Big Technology Podcast - Emergency Podcast: Department of Justice vs. Google with Yelp's Luther Lowe

Episode Date: October 20, 2020

The U.S. Department of Justice filed suit against Google on Tuesday, alleging the company unlawfully maintained a monopoly in search and search advertising. The antitrust action was the most significant since the DOJ's case against Microsoft, and is sure to send ripples through Silicon Valley where Facebook, Apple, and Amazon will be paying close attention since they might be next. To talk about what it all means, Yelp's senior vice president of public policy Luther Lowe joined the Big Technology Podcast on extremely short notice. Lowe has been pushing the case against Google forward for years, and his on the ground perspective can help shed light on what's at stake and what comes next.

Hello and welcome to the big technology podcast. Today we are doing an emergency edition, our first emergency edition, and the moment really does call for it because the Department of Justice just dropped their complaint against Google, and it's about to get really interesting in the antitrust world when it comes to big tech. We couldn't wait. It's time to do it right away. Talk about this immediately. And joining us to do it as someone who's been watching it for a long time and maybe even drop. the movement behind it. It's Luther Lowe, the SVP of public policy at Yelp. Luther, welcome to the big technology podcast. Alex, thanks for having me join for this emergency podcast. I know. It's

definitely an emergency day. It's not every moment that you have the DOJ drop something like this. So can you tell us a little bit about what happened today and where are you expected to go? Sure. I mean, I think it's important to take a step back and just kind of take a deep breath and acknowledge what a seismic event this is. I mean, you've got, it really harkens the last major antitrust investigation against a consumer technology company, Microsoft, over 20 years ago. And really, that was like the biggest story, tech story in the last, you know, 20 plus years. It is, in many ways, there are a lot of echoes of that in the complaint. U.S. First Microsoft started relatively narrow, but it pointed to, in the

theories of harm, broad issues and broad areas of concern. And if you read the complaint that the DOJ dropped this morning, you see that throughout. And then the other thing that's going on is the state attorneys general, have their own parallel investigations, and they are bipartisan or multistate groups. And so there's like these clusters of states, a handful of them, all Republicans signed on to the DOJ this morning. And then you've got the multi-state investigations that Texas is leading into ad tech in Google and the multi-state investigation led by like New York, Colorado, Nebraska, Iowa that is looking at deeper questions on search. So really it is a It's like three vectors of attack here that could ultimately get consolidated into an omnibus case.

But what specifically did the DOJ come after Google on today? The case, the theory of monopolization is oriented around defaults. And so if you think about, you know, whenever you buy a new iPhone or an Android device, Google is very aggressive about ensuring that it's really hard. on to use services like Bing. So, you know, they're a line that they like to throw around as competitions only click away, but they really don't take any chances. Sorry, that's my one-year-old screaming in the background.

That's okay. This is an emergency show, so we need all children on board. I'm not sure if you want her on board. But, well, so we've got a, you know, for example, it's been reported that over the last 12 months, Google spent $13 billion with Apple to ensure that when I, you know, buy an iPhone for Verizon or Apple store and boot it up that if I do some kind of search, if Siri can't easily answer that question, like if, you know, 2 plus two, Siri might be able to give me a four. But otherwise, most of that stuff getting kicked over to Google.

And, you know, that's a privileged position. If I want to change the default, it's actually quite cumbersome. I think the team over at DuckDuck Go has said it's actually like 15 or 17 clicks. And so there's these very high cognitive costs to switching. And, you know, in some ways I think it's like a really, really difficult problem to overcome because I think, you know, the remedies that one could imagine are, you know, like ballot screens or putting consumer choices. And it's not clear to me that that's going to prove.

