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- [00:00]
Alan Chappelle
Alan I'm Alan Chappelle, host of Market, where we talk about the big issues impacting digital media, from privacy to antitrust and the impact of big tech. We take the big ideas and break them down to help you see the future of the ad space. Join me wherever you listen to podcasts. 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. This week my guest is Megan Gray. Megan is a tech lawyer with her own law and policy firm called Gray Matters, headquartered in Washington D.C. she focuses on information, Internet innovation and intangibles and serves on the advisory board for the Electronic Frontier foundation and the center for Democracy and Technology. Earlier in her career, Megan was the senior Counsel at the Federal Trade Commission and the General Counsel of Duck Duck Go. This will be Megan's second appearance on the Monopoly Report podcast and I've had her on as a guest on the Future Media podcast as well. Megan is an experienced litigator with an enormous depth of knowledge on the tech space. Megan was also sitting in the pews during the Google DOJ search remedies trial. For those reasons, Megan is the perfect person to have on this pod to discuss the Google Search remedies trial and its impact on the digital media space. So let's get to it. Hey Megan, thanks for coming back onto the pod. How are you?
- [01:43]
Megan Gray
I'm doing great. Thanks for having me back. It's always fun to talk with you.
- [01:47]
Alan Chappelle
Oh, it's always a blast. And you were my first two time guest. I mean, we're narrowing down on 50 episodes so maybe shame on me for not trying to get you to lure you back earlier.
- [02:00]
Megan Gray
Well, I have to say I don't think it's so much about me, but the fact that the Google Search trial is just so meaty and there's so much to discuss about it.
- [02:10]
Alan Chappelle
There's just so much there and so. Well, let me start us off. You know, I feel like the search trial, at least within the ad space, has been a little bit overshadowed as compared to the separate DOJ ad tech case. So let me set the stage. Last August, after a 10 week bench trial, Judge Mehta concluded that Google possessed monopoly power in two markets, the general search market and the general search text advertising markets. Google had violated Section 2 of the Sherman act by entering exclusive dealing agreements with certain equipment manufacturers like Apple and Samsung, which made Google search engine the exclusive default on smartphones and web browsers. So we're sure Google's going to appeal, but we can now like say that Google is officially a monopolist and turn our attention to the remedies in the case. So you were sitting in the pews.
- [02:59]
Megan Gray
Let me just first say, I think you're being generous to think that the ad tech trial was slightly overshadowed. I think it was massively overshadowed and not for great reasons. It was just that the ad tech trial was so difficult to understand, whereas everybody uses Google search. So I think people instinctively understood what was happening there.
- [03:23]
Alan Chappelle
I think that's a fair point. But, but I was speaking more specifically to the ad space where everybody within, you know, the architecture community wants to talk about the ad tech space. And I think that they are to a certain extent sleeping on the search case. Even though in my view the long term impact to search has a chance of being significantly broader and more helpful to the larger digital media community.
- [03:46]
Megan Gray
I totally agree.
- [03:48]
Alan Chappelle
So you were sitting in the pews for I think most if not all of the remedies trial and the liability trial and the really. Okay, so I would love it if you would set the table like, you know, firstly, just for my audience who are non lawyers, what takes place during a remedy's trial? Why do they bifurcate the remedies trial from the initial trial? Like, can you just give us a quick overview?
- [04:10]
Megan Gray
Sure. You know, this is confusing for lawyers as well. Most trials are just trials, they're not bifurcated. So it is unusual to have a bifurcated trial except in an antitrust case. In an antitrust case it is often done that way because there's so much to figure out with liability. If there's liability, that's the only time that you go into remedies. So it makes sense to bifurcate. And here I will say though that the bifurcation was very weird. There are so many weird aspects of this Google search case and the bifurcation was one of them. And I fell down a rabbit hole trying to figure this out a while ago because I didn't see anything in the docket talking about bifurcation. There was not a motion for bifurcation, for example. And what I did is I went back to very early, early early days during the status conferences and that is the only time that bifurcation was mentioned. And it was mentioned as almost an off the cuff way where both Google and DOJ were on board with bifurcation. The lead lawyer for DOJ at the time didn't want to be thinking about remedy. And to the extent that DOJ was Thinking about remedy way back then, back in 2020, 2021, I honestly believe the only remedy that DOJ was contemplating at that time was to strike the exclusivity provisions in these default deals and a choice screen. But by the time we got to the remedy trial or even the end of the liability trial, I think it was plain as day that that would be a stupid outcome, that that outcome would essentially save Google tens of billions of dollars and change nothing. So all you have done is rewarded the violator.
