Google's economic expert decried in court today the US Department of Justice's remedy proposals over data sharing and ad auctions in a monopoly trial as "regulation," stating the government was forcing the company to reveal the "guts of its system." Dr Mark Israel, who testified for Google during the liability phase of an Internet search monopolization lawsuit, returned to the witness stand in an evidentiary trial in which the DOJ and several states are seeking a corporate split as well as several behavioral remedies.
An economic expert for Google decried in federal court today the US Department of Justice's remedy proposals over data sharing and ad auctions in a monopoly trial as "regulation," stating the government was forcing the company to reveal the "guts of its system."Dr Mark Israel, who testified for Google during the liability phase of an Internet search monopolization lawsuit, returned to the witness stand in an evidentiary trial in which the DOJ and several states are seeking a corporate split as well as several behavioral remedies.
The expert opposed the DOJ's proposal that Google should publicly disclose every change it makes to its auction mechanism and report it on a monthly basis to a technical committee overseeing the remedy compliance.
"I think it's a regulatory mandate. It has nothing to do with the competitive process," Israel said. "My main concern with this, again, it's just regulation. I mean these are proprietary auction designs. This is regulation saying that a firm has to reveal the guts of its system."
"That's a dangerous thing to do by mandate... to reveal how your operations work to the public. It's a public disclosure that Google's competitors would see," the expert said.
The DOJ and states said in a March 7 remedy proposal that Google ought to be banned from limiting the ability of advertisers to export search text ad data and information for which the advertiser bids on keywords. They further required Google to provide to the technical committee and the DOJ a monthly report outlining any changes to its search text ads auction and its public disclosure of those changes (see here).
Israel said he found "particularly problematic" the DOJ's proposal regarding search ad syndication, where Google would have to offer a license or a contract of terms over 10 years to rivals.
"The problem with it is there is an existing competitive syndication market," Israel said. "There hasn't been any showing that I've seen that the syndication market isn't working. So you're coming into the syndication market and you're imposing a contract on top of it that doesn't exist as a competitive outcome," he said.
Israel said it is not a competitive outcome.
"It's disruptive to a market that already exists. So, I worry a lot about dropping a regulatory contract into a market that exists today," which has players such as DuckDuckGo and Yahoo. "I worry a lot about this. It isn't just Google that you should worry about, right? Microsoft is a big competitor in that market."
Israel explained the problem with this remedy is that the government would say Google has a really attractive contract, and now Microsoft has to compete with that.
"That didn't come out of the market itself, and so Microsoft might find that very hard to compete with, because the government has mandated that Google provides this contract with all these terms that Microsoft might have to match or people wouldn't want to work with them anymore," the expert said.
— DOJ's cross-examination —
During cross-examination, DOJ attorney David Dahlquist sought to impeach the Google witness. Israel agreed that his primary occupation is as a professional economic consultant and not a lawyer or expert in legal remedies.
Israel also conceded to the DOJ attorney that he wasn't an expert when it comes to actual standards or techniques that are used in privacy. Israel acknowledged he wasn't offering any opinion related to the privacy techniques that either Google or other entrants can or should use in implementing any remedies. Earlier, during direct examination by DOJ counsel, Israel took issue with the DOJ's search user query data-sharing remedy due to privacy concerns.
"If I think of myself as a user, I go to Google and I put my searches in at Google... my data doesn't just go to Google. It goes to everybody," Israel had said earlier. "That information is now not just Google's, it's everyone's."
In order to show inconsistencies between a previous deposition and Israel's witness stand testimony, Dahlquist questioned the expert about structural versus behavioral remedies. "All things being equal, do you prefer well-tailored structural remedies over behavioral remedies?"
"Behavioral remedies that try to dictate the behavior of a firm almost very rarely work. So, a structural remedy that is well tailored would have a better chance," the expert said.
Dahlquist persisted, asking if Israel prefers structural remedies because they require less ongoing enforcement. "I think that's fair," Israel said.
Israel's testimony picked at nearly every DOJ remedy proposal, saying they would either impose costs on the market or hurt the competitive process. At one point Dahlquist said, "Dr. Israel, you know that the role of an expert witness in cases like this in litigation is to assist the court, assist the trier of fact, right?" Dahlquist asked. "You don't like any of our remedies. You haven't studied their [Google's] remedies. You're not offering any other remedies. You're really not helping the court here, are you?"
Google's attorney raised an objection, which US District Judge Amit Mehta sustained.
— Mozilla in a tight spot —
Mozilla’s chief financial officer today testified about the company’s dire financial situation and its complicated business relationship with Google.