a lot of competition in the market, though I think we've got to see sort of what additional evidence is going to be presented and remedies that will be suggested. But, you know, Chrome, Android, the iOS deal, these are three important ways that Google protects its defaults, sort of across all the different ways that one can access the Internet. Right. And so Chrome being, you know, that they, If you search on the Chrome address bar, it goes to Google Android, obviously, Google on search engine, a Google own mobile operating system. There's a, you know, the browser does default Google search and then they're working to,

as you mentioned, get their search, you know, available to, you know, on iOS devices. I guess like, you know, the one question I would have in this is, you know, Google did start as a website, right? And they've only been able to persist because they've been so good at seeing. what was coming next and finding a way to build for it, which is not typical for a big technology company or a big company at all to be that nimble. I mean, they go from a website, you know, in Microsoft's browser to toolbar on Microsoft's browser, then realize the threat for Microsoft and they sort of had to build Chrome to survive. And then, of course, we go from desktop to mobile

and Android is something that makes sense. And they're now working on the Google Assistant. You know, it is supposed to be the search engine for voice competing against Alexa. So I guess what I'd like to know is where's the crime here? Because, you know, they're doing what any prudent business would do in terms of trying to help their business survive. So, you know, I know that, you know, there's some issue with the fact that they have, you know, this control. But what should they have done differently and how is this wronging people? So I think the history there is actually important because if you look at, what happened six months after U.S. versus Microsoft was filed, you know, Microsoft up to that point

had successfully parlayed its dominance in OS into browsers. It killed Netscape. It was a 90% market share and with Internet score about 1998. And I think but for the DOJ and many antitrust historians on both sides of the argument, agree that but for U.S. versus Microsoft in 1998, in spring of 1998, you wouldn't have Google born in a garage six months later because you can very easily imagine an alternate universe where Microsoft just runs the same playbook. It had been running throughout the 90s where it recognizes eventually, gosh, this Google site is bubbling up and getting some contraction. Let's throw 50 million bucks worth of research at this page rank paper that Larry and survey have written,

let's clone this and bake it into our internet explore. And of course, Microsoft had the kind of the hammer brought down both in the U.S. but also in Europe. And ironically, Google was one of the chief complainants about that. And Eric Schmidt prior to Google at Sun-Novel Microsystems was one of the key agitators to bring U.S. First Microsoft.

So he actually learned how to, you know, He got a front row view of what can bring a technology giant to its knees, and he applied those lessons as soon as he was hired at Google, and he went out and hired Halvaryan, who's like the top, you know, technology, industrial organization economists. Those guys are like the wizards of the courtrooms in antitrust law. He hired Halvary in 2002, maybe late 2001, like six months after he was brought on its CEO. So he knew Google was going to be in the nonprofit. If you read early stories of, like, Google employees, there's, like, a moment.

I've read this in, like, multiple biographies of Google employees and, you know, their kiss and tells. There's, like, a moment where they see the graph, like the hockey stick graph, and everybody realizes, oh, shit, this is going to be a really big company. And so the name of the game, and we actually saw some great coverage at the New York Times last week about this, is, like, we've got to do all we can to forestall the day that we have. face the A word. In fact, let's not even talk about it. Antitrust, yeah. Yeah. And so, you know, and so I would actually argue that Google, you know, I agree with sort of Steve Balmer's thesis, that Google is in many ways a one-trick pony. I mean, page rank undeniably is a differentiated, was a differentiated technology that was leaps and downs ahead of like the altadistas and Yahoo's of the time. And they essentially took a page rank like quality score,

and attached it to an ad auction algorithm to monetize the site after it had leapfrogged all these sites. And then it was basically a money printing machine. And then they went around and sort of scanned the landscape and said, okay, let's enter the map's vertical. Let's enter the video vertical. And they bought all the stuff for Google Maps. They bought all the stuff for YouTube.