- [06:20]
Alan Chappelle
Can you point to a place in time where the DOJ seemed to be thinking differently about that? Was it that they were winning or was it that, you know, they didn't think they would win? And so, well, now that we've won, now we're going to, we're going to double down and ask for more.
- [06:35]
Megan Gray
That's a great question. I will tell you that I don't think DOJ was seriously thinking about remedy until the last month of the liability trial. I think it took getting Jonathan Kanter and his team in there and involved confirmed up to speed, realizing that, oh my God, the trial team has not spent a lot of time here and none of the remedies that are currently before us that had been batted around are going to do a damn thing. Remember, it wasn't really until the end of that trial that you had the choice screens in Europe and those choice screens didn't do squat. And there was this belief that, oh, all you have to do is give people choice and then they will choose non Google alternatives. And that obviously is not true for a host of reasons that Google has long been relying on that because of their anti competitive conduct. They have primed people to think that Google's the only option. They have infiltrated into Chromebooks in the schools. You've got a whole generation of people who have grown up on Google. The judge in this case did not know there was another search engine other than Google until he got this case. Like just flat out there was a lot to overcome to think about. How are you going to erode the inappropriate dominance that Google has achieved as a result of its many, many years of these anti competitive contracts?
- [08:28]
Alan Chappelle
Somebody used the analogy that like when the dog finally catches the car, he doesn't really know what to do with it.
- [08:34]
Megan Gray
It's true. I do think it is true. You have to go back to 2019 and 2020 when DOJ was investigating this case and to understand that context and doj, the antitrust division was instructed to bring an antitrust case against Google flat out I don't care what it is. Bill Barr was the attorney general. Trump wanted a case against Google. He made that very clear to Barr. Barr made it very clear to the antitrust division. And the easiest, most straightforward, simplest case that you can have an antitrust world is, is exclusive contracts to maintain a monopoly. So that's what they did. Unfortunately, it's an easy liability case. It's a really hard remedy case. And good litigators in any context torts, antitrust, copyright. What you ought to do is figure out the outcome that you want first and work backwards. But because of the politics of this particular case, it didn't work that way.
- [09:41]
Alan Chappelle
Ah, okay, that makes sense. So what's your thought about the. So we're now in remedies and you know, we'll start with Google. What's your thought about their approach to negotiating? Like, I've, I've bought, I bought apartments in New York City and I am familiar with the concept of a lowball offer is that all they're doing is.
- [10:02]
Megan Gray
Not even a lowball offer. I laugh because the idea that Google has, has offered a lowball proposal as a remedy is absurd. Let me just tell you what Google has offered. Okay? Now remember, the crux of the case is that Google has locked down browsers and Android from having other search engines as the default. These are exclusive default deals that prevent the rise of other competitive search engines. Okay, so those contracts are the problem. So you would think that it is a minimum. Google would say, we're not going to do those contracts anymore. No, they didn't even do that. Did not even offer that. The, the offer there. Google's remedy proposal was we will continue to do those contracts, but we will have them with only one year terms. And at the end of every year, then that contract partner, Apple, for example, could decide to do a deal with Microsoft if they wanted.
- [11:22]
Alan Chappelle
Ignoring the last 10 years, apparently, yes.
- [11:25]
Megan Gray
And ignoring that. Google would be of course the easiest rollover partner. Whether you get the most money, it's this smoothest, frictionless. It's absurd to think that anybody would say, yeah, after the end of this year, let's totally switch search engines.
- [11:43]
Alan Chappelle
But do you think there's a strategy behind that?
