Recent Antitrust Developments with Michael Katz

Episode Summary

Executive Summary: The episode analyzes the U.S. v. Google antitrust trial, focusing on the DOJ’s claim that Google maintained search dominance through default-placement and exclusivity deals with Apple and Android partners rather than merit. Guest Michael Katz argues the case is legally and economically difficult because the government has not clearly shown a but-for world or consumer harm, and remedies like choice screens have often underperformed abroad.

Main Topics: Google’s alleged monopoly maintenance through default deals (Priority: 5/5): The conversation centers on DOJ’s theory that Google preserved search dominance by paying to be the default search engine on Apple Safari and by securing preferential placement on Android through deals with carriers and OEMs. The but-for world problem and proving harm (Priority: 5/5): Katz repeatedly argues that antitrust liability requires comparing Google’s conduct to a plausible alternative world, and that the DOJ has not clearly explained what would have happened absent the challenged agreements. Apple’s role and consumer preference for defaults (Priority: 4/5): The discussion examines whether consumers and Apple want a preinstalled default search engine, with Katz emphasizing that Apple says users prefer a seamless experience and that Google is widely viewed as the best general search engine. Choice screens and European antitrust experience (Priority: 4/5): The panel compares U.S. theories to European remedies, especially mandated choice screens on Android and browsers, which Katz says have often had limited impact and show how difficult effective remedies are to design. Exclusivity vs. distribution bargaining (Priority: 5/5): A major debate is whether Google’s payments reflect legitimate competition for distribution or unlawful exclusion of rivals. Katz says the DOJ may need to prove Google insisted on exclusivity, not merely paid for placement. Parallels and differences with Microsoft (Priority: 3/5): The case is compared to the Microsoft antitrust case because both involve exclusionary distribution agreements, but Katz notes important differences in product structure, market dynamics, and the role of explicit payments. Evidence, emails, and intent in antitrust litigation (Priority: 3/5): The conversation closes with a discussion of how courts interpret internal emails. Katz says such documents can be overread unless they clearly show fake procompetitive justifications or direct exclusionary intent.

Key Arguments: Katz argues the DOJ’s theory is incomplete because it does not clearly specify a credible but-for world showing that Google’s conduct changed market outcomes. He says Google’s payments to Apple can be interpreted as paying for distribution, which is competitive behavior, rather than paying solely to exclude rivals. Katz stresses that Apple’s own testimony suggests it wanted a default search engine for user experience reasons and chose Google because it was the best general search engine. He notes that if switching defaults is easy and consumers would switch anyway, Google’s large payments become harder to explain; if switching is hard, the default is valuable because users prefer quality preinstallation. He suggests the government may try a “no economic sense” style theory, arguing Google paid more than would make sense unless part of the benefit came from weakening rivals like Bing. He believes the exclusivity issue may matter more than revenue-sharing itself, because a blanket “all or nothing” restriction could be more exclusionary than a simple placement payment. He says choice screens are not an obviously effective remedy and that Europe’s experience shows that mandated alternatives can fail or require highly specific design choices. He compares the case to Microsoft but says the analogy is imperfect because this case involves direct payment contracts and mobile ecosystems rather than browser bundling alone. He argues that antitrust cases often turn on very fact-specific proof, and he does not view the Google case as a slam dunk for either side.

Data Points: Trial start date: September 12 - The Google antitrust trial was described as having started on September 12. Episode date: Tuesday, September 26 - The hosts opened by identifying the recording date. Projected trial length: about 10 weeks - The hosts said the trial is expected to last roughly ten weeks. Potential case timeline: many years - They noted that if Google is found liable, a remedies phase and appeals could extend resolution for years. Case comparison: first major monopolization case since Microsoft - The host characterized U.S. v. Google as the first major monopolization case since Microsoft. Search payment magnitude: $10 billion - A question was raised about whether Google’s annual payment to Apple is a lot of money; the figure cited was $10 billion. Europe remedy effect: minimal effect / very little difference - Katz said European choice screens reportedly produced little change in search choice in many places. Android remedy example: 50 euros - Katz gave a hypothetical example of Google charging 50 euros for apps and paying 50 euros for better placement to illustrate remedy design. Android remedy example: 50 euros - The same hypothetical was used to show how Google might offset a mandated pricing structure. Market duration claim: 12 years - The DOJ was described as arguing that Google’s dominance and conduct had persisted for about 12 years.

Pivotal Quotes: "What did Google was supposed to do?" — Judge Ahmet Mehta (as described by Michael Katz): Katz used the judge’s question to highlight the DOJ’s alleged failure to provide a clear alternative course of conduct. "I definitely do not see it as a slam dunk" — Michael Katz: Katz summarized his view of the case’s prospects for the government. "That’s not competition on the merits" — Michael Katz, describing the DOJ’s position: He summarized the government’s objection to Google paying for default placement as a form of exclusion rather than merit-based competition.

Implications: The case could reshape default-placement, exclusivity, and remedy standards in digital antitrust. But Katz warns that weak but-for proof or ineffective remedies could limit DOJ’s chances and influence future Section 2 enforcement.