They bought all, they bought Android. Like none of this stuff has been built in house. It's just how can we attach these. Chrome was built in house. The assistant is being built in house. No, but they definitely had an aggressive. Chrome was built by Firefox engineers that they

post using the entire Firefox tech stack. And Firefox, by the way, is another example of how they spend defaults Firefox is effectively a subsidiary of Google because all their money comes from Google being the default. So anyway, what I'm saying, though, is

that I would actually argue they haven't been that innovative of a company. They've been a clever company in terms of avoiding anti-trust scrutiny in terms of using the money printing machine that they have from search ads to extend into all these adjacent markets. Okay, but what is the, so can you give us some specifics of what the Department of Justice is saying is the harm here? Like, where is the place where Google is now getting into trouble for? You know, we know that they've done all this stuff, which is all, you know, what you're talking about spreading, you know, across all these problems. products is legal. It is doing business. So where have they sort of crossed the line and where

is the Department of Justice seizing onto right now? Sure. Well, I mean, I think they articulate a lot of examples of harms in the form of increased prices for advertisers. They also note there's echoes of the U.S. House Antitrust Subcommittee report, which was all Democrats. And that's the important thing to understand this thing is really a bipartisan thing. I was just retweeting Elizabeth Warren. and praising the DOJ while dunking on Bill Barr. And, you know, I'm looking at Section 170. Google's monopoly in general search has given the company's extraordinary powers gateway

to the internet, which it uses to promote its own web content and increase its profits. It fight itself as being the turnstile to the internet, sending users off its results pages through organic links designed to connect the user with third party websites that would best answer a query. Over time, however, Google has pushed the organic links for the internet links for the and further down the page and featured more search advertising results and Google's own vertical and specialized search offering. This in turn has demoted organic links of third-party verticals pushing these links below the fold on the portion of the search engine result page

that is visible only if the user scrolls down and requiring them to buy more search ads from Google to remain relevant. This raises their costs, reduces their competitiveness, and limits their incentive and ability to invest in innovations that can be attractive to users. Not surprisingly, investors also report being unwilling to provide funding to vertical startups with business model similar to or potentially competitive with Google's search advertising monopoly. So there you go. I mean, like, this is one of, you know, hundreds of bullets here talking about the raising of rival's cost, which is a major way that there is a clear way that kind of antitrust practitioners

is articulate harms of monopolization. Hey everyone, let me tell you about The Hustle Daily Show, a podcast filled with business, tech news, and original stories to keep you in the loop on what's trending. More than 2 million professionals read The Hustle's daily email for its irreverent and informative takes on business and tech news. Now, they have a daily podcast called The Hustle Daily Show, where their team of writers break down the biggest business headlines

in 15 minutes or less and explain why you should care about them. So, search for The Hustled Daily Show and your favorite podcast app, like the one you're using right now. Yeah, this is the interesting thing about the Google story to me is they began as a company to sort of help you navigate the internet, right? They sorted the internet for you. And then I think through all these different products acquisitions, and I think, okay, I think they built, but we believe that for another day. You know, through the products they've developed, they've become the internet in many ways. they're charging businesses, you know, a fee in order to play on the internet. That's not good. No, I don't think that is for another day. I mean, I think that's at the heart of the issue here is that

this is what, and it makes it so heartbreaking because I used to love Google. I mean, I was, I mean, I remember running out and buying the first G1 phone. I remember using Google for the first time in 2000. And it is hard to decouple the rise of Google from the rise of what, Tim O'Reilly popularized this term web 2.0. And it really, it was like a thousand flowers bloom. And the bargain was for webmasters, you come here or you architect your site in this particular way and you focus on cultivating interesting content, you'll be rewarded with an audience.

