that they want here?
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Brendan Benedict
Right, so the publishers, you know, these are websites that have content like you know, you mentioned advanced publications so news media and they sell space on the website called display advertising to advertisers and they use exchanges or in other cases Google's publishing server tools in order to get advertisers ads placed in those spots. So their theory is, is similar in the sort of different buckets of liability that the DOJ alleged ran a competitive that Google has, you know, unlawfully tied use of DoubleClick for publishers to ADX in a way that means that publishers didn't get as much money as they would have. In the absence of that there's some other rules around pricing that Google had or the way that actually bids are placed on ads, first look and last look for instance. And the combination of this conduct meant that the publishers didn't get as much money for their ad space as they could have in the absence of these restrictions and terms. So what they want are damages and also injunctive relief to change things going forward. I think that's going to be, you know, kind of overlapping with what the DOJ is seeking. But the new element is damages and getting less revenue than they would have gotten in the buck four ruled in the absence of their conduct.
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Alan Chappelle
And what type of damages are we really talking about? I mean is this enough to keep the lights on for a couple of years for some of these pubs? Is this just a, how big is it? Is this going to change things for them?
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Brendan Benedict
You know, I think we're the cart's before the horse on that. I mean I've seen numbers thrown around that it's tens of millions or billions of dollars on an industry wide basis. You also want to think not just of the individual publishers that you name that there's a class action of publishers as well that's happening in multi district litigation. The Southern District of New York so we're before the point in time where we've seen kind of damages estimates from experts. I think discovery is closed in some of the cases. But right now, because we're sort of just at the pre trial phase, in some cases a partial summary judgment phase, we haven't gotten, I think exact figures, but you know, in terms of who controls the industry, I mean this is bread and butter for these publications, these websites. I mean they're advertising businesses. That's the way that they make revenue. There's subscription on some of them. That's a component of it. But if you're looking at the lion's share of all the revenue that you make as a company from advertising and you didn't get as much money as you could on all those transactions over a period of time and we'll talk about, you know, kind of what period that is under the statute of limitations, it's probably know, material to your business.
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Alan Chappelle
So at a high level, how much heavy lifting has the DOJ done? I know the DOJ isn't really working on behalf of these publishers per se, but like, you know, these, the publishers and the ad techs are coming in now having seen the liability ruling and, and so how much of the heavy lifting has the DOJ done for them.
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Brendan Benedict
Here for, for the publishers? I think quite a bit. And, and in two respects. So there's actually in some of these cases, motions for partial summary judgment on what's called collateral estoppel, which means that Google would be prevented from relitigating the same issues that are essential kind of to the publisher's claims that are litigated in the DOJ case. And then there's also something that's, that's built into the Sherman act itself, which allows after a final judgment has been entered in a government led antitrust case brought by the United States, a private follow on suit can use that outcome as prima facie evidence of a violation in their case. So related concepts a little bit different based on the timing and finality. And we're still awaiting the final judgment of the court that includes, you know, remedies, but certainly it has an outcome on liability. And you know, the overlap between the two cases is, you know, there's a lot, there's first the market definition between the two cases or the two sets of cases, I should say. So you know, defining a market for Open Web display publisher ad server market that relates to DoubleClick for publishers, Google's publisher server tool, as well as the open Web display ad exchange market, which concerns adex. So, you know, smartly, I think the publishers have sort of hugged the market definition and made similar market definition allegations in their cases. There's a couple looking at the broader suite of cases, including the competing exchanges that have some additional markets in there, but those two are the same. And then the finding of monopoly power in those markets, that would be the same, I think, between the cases and then certain aspects of liability, that the tying between ADEX and DFP was unlawful, as well as the kind of first and last look, sort of auction rules. So a lot is done. What hasn't been done is damages, the calculation of damages. Now, the government did have in the DOJ case, a claim for damages. Google mooted that to avoid a jury trial by just writing a check for the amount that the government could get. So damages were not litigated in the government's case. And that's something that's a little bit more individualized, where, you know, each of these publishers is going to have a different calculation of damages based on how many ads they placed to the prices that, that were paid for them. So that's, I think, still to come. But it takes, you know, a lot of the work and a lot of the discovery out of the way to be able to just rely on the outcomes in the DOJ case.
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Alan Chappelle
So I do want to come back to the question about Google sort of buying their way out of a jury trial, because I think there might be some interesting implications of that. But before we do that, I mean is, do you have a sense of how some of these cases are being consolidated? By my count, there's 17 separate cases. Are all the publisher cases being consolidated? Are all the ad tech cases being consolidated? What's the update there?