- [11:45]
Megan Gray
I think it is a considered approach. I think it's a savvy approach. Antitrust cases take a very long time, even when you're not in a very fast moving market like we have now with AI and search, you know, it's a monopolist. Best strategy to string this out as long as possible, continue to earn Those monopoly rents continue to be embedded in the mindset of the entire world as the only true information source for search. Like, I don't fault them for, you know, if I was Google's lawyer, I would probably do the same thing. It, that is a good strategy for them, I think. It, the internal conversations that Google has had, I'm sure are revolving around if we don't offer more, then the judge is going to go all in for DOJ's proposal. Because we have given the judge no option. It's either. And the judge even characterized this in open court as I could go with Google's remedy. That's the status quo, right? That, that is not the, the reaction that you want from a judge that just found you liable for violating the laws. He does not want the status quo. And if he sees your proposal as the status quo, you know he's not doing yours. So then the question is, the entire Google defense is can they shit on the DOJ proposal enough to pair off particular components of it? But Google knows they're not going to get their remedy, but they don't want to help the judge or DOJ with any sort of middle ground.
- [13:47]
Alan Chappelle
I get that. But it just in the back of my mind, I wonder, does that strategy eventually come back to haunt them?
- [13:55]
Megan Gray
Yes and no. I mean, you can go back to this is what happened with AT&T, this is what happened with big Oil. This is what happened with, in most recent memory with Microsoft, where these big companies just fought, fought, fought tooth and nail for decades. And eventually everybody in the judicial system, in the governmental system, in the public awareness was sick of it and that they were not willing to give them the benefit of doubt at any point. And Microsoft and the current president of Microsoft, Brad Smith, who was general counsel during the antitrust trial, has spoken quite openly that the reason why they finally, quote, unquote, caved and offered a robust settlement proposal to end the case is because they were spending too much time and energy dealing with this horrific reputation and cloud over their businesses. And they felt that it was impairing their ability to exploit the next innovation wave. And they wanted to be, they just wanted to get that off their back and move forward as a true business that was just totally focused on business. Now, whether Google reaches that point, I think we're probably a long way away from. The Microsoft case, don't forget, was a series of cases. DOJ had to sue Microsoft three times before they got to the point where they had a strong liability decision. And then eventually, after the liability decision, after an appeal. True settlement discussions. Yeah.
- [15:46]
Alan Chappelle
It strikes me that there's, there's just so many other data points that have to crystallize before it even becomes clear whether Google's doing the right thing in their overall approach here.
- [16:00]
Megan Gray
It's tricky because they, unlike Microsoft, they've got other fronts. They've got ad tech, they've got cloud, they're going to have AI, they're going to have, they, they are facing many more shopping and Android travel like they've got a lot more irons in the fire than Microsoft ever did.
- [16:19]
Alan Chappelle
Yeah, no, that's for sure. I've seen some of your posts on X and we're talking about Microsoft and. But I saw some of your posts saying that Google's approach, you know, around required sharing of data has been, has been frustrating the purpose in other cases. So I'm going to use the example of the EU dma. So what's your sense of how Judge Mehta is looking at some of the data sharing and open access proposals there? I mean, is he looking at it skeptically? Is he or do you have a sense of that at all?
- [16:51]
Megan Gray
I think that DOJ has proposed a very complicated and complex remedy that has many elements, data sharing being only one of them. Knowing that Google will continue the malicious compliance playbook and drag its feet the entire time around, DOJ has tried to plug as many holes as it can in advance. The trade off is that that makes the remedy proposal even more complicated and the judge understands that he is not supposed to be working on Google's business every day. Right. This is not a case that he wants his entire career to revolve around. And the proposal that DOJ has suggested may very well entail that. On the flip side, the judge I think is on board with DOJ's proposal in principle, almost all components of it. I think the judge agrees that is the way that you would fix this. It's just that it's so complicated that a judge is not supposed to be that enmeshed in a company's business on a daily multi year basis and he's trying to figure out a way to remedy the data sharing discrepancy and disparity. I think it's helpful for the listeners to understand that the violative conduct is these contracts, but that's only part of the story. As a result of those contracts, Google is the only one who has been able to acquire information on mobile and how people use search on cell phones or in the mobile environment. And unless you have that user data and user interaction Data. Because users search differently in mobile than they do on desktop. Very differently. And so unless you can say, okay, I'm going to share all of your learnings, Google, with these other search companies, they don't have a way to improve their product and become true rivals to Google, you can't say, okay, here's somebody who's always been super successful in life and was born with a silver spoon in their mouth. And now I'm going to take somebody from the boondocks and say, okay, you can now compete to be CEO. Like, you have no experience in any of this. You don't know anybody. You, you've never taken any of the classes, you have none of the life learnings, you have none of the vocabulary. But hey, I'm now going to consider you equally and you will be on a choice screen. And people could choose either you or the very experienced and successful CEO to run this company. I mean, that's not a real competition. They need to have the data.