Eric Mulheim was questioned by the DOJ about the potential “existential threat” facing his company due to declining market share.
“I’m frightened for Mozilla, yes,” Mulheim said during cross-examination by a DOJ attorney. He also testified that it was undesirable to continue relying on Google for about 85 percent of Mozilla's $570 million annual revenue.
Judge Mehta will decide whether to grant the DOJ’s proposal to hive the Chrome browser off from Google and force the tech giant to share user data, as well as syndicate its search and ads results. If the judge grants the DOJ’s proposal in full or in part, it could hurt a lucrative revenue-sharing deal the tech giant has in place with Mozilla where Google Search is set as the default search engine on the Firefox browser.
Mehta asked Mulheim if he agreed that Mozilla would benefit from having at least one other search provider in the marketplace that equaled Google’s quality and ability.
“If we were in that world, that would be better for Mozilla,” Mulheim responded.
Mehta asked what it would take to bring that world about.
“Time,” Mulheim said.
“It would take time and investment on behalf of the companies. That’s the kind of time that we don’t have if this revenue source is cut off from us,” the Mozilla executive said.
The judge pressed on, asking whether existing market conditions could result in achieving the outcome.
Given the recent emergence of “AI and search crossovers” and “very well-funded companies doing interesting things,” Mulheim said such a result was “not out of the question.”
— Browser competition —
Google attorney Graham Safty presented Mulheim with multiple scenarios whereby the nonprofit software company could mitigate its struggles to stay afloat due to a lack of competitive alternatives in a monopolized web search market.
But all of those scenarios would involve Mozilla “scrambling” to fill a massive hole in the company’s annual revenue that is filled by advertising dollars shared with Google as part of an agreement to make Google’s Search the default engine on Firefox, Mulheim said.
Without the Google deal, Firefox’s revenue in the US would “drop precipitously” and “no other provider can provide compensation” to fill the ensuing “hole in our revenues,” the Mozilla executive said.
That would require pretty significant cost cuts across the business, potentially leading to a “downward spiral of usage” as users defect from the browser and potentially “put Firefox out of business,” he said.
Google’s Chrome browser is Firefox’s largest competitor in the US, but Mozilla’s ability to continue developing and utilizing the only large-scale browser engine that isn’t owned by a Big Tech platform depends on its “critical” search partnership with Google, Mulheim said.
“It’s increasingly urgent to diversify revenue, but it’s progressing slowly,” an internal Mozilla corporate strategy presentation from 2024 said.
While Firefox’s ads business has “high potential,” it was underperforming, according to the document. It also noted that Firefox’s declining market share was “leading to reduced compatibility and relevance.”
DOJ attorney Travis Chapman presented Mulheim with a highly redacted internal strategic planning analysis that only revealed two bullet points under a section titled “our external threats.”
One of those bullets read: “Potential existential threat to search revenue due to declining market share, DOJ case, and AI disrupting Google’s revenue.”
— Consequences of DOJ remedy on Mozilla —
Google and DOJ attorneys each questioned Mulheim about a five-month study sponsored within the company to inform senior management and the Board of Directors about the consequences to Mozilla if the full suite of the government’s proposed search remedies were to be implemented.
The analysis largely piggybacked off a year-long internal experiment in 2021. It looked at search behavior and monetization on Firefox for users who had Google Search set as their browser’s default engine but were “quietly” moved to Microsoft’s search engine, Bing.
“Discontinuation of payments from Google is a significant threat to viability for Mozilla with limited ability to mitigate,” the study said.
Chapman challenged the methodology of the analysis. Mozilla’s conclusions in 2024 relied heavily on an experiment that had been conducted on desktop computers instead of mobile devices, and the company’s so-called “Redwoods Analyses” were “not a new study,” Chapman said.
Mulheim responded that the estimates of a potentially “disastrous reduction in revenue” were likely underestimated because Mozilla’s “past experience” with Microsoft suggested the company could start cutting the amount of search advertising revenue it shared once Google was out of the picture.
The reason Mozilla exists in the first place, according to Mulheim, was out of a concern that Microsoft “would control all protocols by which people browse the Internet.”
Mozilla’s Gecko browser engine is the “heart” of Firefox, and the only independent browser engine available in a market now dominated by Google’s Chromium and Apple’s Webkit, the executive said.
The Mozilla CFO also testified about Firefox’s negative experience switching to Yahoo as the default search engine on its browser between 2014 and 2017. Search volumes declined and Mozilla received complaints, he said. Users didn’t like the search experience, and almost immediately “people shifted away to Google or elsewhere.”
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