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Brendan Benedict
So I think the publisher cases, some of them are paused, sort of awaiting further developments. There's also this MDL class action for publishers. And you think the individual publishers are in effect opting out of that class action and want to, you know, if there is going to be a settlement, negotiate their own settlement and have something that's focused on them with lawyers that they get to choose. In terms of the competing exchanges, there's been, right now that's just at the sort of pleading stage where a complaint's been filed and they're getting ready for motion to dismiss briefing. And there has been a consolidation where those six, I think individual exchanges are now proceeding in two tracks. So consolidating, you know, the number of complaints as well as the number of motions to dismiss that are going to be responsive to them. Rather than doing six. And I think the mdl, Judge Castell in the Southern District of New York wants those cases really to be consolidated going forward for discovery and the like. Now there's different sort of levels of consolidation. Typically, you know, coordination in an MDL or consolidation would be for pre trial purposes, like for discovery. This is even a little more extreme than that in that, you know, the judge has basically ordered some of these exchanges to file one complaint together so that he doesn't have to rule on, you know, six motions to dismiss. So it's a little bit unique. And I think, you know, the parties did some letter briefing about whether they should all be in the same case or same complaint or not. And there's, I think, minor differences between some of the claims. Some add additional markets, some have, you know, some extra stuff on liability that wasn't part of the DOJ case or not part of each other's case. But you know, and there's a little bit of difference on geographic market, us versus worldwide. But I think setting aside those differences, you know, the, the main thrust is the same and so it makes sense for them to kind of proceed as, as one action to the extent possible.
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Alan Chappelle
So I, I think that people generally overuse the term 3D chess, but, but I actually think it's an apt term here because there are so many additional factors and variables in play and I'd love to walk through at least some of them with you and get your reaction. So we're all sort of assuming that Google is going to appeal the DOJ liability ruling. Is this just a pro forma thing Google's doing? Are they appealing just to delay and you know, what's the likelihood of Google clawing back some of Judge Brinkoma's decision?
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Brendan Benedict
So yeah, I guess you could predict that. And I think a lot will depend on, you know, what we talked about at the top, about what the remedy is going to look like. I don't think it's just a delay tactic. I think there are some things that Google could point to that there's some dispute or debate about the legal standards. So maybe one is on tying. So tying is an antitrust theory is typically evaluated under what's called the rule of reason, where there's a burden shifting framework of, you know, the plaintiffs show any competitive effect, then the defendant gets to rebut it with a pro competitive justification. And then, you know, potentially there's balancing of pro and anti competitive effects. And there was some of that in Judge Brakema's decision and she kind of considered that in any event, but really she set out the test for tying per se, which, you know, typically if you meet the elements for tying per se, there's not pro competitive justification that outweighs that. You don't get to that step. So whether that's true or not and whether you can still do tying per se, I think are open issues. There's some language in different court opinions, Microsoft from 25 years ago and the D.C. circuit more recently out in California in the 9th Circuit and the Qualcomm case and the Epic Games versus Apple cases, cases that I worked on earlier in my career. There's some language about tying per se being inappropriate for technology markets. Now. I think, you know, maybe that's an overreading and you know, it can't mean that tying per se is illegal everywhere just because it runs on a computer. At the same time, I think it's fair to say the general trend in antitrust has been away from per se rules and putting everything into the rule of reason. So is there something there where Google could say, look, tying per se is inappropriate in this market. You needed to do the full blown rule of reason. A lot of the ingredients were there, but it's not really the test that was applied. And so you needed to give more weight to approve competitive effects. The next, I would say, is market share. So there's some argument in the law, and we see this in the FTC Medicase as well. If you're doing what's called indirect analysis of monopoly power, there's direct evidence which is proof of a super competitive price, but there's indirect evidence which is a combination of high market share and high barriers to entry. And what's the percentage of the market that has to be controlled for finding a monopoly power using indirect evidence? And there's a lot of different statements in the law about that. You know, certainly something above 75%. Yes. If there's barriers to entry, then that suffice to show monopoly power. But there's a lot of different, I think looking at the federal court's, you know, leeway within that 50 to 70% range of is that enough for monopoly power? Is it categorically not enough? Are there some cases where that can be enough? And if you look at some of the ADX market share figures from Judge Prima's opinion, it depending on what you measure, it was between, you know, 54% and 71%. So, you know, maybe the high end looks like monopoly power, but it's 54% enough. I think those are just Some, you know, issues that are unsettled enough that Google can, can make an appeal at them.