- [20:14]
Alan Chappelle
What's your overall level of confidence that a technical committee can actually accomplish some of these complicated goals? And I'm going to admit I have PTSD from dealing with the competition of markets authority in connection with the sandbox, because in that situation I thought Google masterfully ran everyone around in circles for several years. Like, what's to prevent that via technical committee other than like appointing you to the technical committee?
- [20:41]
Megan Gray
Well, it's very different to try to come from this. As a government bureaucrat, you are not a technical expert. The UK cma, even though they have a technical group, they are not specialists in this particular technology and they are being pulled in many, many different directions. So a technical committee, that's all they do. This is their only job. And here's the catch. Google has to fund it, Google has to pay for it. Whatever the technical committee wants, the technical committee gets in terms of resources and Google pays for it. In the Microsoft case, the technical committee in the Microsoft case ended up having three campuses, including one actually in Redmond. At Microsoft's headquarters, they had a staff of more than 40 people. They had three leaders that were incredibly skilled and experienced in business and technology, in running tech companies. And they had a lot of money and they had experts and this was their sole job to address all of these issues. And you just, you can't compare that to what happened with privacy sandbox. It's just night and day. Interestingly, the folks in the Microsoft technical committee were wrote a paper which I sent to you just a few minutes ago, talking about how this works, how A technical committee works in this type of circumstance and you see this in other types of court cases. You see it with desegregation, you see it with product liability, you see it with bankruptcy and unraveling, you know, huge, massive frauds like Bernie Madoff. They work because there's funding and there are resources and that is their job. And they are incentivized to make it work because that's what they do. So I, I think it will work. I think it can work. I want to have a huge asterisk there, which is that it's still fricking hard. Like it's still really hard. And you are not going to be able to just turn a remedy over to the technical committee and wash your hands of it and they take care of it. What will happen is that there will be a group of people at Google who their sole job is to interact with the technical committee. There's going to be a team at DOJ and with the states, and their sole job is going to be working with the technical committee. It is a massive operation with a lot of people after the remedy is finalized.
- [23:36]
Alan Chappelle
It all makes sense to me. I just. Boy, those Google folks sure are persuasive. So if there's three leaders they need.
- [23:43]
Megan Gray
To convince, interestingly, it's, it's the, the proposal from the, from doj. And this weirdly was never mentioned in the remedy trial. What DOJ has proposed for the technical committee is five leaders. One that would be selected by doj, one that would be selected by the States, one that would be selected by Google, and then two that would be selected by the three of those who are of course outnumbered. You can structure it in a way that would be incredibly a huge irritant and motivator to Google. I mean, the problem with a lot of these, and you saw this with the epic Apple case, for example, and you see it with a lot of the remedies in Europe with shopping, for example, where if you just say, okay, Google, here, here's the outcome, here's what you need to do. You go do it and then we'll check back with you in a year. That does not work. You have to be on them like butter on toast, right? Like you, you cannot ever take a break from monitoring, watching, double checking, doing your own research, demanding answers. It is a daily constant job. But when you have that, I do think it works. We've seen it in so many other non antitrust situations where people are hiding funds and you know, putting money in different bank accounts and like there's a lot of shenanigans that go on in the business world. And we have mechanisms to deal with that. It just takes where there's a will, there's a way, and it's just a question of whether you have the will and whether the bad person has to pay for that will.
- [25:37]
Alan Chappelle
Yeah, I guess that's, that's a pretty good motivator right there. So what, what were the head scratching moments? Having sat through the remedies trial, you.