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Alan Chappelle
Well, one of the things that I've been hearing is that one of the things that, that Judge Brinkama had relied on or at least cited in the liability ruling was this Duke Energy case. And that case, what I'm hearing at least is that some Google proxies were trying to get the Supreme Court to pick up the Duke Energy case and potentially get that overturned. And the strategy there would be that if, if Duke Energy were over overturned, you would be pulling at least a plank. Whether it's a central plank, I do not know, but you'd be pulling a plank out of Judge Brinkham's initial ruling and that would would certainly bolster the case for overturning at least part of it.
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Brendan Benedict
Yeah, so I think, you know, Duke Energy, the issue is really about consolidation of different theories of liability, sometimes called monopoly broth or monopoly soup. And there is a little difference in the law right now about whether you look at each aspect of the challenge conduct individually to see if that contributed to monopoly power, whether you aggregate the conduct, look at it together and see if the working together is what creates monopoly power. So the Supreme Court, I think, passed on that issue in the Duke Energy case. There's some conflicting statements about that in the law. Certainly I think there's a Supreme Court decision that predates that, that says you don't tightly compartmentalize each of the areas of conduct in looking at whether that contributed to monopolization, especially where the theory is, I think, nuanced and complicated. You want to look at the whole and not sort of have this artificial gerrymandering of conduct. So I think, you know, I don't know that that particular case moved the needle. You know, the fact that SCOTUS didn't take a moves the needle one way or another. Because there's other cases out there that stand for that proposition that you do look at everything together and there's other cases out there that stand for the proposition that you don't. So I think, you know, that's another area that Google could look at. I think though, you know, Judge Brinkoma, in her opinion, she was, you know, even if you look at aspects of the conduct individually, you know, she did so tying. I think whether or not there's anything else in the case, there's sort of a straight up tying claim. And I don't think that that is really going to depend on this issue of monopoly broth. Maybe there's a closer issue on some of the other aspects of conduct. But I thought, you know, some of those were addressed individually. So I'm not sure that that would make an outcome. But I think that's always, you know, an arrow in the quiver of an adjudged or accused monopolist to say, look, you know, you're aggregating together different things and you really need to do a more specific job to look at whether each one in isolation is anti competitive. So I think that that's still on the menu for Google.
- [22:56]
Alan Chappelle
Well, let me turn to a different one. You had teed this up a minute ago. You know, some commentators were making a big deal out of the fact that Google had, you know, I'm using air quotes here, had sort of bought their way out of the jury trial. And while that may have been somewhat helpful in terms of the liability decision, because it's much, much better, I think, to have a judge who is a lawyer who understands a lot of these complex business dealings than to put that in front of a jury. And so that might have been a prudent decision specific to the liability phase, but it may have sort of bit Google in the behind because doesn't that just further solidify the liability decision?
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Brendan Benedict
Yeah, I think that's right. And that's because you get a lot more specifics in a ruling from the bench than you do on a jury verdict forum. You know, we saw this in the appeal of Epic Games versus Google where, you know, Google tried to make hash out of the verdict forum after the fact. But then, you know, Judge Donato in that case issued sort of detailed, you know, legal reasoning rejecting the arguments. In a post trial briefing here you didn't have a jury at all. So it gets done in the first instance by the court and that's right. So the judge has, you know, kind of put out all her reasoning and it's a very lengthy opinion, 115 pages. A lot of it is on explaining the background of the law. But there's detailed findings there that I think make it more challenging for a defendant to appeal than a jury verdict in the sense of there's just greater clarity, you know, maybe cutting the other ways. The idea that there is, I think a reluctance may be unstated among judges to undo a jury verdict because there's this democratic aspect of it. I don't think there's going to be the same reluctance to just overturn or disagree with or affirm in reverse and pardon remand to Judge Brinkman. Happens all the time. So, you know, I think there's there's pros and cons of that approach for Google, but I think certainly by trying to moot the government's damages claims, it's clear that Google didn't want the case heard before a jury and obviously it didn't change the outcome they were trying to avoid.
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Alan Chappelle
Fair point. And we haven't even talked about the Texas led red state antitrust trial and that's coming soon on the heels of the remedies decision. I think it's 60 days after after all that gets tied up. But how does that case affect the math with some of these private litigants?