- [25:46]
Megan Gray
Know, there, there were, there were a lot for me. I was surprised how much time we talked about divestiture of Chrome going into the remedy trial. I thought DOJ had proposed that portion of the remedy as kind of a throwaway, something to expand the Overton window. And that wasn't something that was going to be a tent pole of the remedy's trial. And I was just wrong. It was a huge part of the remedies trial. So that was interesting. I was surprised that we spent as much time as we did on AI and browsers without a tutorial in advance for the judge. So I think that was a mistake that it made it difficult for him to immediately understand a lot of the evidence that was being presented to him. The judge is just such a straight shooter. I don't think he appreciated all the different ways that Google could sidestep any of these remedies. And that is why DOJ had, had made it so granular to plug all of the holes. So, for example, it came up at the remedy trial. One of the experts was talking about choice screens, and she was talking about how the remedy from DOJ would prohibit Google from paying to be on the choice screen. And the judge was like, wait, what? Why? I, I did not understand that nuance from the proposal. Why is that an issue? And the expert had to explain, well, Google knows it's going to be chosen almost exclusively on a choice screen. So it's, it has every incentive to pay Apple $15 billion instead of $20 billion to do a choice screen. Right. So that's why it's prohibited. And he was like, oh, you know, good, good point. Like, now I see it. Right. So it was surprising to me that he hadn't thought that through as much as I had hoped he, he would. The other surprises were that DOJ made a strategic choice to not mention any of the unethical behavior that Google had engaged in with withholding documents and falsely designating hiding documents as being privileged. That's very much incidentally in contrast to DOJ's approach in the ad tech Case where they have made that a thematic aspect of, of the remedy trial. Yeah.
- [28:40]
Alan Chappelle
Why do you think they did that?
- [28:41]
Megan Gray
I don't know. I am disappointed that they. That DOJ made that choice. I suspect that the long shadow of the Microsoft case is what made them DOJ go in that direction. The Microsoft case liability finding, which was not bifurcated instantly, that went up the full package that got reversed and it was reversed in large part because the appellate court felt that the judge was out to get Microsoft, that he was being punitive, that he, he had become hostile to Microsoft. And I suspect that they wanted to stay away from any of those overtones.
- [29:33]
Alan Chappelle
Okay. Yeah, fair. I mean, that's a strategy. You know, I asked Jonathan Cancer this and you know, he's obviously limited in terms of how he can publicly comment on this, but his sense was like, it was obvious the judge knew. Do we really need to keep rubbing it in the judge's face? I'm the type of person strategically that.
- [29:55]
Megan Gray
I would Cancer say that and I will say this to Jonathan's face face. You don't have to rub it in his. In the judge's face. You can put a footnote. What's wrong? Putting a footnote.
- [30:08]
Alan Chappelle
Fair point. So do you have any predictions for how this is going to play out and how long it's going to take to play out?
- [30:16]
Megan Gray
Well, how long is the easiest. The judge himself has said that he's going to issue a decision by or in August. So, so that's what I'm expecting. And, and this is different from brinkoma in the ad tech case who had said that she was going to have her liability decision very soon. And she was saying December, maybe January, and it ended up being much later. The reason for to, to have faith in Judge Mehta's prediction that he's going to have a decision in August is because that's when his law clerks leave. And in order to finalize the writing of his opinion, he really needs to get that done so he has doesn't have to train up a new clerk when he's trying to find. I need, you know, the depo transcript of so and so. So after that. Google has already, during closing arguments asked for a, a semi stay without asking for a stay. They've said, you know, August people are taking vacation. You know, when you issue your decision, Judge, you could have a delayed effective date. Right. Because most orders go into effect immediately. And when an order goes into effect immediately, that makes the lawyer scramble because they have to file motions for stay. They have to do if that motion for stay is denied at the district court, then they have to do a motion for stay at the appellate court. It's just a lot of a beehive of activity. And so Google said, you know, maybe we could avoid all of that trouble. I'm sure you want to take a vacation, too, Judge. So if you were to just push out that effective date. And of course, DOJ stood up and said, ah, no, no, we're not on board with that. If that's the direction you're going, we want to at least have a chance to brief it and talk about it officially. So you have a decision in August. You're going to have some fights over when that order goes into effect. You're going to have fights over whether it stayed while the case goes up on appeal. There was some talk about some aspects of it being stayed and not others. I think the judge will recognize that that is a recipe for disaster, because then everything will be disjointed. So then it goes up on appeal, and that appeal is going to be at least a year. At least a year. And an appeal can go fast or it can go slow. I don't know here what the dynamics of that will be. One concern that I have is that that's going to be heading into the midterms, and the Trump administration may want to negotiate on some aspects of, say, oh, news coverage that may benefit from a delay on the antitrust aspects of that appeal. But even assuming that's not the case, and you've got a year of an appeal, usually what happens at an appeal is that the appellate court says you got some of it right and you got some of it wrong. And so we're sending it back down to the judge to reconsider in light of the wise advice that we have provided here. And so then it goes back to the district court, he issues a revised opinion or a revised appeal, and then goes back up to the appellate court. So it bounces around for a while. It bounces around, and that's why you often see settlements, is because it is very hard to envision a remedy that works and works on a timeline that makes sense. If you have a remedy right now, let's say in two years, you have this remedy go into effect. The search engine industry is going to be very different in two years, so you're already going to be out of sync. So there's going to be incentives on all sides to try to find some settlement.