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Brendan Benedict
Yeah, so the state case is interesting because you know, number one, I think there's some different theories of liability that were not in the DOJ case that are in some of the other private cases. And I'm thinking here of the advertiser class action that's also in the Southern District of New York. So they focus on something called Project Bernanke, which has to do with series of auctions. That's kind of a different flavor or theory of monopolization than what was on display in the case before Judge Brinkuma. Then you also have damages. Now you know, the state AGs are saying that they're bringing their case as parents Petrae but that means that's only behalf of individual people and not businesses. It has to be on behalf of natural persons. While some states claim, I think parents damages in the same way, we might think of like a consumer class action, I think the real money there is in civil penalties where the states, the AGs have the authority to assess on a per violation basis or maybe even on a per transaction basis, a statutory amount of damages that if you add that up from lots of ad auctions becomes a large number, billions of dollars I think is what's claimed in the Texas case. So that I think definitely changes the calculus for Google, I think, but you know, we'll have to see. I think the thing to really look for is the effect that that case has on the advertiser class action where these different theories of liability are being heard for the first time.
- [26:54]
Alan Chappelle
Yeah, it seems like the Texas case has expanded on the theories of liability and so that may even end up bringing the buy side in in private litigation once that's all wrapped up. Or it may end up just further confusing everything. And that I think in the long term probably plays to Google's strengths. Okay, so what we haven't talked about yet is Europe and the rest of the world. So you've got, you know, the eu, which to my understanding seems pretty far along in their competition case against the Google Ad tech side. I think at this point they're sort of evaluating Google's proposal and, and Google's proposal to the, to the European Union is very similar to their proposal, their proposed set of remedies in the brink of case where it's very behavioral, it's sort of a promise not to do the things that they've done before. And the consensus in Europe seems to be that, well wait a minute, if you're still sitting on both sides of the equation, you know, bad things are going to happen. There's just the temptation to self deal is going to be so great that even if you stop X, Y and Z, there's nothing that's going to prevent 1, 2 and 3. And so that's my take on where Europe is. But my question for you is how does the European process tie into the calculus for some of these private litigants here in the States?
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Brendan Benedict
Yeah, I'm not a European competition lawyer, so I'll take, I'll take your word for it. And I think, you know, the big difference in the EU is a kind of different standard where they don't really have the same monopolization concept. It's dominance and abuse of dominance, which maybe we might think of as less formalistic and maybe broader way to get to liability than in the United States. Certainly it would be interesting and I think raises jurisdictional questions, important problems about, you know, what if Google is ordered, you know, doesn't have to divest before Judge Brinka. But, but does in Europe, how does that work? Is it limited to just the European Economic zone? Does it happen all over the world? You know, that raises some interesting questions. I think for the private litigants the way that you see this play out is really just in evidence or the persuasive force of whatever the reasoning is that the European Commission has. Certainly when there's I think findings against Google around the world, it's been the move to try and get those into evidence in the underlying private actions. Now it's not clear how much of a difference that makes if you're already getting collateral stop or issue preclusive effect from Judge Brinkman's ruling. If you're already getting the benefit of a prima facie government case, you know, do you need anything else? Because it's not clear that that's going to change the quantum of proof. But I think that's a move and I think defendants I've seen in the litigation against Google play try to limit the admissibility of that evidence. And I think there are some stronger arguments about why it's not going to have the same sort of preclusive effect in US Litigation just because the legal standards are different and the processes are different. It's not like a jury trial before the European Commission. So, you know, I think it's, it's helpful if you're a plaintiff, anytime there's more adverse finding, it's against your defendant in the same area to try and bring those in. But I don't think it's something that is going to move the needle all that much on, you know, these private actions for damages.
- [30:27]
Alan Chappelle
So I want to talk about lost revenues and damages. So how does one calculate? Like, I'm sure every single one of those ad tech companies and every single one of those publishers has a spreadsheet out there that is, you know, that can, to the penny explain, you know, the impact of Google's practices over the last decade and a half. But how does the court really take that in? How do they digest that? How do they, you know, is that a place where they bring in additional experts and then is, you know, is there, is there like kind of a separate, almost a separate process there to, to calculate just the damage claims?