- [34:20]
Alan Chappelle
Well, I hope that's right. And hopefully this, this resolved itself more quickly. Than not just to me, it seems like the, the, you know, we're witnessing in, in front of our eyes the, the AI moratorium alone.
- [34:32]
Megan Gray
Well, let me, let me answer the. The. I think probably the more important part of your question is what do I predict for that remedy? And I think for the most part, Judge Meta is going to give DOJ what they've requested. I have some parts that are. I have less confidence in, but I think there will be a Chrome divestiture. I am one of the few who, who predicts that. I do not have a high level of confidence in that, but I understand the appeal that a crime divestiture has for the judge and for the appellate court. And all of Google's arguments for why there shouldn't be a Chrome divestiture mostly hang on what I consider to be flawed legal arguments. And that flawed legal argument is basically the concept that a divestiture is more invasive than a data sharing remedy. But in this case, I actually think that's reversed in terms of in how much you are shaking up a business entity and controlling their operations.
- [35:49]
Alan Chappelle
Did you see the paper Alyssa Cooper and her colleagues released today? I think it was affiliated with Georgetown. I'll send it off to you and I'll even post it in the show notes to our audience here. I have not read it. My inference is that they're making a case that Chrome divestiture is not nearly as difficult as Google would have us believe.
- [36:10]
Megan Gray
Oh, I totally believe that to be true. I know Chrome, a Chrome divestiture is not as difficult as, as Google would have us believe. That's. That's Google's job is to make us believe that it is super difficult.
- [36:21]
Alan Chappelle
Well, we've got that to look forward to. Megan, this has been a fantastic discussion. I really appreciate you coming on.
- [36:26]
Megan Gray
Happy to. Anytime. Always loving talking with you, Alan.
- [36:30]
Alan Chappelle
Take care. That was a fantastic conversation. A few thoughts. First, I think Megan has successfully walked me off the ledge when it comes to the use of a technical committee. It seems significantly more robust than the process put together by the UK Competition of Markets Authority in connection with Google's privacy sandbox. Second, it was helpful to hear another credible voice tell me that Chrome will likely be divested and that many, if not most, of the other remedies being proposed by the Department of Justice are likely to be accepted by Judge Mehta. Megan also told me that the judge is unlikely to do much with the search text advertising case in terms of remedies, as she takes the position that the judge will probably state that search text advertising markets issues were likely to be addressed by the general search remedies. That's something I would agree with, and in terms of timing, we're probably looking at at least a couple of years before this case gets resolved. We have a bunch of other fantastic guests coming up on the Monopoly Report podcast. Please subscribe to the show@monopolyreportpod.com or on Spotify, Apple, YouTube, or wherever you listen to your podcasts. And thanks for listening. Thank you for listening to the Market Podcast. New episodes come out every Friday, and.
- [37:50]
Megan Gray
An insightful vendor interview is published each Monday.
- [37:53]
Alan Chappelle
You can subscribe to our library of hundreds of executive interviews at marketecture tv.
- [37:58]
Megan Gray
You can also sign up for free for our weekly newsletter with my original strategic insights on the week's news at News Market tv.
- [38:06]
Alan Chappelle
And if you're feeling social, we operate.
- [38:08]
Megan Gray
A vibrant Slack community that you can apply to join@adtechgod.com.