- [31:08]
Brendan Benedict
Yeah, absolutely. And this is something that's going to be the subject of expert testimony, you know, for the plaintiffs as well as for Google. And I'm sure we'll have their own expert with their own calculations. But really we're talking about, you know, with publishers and with the competing ad exchanges, lost profits. You know, there's some idea that in the world of the monopoly, a competitor of the monopoly can actually also charge a higher price because the monopoly is a price maker and not a price taker. And so if the price gets raised above a competitive level, maybe the competitors get to charge a higher price too, but they're harmed because of the monopoly. Price output has decreased. And if Google is using any competitive means to increase its market share, that means that it's coming at the expansive market share of its competition competitors. So the calculation is really in the bot for world at a lower price or lower prices, let's say, but a higher output and a greater market share, that gives you a number compared to the world that the competitors actually experienced with Google's conduct. And the delta between those is the measure of lost profits that can then be trebled. And then, you know, there's other aspects to recovery in antitrust cases like attorney fee shifting if there's a successful outcome. But in terms of just damages, it's a lost profits calculation. Now, you know, one thing that's interesting is some of the conduct has gone on for longer than other pieces of the conduct. You know, one thing that the court, I think, is going to be more involved in, and we already see this getting fleshed out in the exchange cases, is the statute of limitations, which creates a limit on the years during which the plaintiffs can recover damages. So default statute of limitations are. The Clayton act is four years. But the exchanges have an argument that they actually get to go further back in time on their damages because a government suit tolls the statute of limitations during the pendency of that suit. And at least OpenX, represented by my former colleague Zach, has made the argument that pendency includes until the final judgment on remedies, including liability. So if that's true, they've argued that their statute of limitations period isn't four years before they filed suit in 2025, but it's four years before the government filed suit in 2023, potentially reaching back to 2019. And it's a little more complicated than that because, you know, there's also issues of, you know, can you recover four bad acts that were before that where your claim didn't accrue necessarily until you paid an inflated price or lost profits as a result of that during the damages period. That I think is going to be worked out. But I think the key thing to, key things to keep in mind are, you know, four years generally, and if they're hugging the DOJ's case, then is it four years before they brought suit in 2019?
- [34:01]
Alan Chappelle
I'm really looking forward to these cases starting, but I also think that they're probably not going to get a ton of attention. The component of these around the who did what when and the no disrespect as a trial lawyer, like the, the machinations of like, you know, who gets to say what and all that stuff. I don't think anybody's going to pay attention to. What I think people are going to really, really start paying attention to is as they start calculating what the damages are. And I'm going to ask you for your predictions in a minute, but I'm going to start with one. I predict that Google is going to bring at least two people to the damages section. The first one will be a PhD at know, Stanford or Harvard or wherever who will figure out a plausible calculation that says, you know what, it turns out that, that you ad tech companies, you owe us a little bit because, because we raise prices or something along those lines. And so they're going to shrink whatever that amount is. And, and in at least one case it's going to turn out that like OpenX is going to have to like write a $100,000 check to Google or something. That's my first prediction. My second prediction is the second one they're going to bring in is some publisher who is, you know, some small to mid sized publisher who it turns out did so much better because of Google's practices or policies and they're going to drive that home which is going to further cloud everything. Now that I've made a, I don't know, but informed prediction, I would like to hear your very informed predictions. How do you see all of this playing out?
- [35:35]
Brendan Benedict
Yeah, so the first thing I would say is because there's already been, and I think there's going to be more motions on this collateral stop or issue preclusion legal issue as well as this prima facie case issue, that the follow on cases are really abbreviated because at least as to the publishers and the competing exchanges, because if you're already done on market definition, you're already done on monopoly power, you're already done on liability maybe. There's a couple unique aspects of liability that different plaintiffs want to explore that are relevant. Suspenders and additional really the terrain is just damages. And so at that point, if there's just a difference in numbers, I think it's easier to settle those cases and you know, save on legal fees and not really have damages trials at all. Now, you know, it's probably more likely that there might be a couple that go forward as kind of bellwethers where each side sort of sees, well, how does one of these big dogs, how does their damages case go and what are the arguments there so we can price ours? So that wouldn't surprise me. I definitely think it's always the case having litigated against Google and Google Play, that they try to find the friendly customers of Google who say they've done all these marvelous things and you wonder if there's some sort of commercial incentive for them to do that or to Google solicit them to, to get their testimony in that regard. So I could definitely see that and I do think there is going to be at least an offset in the way that I described at least an argument from a Google expert that the ability of a competitor to charge a higher price because Google was charging a monopoly price means that their damages for lost profits are reduced. I think you're going to see that now, OpenX, I think they allege that they're publisher Server went out of business altogether in 2019. So I don't know that they're the best example of that. But certainly I think it's going to be an argument Google makes. But I wouldn't be surprised given, you know, and I think in the sdny, the court has already ruled that collateral stoppable applies and that at least for certain buckets of plaintiffs, relitigation on these issues is not going to happen. I think the wild card is if there's a difference on appeal, if some aspect of Judge Brinkman's ruling on liability gets overturned. Well, now those plaintiffs maybe don't want issue preclusion to apply because it means that their case is now cut down because of something the D.C. circuit or the Supreme Court has done and their fate is now kind of tied to the fate of the DOJ's case. So I don't think, you know, that there are tons of grounds on liability. We talked about them earlier for something to be undone. But I do think that whatever happens, it's going to be more abbreviated by virtue of getting to collapse these issues from the outcome of the DOJ case.
- [38:24]
Alan Chappelle
All right, so I've got one follow up here. Doesn't it get really dicey for Google to try to claim in an ad tech case that, hey, yeah, you're welcome, we raised all the prices for you, so you benefited and then go across the street and make what claim exactly in a publisher context? Because the publisher people that must be participating in the ad tech cases, at least they're watching. So, like, how do you navigate what would seem like two completely opposite arguments?
- [38:56]
Brendan Benedict
Well, you have the expert as God, right? You have the expert as God, and the expert is just exploring different conditional and hypothetical worlds. And the expert's going to say, well, there's no reliable way that the plaintiffs could calculate any damages. So damages are zero. And there's nothing to see here. Their methods aren't reliable, so you don't even get to a penny. And they'll have their own estimates. And then they'll say, well, even if they were right, even if it were a monopoly price, and it's not because of X, Y and Z that this is the logic that would follow, that they would naturally benefit from that. So you kind of see that optionality built in all the time. It happened. When I worked on the Google Play Store case, Google's damages experts said, we think it's zero. We think there's no way to Calculate it, by the way, if it's not zero, then it's this amount. And if it's not that amount, then it's a different amount based on certain presuppositions and assumptions being true or certain issues won by the plaintiff. So I think it's going to be a big expert report with a lot of different permutations and calculations and ways of looking at it. And I think that range, though, really encourages settlement because the experts are going to be doing something like an expected value calculation, even by just giving a range of possible outcomes and damages based on different issues on liability or the reliability of the damages calculations themselves. So if those sort of toggled up like that, I think it does encourage settlement. But it will be interesting if we get to a Daubert hearing, the experts and we see if there's some complications that, that knock somebody out or knock different theories out and what's left.
- [40:34]
Alan Chappelle
So, Brendan, before I let you go, I had you on six months or so ago to talk about the FTC antitrust case against Meta. And just a week or so ago, the FTC had announced that they're planning to appeal the decision by Judge Boasberg in that antitrust case. Were you surprised by this and, you know, what's your initial take?
- [40:58]
Brendan Benedict
Yeah, so maybe I was a little legally surprised, but I guess I'm not surprised based on the politics of the case and some of the statements that the FTC made right after the loss, kind of really attacking Judge Boasberg, Chief Judge Boasberg, his credibility as a judge, and pointing out that he's subject to articles of impeachment. So that, that, you know, in light of that, I wasn't surprised that they made.
- [41:20]
Alan Chappelle
Sorry, is that common?
- [41:22]
Brendan Benedict
It's not common, and I think it's not likely to be successful. And I think it's even rarer for somebody to make an issue out of, you know, some member of the House introduced. People in the House are impeaching, trying to impeach everybody in federal government from time to time. And like, this isn't.
- [41:38]
Alan Chappelle
This isn't like an. An umpire at like, you know, a kid's softball game, right?
- [41:43]
Brendan Benedict
Yeah. No, it's an Article 3 judge. And you've seen a lot of attacks on Chief Judge Brosberg because he's also touched an aspect of the administration's deportation policy. So he's been a lightning rod for the MAGA movement. But to turn to the merits, I think what's challenging is just how limited the opinion was and that it just focused on market definition and market shares, market power. Typically, market definition is considered like a mixed question of law and fact, or depending on what aspects of the analysis are being challenged. If you're just appealing on a factual issue, that's a tough standard of review on appeal for clear error. If it's a legal issue, it gets reviewed de novo. If it's mixed, well, we'll see what they focus on. But I think that sort of at the outset makes. Makes an appeal challenging in this area. And then, you know, I think there are arguments available. I'll talk about a couple that, that I can see from the FTC standpoint. But so much of the opinion is shot through with credibility determinations, determinations about weighing some evidence more than others. You know, discounting the credibility of the government's expert economists for potential bias. Those things are very difficult to challenge on appeal. But a couple areas I see that, you know, are closer to legal issues. You know, one which is a legal issue is the FTC's authority under Section 13B to, you know, really, the court said there has to be a monopoly now or in the future. The conduct has to be ongoing in order to get an injunction under section 13B of the FTC Act. And generally, we think about equitable principles, as, you know, injunction is stopping something that's happening or happening in the future. And the reason that's important is, you know, at what point in time do you measure whether Meta was a monopolist? Do you look at the time of the acquisitions of Instagram and WhatsApp in 2012, 2014? Or do you do it as the court said today and look at monopoly power today? You know, I think what the FTC would say is that it might have proved a violation in the past and that it's still able to get injunctive relief to remedy the past violation if Google is still enjoying the fruits of that and if there's, you know, also a likelihood of recurrence in the future. So I think, you know, that that's one area they could look at as a sort of legal issue. And so, you know, maybe then they didn't have to prove that Metta had a monopoly today, but they could look back in time and say, well, certainly at 2014, you know, they had a monopoly. I think another issue is the courts. Just as we talked about market share, what. What is enough to show monopoly power is indirect evidence. Same issue in that case in. In the medic case, where the court sort of cast doubt on the idea that something less than 65% market share could show monopoly power. It's cited to Alcoa in the Second Circuit, which a case from, you know, judge learned hand in like the 50s or 60s, saying that you need 2/3 of the market for monopoly power. That's not even good law in the Second Circuit anymore. And that's out of circuit from where the trial was, which was in the District of Columbia. Now there's other stuff in there where the, where the court said, you know, sort of consider the idea, well, maybe in the 50 to 70% range, but here's some factual reasons why that doesn't matter. That's what I think complicates it. But still, you know, you could point to that as an issue and say, listen, 50% is enough, 51% is enough. The court, you know, kind of pay lip service to this idea really, you know, created a rule that says you need 2/3 of the market and that's, that's legally wrong. And then the third one I might think about is the court focused so much on time spent between Meta's apps, Instagram and Facebook and TikTok and YouTube, and it really, you know, bought hook, line and sinker. The story that Meta's expert John List was talking about substitution between those apps. But most of the experiments that he looked at were cases where one of them was completely offline. So in India, where there's a ban of TikTok, where does usage go from the time spent that was on TikTok to other apps? Or when Meta briefly had a blackout of its apps, where does user time go on the mobile device there? And really it was about the order of substitution based on the FTC's market definition of personal social networking. So the FTC said Snapchat's in the market, for instance. And some of these experiments showed that in those blackouts, more people went to YouTube and to TikTok than they went to Snapchat. So if Snapchat's in the market, doesn't it mean by deductive reasoning that these apps were also in the market too? That is backwards. That is not how markets get defined. We're always trying to define the smallest market. So you start with the candidate product and add products to that market one by one to see if the hypothetical monopolist could properly impose a price increase on those products. That's where you draw then the market definition line. Once the answer to that question is yes, and you do it at the smallest level that you can do it. If you start from the outside looking in, there's plenty of Antitrust cases that say, yeah, there might be competition happening up here or happening in the broader market or happening for other goods and services, but it's not competition that's happening at the level that we care about for analyzing monopoly power based on the plaintiff's claim. So I don't doubt at all that there is competition between Meta's apps and TikTok and YouTube for watching video. But how many people announce their engagement news or the birth of their child on YouTube versus on Meta's apps? And that was at the core of the use case that the FTC was defining. So I think, you know, it's fair to say that a lot of these apps have tons of different features or different products embedded within them. In some ways they resemble cluster markets which are multiple products being offered together. It wasn't a problem for the court that, you know, Facebook has a dating app, Facebook has a marketplace. Facebook has a lot of stuff that wasn't talked about in the case. But if the court just looked at the level of the firm rather than the level of the product, that is a basic antitrust mistake. Now I guess the question is, even if it did make that mistake, does it matter? Because the court didn't even reach anti competitive effects. Does Google have an argument that says even if it was wrong on market definition, we still would have won the case because there were no anti competitive effects or the pro competitive benefits outweighed? If it gets remanded for the court to do do that, does it change its mind? Probably not. He was a skeptic of the case. Clearly, if you read that opinion. So you know, I could see there's, there's some grist there for short term win or you know, some legal issues that could get resolved. But I'm not sure that the ultimate outcome would be different.
- [48:30]
Alan Chappelle
No fair point. And just to correct you, you, you meant, you said Google, you meant Meta. We've been talking mostly about Google today. That's okay. But just in case anybody was unclear. All right. So Brendan, where do people find you?
- [48:43]
Brendan Benedict
You can find me in D.C. and New York. We have offices. You can find me online at our website, benedictlawgroup.com or if you want to follow along on Twitter, I'm Benedict33, where sometimes I'm commenting on these issues.
- [48:56]
Alan Chappelle
Yeah, I've seen over the years a number of you, you've got some really interesting back and forths with some other, what I'll call prominent legal scholars.
- [49:05]
Brendan Benedict
Professor Hovenkamp and I have been going back and forth this whole time about this Market share issue. He likes Alcoa, but he doesn't practice in the Second Circuit, so he hasn't read the cases after Alcoa that lately. So he's won this round. We'll see what happens next.
- [49:21]
Alan Chappelle
All right, well, Brendan, this has been a great discussion. I really appreciate you coming on. Thanks so much.
- [49:25]
Brendan Benedict
Thanks for having me, Ellen.
- [49:28]
Alan Chappelle
Okay, we covered a lot of ground, so let me break down the four or five most important takeaways. First, the DOJ case has certainly done the heavy listing, but for the private plaintiffs. So on some level, the DOJ case is really a roadmap for some of these private lawsuits. So you got publishers like Gannett and the Atlantic, along with ad tech companies like OpenX and Magnite. They can now use collateral estoppel, which is a legal doctrine saying they don't need to reprove that Google monopolized the market or engaged in anti competitive tying. That likely shortens the litigation timeline and reduces costs for plaintiffs. Second, Google's decision to avoid a jury trial may ultimately backfire. As we discussed, Google wrote a check to moot the DOJ's damage claims specifically to keep the case away from a jury. While this might have seemed like a good idea because judges tend to understand complex business dealings better than juries, it created a detailed set of findings which might be more difficult for Google to challenge in their appeal. On some level, Google traded the unpredictability of a jury for the precision of a judicial opinion, and that precision may now work against them when it comes to these private lawsuits. Third, what's taking place in Europe, Canada and the Texas Red State AG cases are still ongoing, so there's still a ton of dust that needs to settle here. And you're just as likely to see the other private plaintiffs file over the course of the next few months. The Texas AG case is probably going to raise more buy side issues, which then opens the door to a whole new category of private litigants. And here's the kicker. When it comes to Europe, the EU may order divestiture even if the US Courts don't, creating a jurisdictional nightmare for Google and a whole additional geopolitical component. Fourth, the damage calculations will be where this private litigation really gets interesting. Discussions over lost profits for publishers and competing ad exchanges over potentially a decade or more. Brendan noted that there was a statute of limitations for these types of claims that typically runs four years. But there's an argument to be made that it extends back to 2019 because that's the timing of the government's case, so we're going to be really interesting to see how far back they're able to go. Fifth, the brink of my remedies decision is the next domino that will shape everything that follows. Judge Brinka hasn't yet ruled on remedies, and whether she orders behavioral changes or structural divestiture matters significantly. Structural remedies, like forcing Google to sell off parts of his ad tech stack, would fundamentally reshape the market, but it would face significant legal hurdles, not to mention all of the economic realities that I cited at the beginning of the episode. So Brendan and Ira both predict that behavioral remedies are more likely from Judge Brinkoma, but that certainly creates a longer timeline. So unless Google is able to settle, this is likely to go on for years. The DOJ established liability appeals will challenge market share thresholds and tying standards. European regulators may force structural changes. American Corporations Court seemingly won't. But if they do in Europe, it'll lead to a series of geopolitical consequences. Private plaintiffs will fight over damages, and through it all, Google will deploy armies of experts arguing that damages are either zero or that plaintiffs actually benefited from Google's conduct. For publishers and ad tech companies, the question isn't whether Google violated antitrust law. Judge Brinkham had clearly answered that. The question is how that violation cost them and whether they can prove prove it with sufficient economic rigor to survive Google's inevitable challenges. We'll continue tracking these cases as they develop, and I'll be covering all of this in more detail in the Chappelle Regulatory Insider and potentially the Monopoly Report newsletter. We've a bunch of other fantastic guests coming up on the Monopoly Report podcast over the next few weeks. Next week, Tom Kemp from Cal Privacy will be here to discuss the launch of California's new Dream Drop data deletion mechanism and a whole bunch of other work they're doing there in California. Please subscribe to the show at monopolyreportpod. Com or on Spotify, Apple, YouTube, wherever you listen to your podcast. And thanks for listening.