To consumers, you use us, you're never going to use Altivista or Yahoo again. And what happened was like roughly the first decade of Google, as the DOJ says, it was a turnstile, and then eventually it started dialing the knobs such that it became this portal. And now, as we know from data that the House Antitrust Subcommittee shared a couple weeks ago, the majority of traffic going to Google today either terminates on Google or goes to Google secondary pages. And so what's heartbreaking is that Google really betrayed the web. And they, in some ways here are kind of like, are a, they're killing the Golden Goose, this is a reckoning of their own making. And it's, I'm glad it's happening

because I think that we need more oxygenation of the internet markets. I don't, I believe in the web. I believe that the World Wide Web can still be restored to a strong state. But, you know, It is unfortunate that Google has been, was so instrumental in growing the web, and then basically, once they reached a point of just unassailable dominance, began using that dominance to then sort of steer unwitting users into lower quality services. Yeah. And when I say leave it for the other day, the thing I was mentioning was Chrome built or bought. But I agree with you that the central point of this is that what we've been discussing is, you know, has, is, Google suffocating the web by pointing people to its own services? You're coming from an interesting standpoint, Luther, I feel like you've sort of led the effort

here and maybe single-handedly help push this more than any one human being, as, you know, from your position at Yelp, is this an issue that, you know, that basically Yelp identified years ago is realizing that Google was, you know, Yelp was open web and Google was going to essentially suffocate the business through things like Google Maps and their reviews there? Yeah, I mean, I, you know, I think I'm a mere sort of actor in this. I think, you know, the real credit goes to the prescient callouts of, you know, that our CEO and co-founder Jeremy Stappelman, you know, very early on was suspicious of Google's motives and as early as like 2007 was accusing them of acting in.

anti-competitive ways. And so this has been going on for over a decade. And I mean, I think that there are a lot of companies that you're starting to see come out of the woodwork. In fact, I think much of the energy, and though we are sort of the canaries in the coal mine and really active on these issues when it wasn't cool, you're now starting to see so many other companies, sensing that the zeitized around big tech antitrust has changed and they're coming off the sidelines and they're filing their own private antitrust suits. They're becoming public witnesses in these hearings. So we really have turned a page here. I mean, if this would have happened seven or eight years ago, in fact, we can use another example, 2015, when Europe

announced it was starting to do stuff with Google. I mean, you had letters from members of Congress. You had like randomly a letter from the governor of California. Then Jerry Brown wagging their finger at EU saying, why are you messing with this great company? And now it's literally the only people putting their necks out for Google today are people on the payroll like CCIA or PPI, these things that basically get all their money from Google or the op-ed writers that you've reported on. Which are small businesses that say, you know, harming Google would harm me.

And then you look at how that op-ed came to be and it's some Google-funded organization that found them and helped bring that to light. I've had a great example of this the other day that I need to send you offline. I'm just absolute, just mind-boggling example of an op-ed writer that appears to be on the payroll. Anyway, so it's like there's really nobody, the emperor has no clothes. I mean, there's nobody defending these guys anymore. And I think that that probably helps with sort of setting the political temperature necessary to do a big case like this.

Right. But the defense would be, and let me just make it. We can talk about it for a moment. Is that, okay, well, Google, I kind of like Google. Like, I like Google services. I generally find what I want when I search the Internet. Maps is pretty great. Gmail is nice.

I, you know, I write and drive and use sheets for invoices and, you know, doing Excel like, calculations and it's free. So, you know, I guess like there's an argument that a consumer can make that says, you know, this is a thing that's been talked about, you know, in Washington and by companies, but if I think about my everyday experience, it's actually pretty good and why are you going to mess with that? Well, I don't, I mean, based on this complaint, it doesn't, for what it's worth, I don't think Drive and Gmail are on the chopping block. And, And, you know, I do agree that Google offers some good results. The problem is they blend the results that we have been habituated to expect are the best.

They blend those results with lower quality results that are from their own house properties. I mean, that's a problem. It's not the problem is one major problem. And so I think that this is a common thread you see where Google sort of find some kind of pro-consumer pretense to behave in an anti-competitive manner. And I think if nothing else, this case is going to send some shockwaves through Mountain View and signal that, you know, just bulldozing into adjacent markets is not cool anymore. I mean, it's interesting, you know, a lot of people are talking about how Google aggressively

is pushing their Zoom competitor in Google Calendar. And, you know, I wonder if they would do that if, like, if U.S. first Google had been filed like nine, nine months ago, if that tactic, they would have even played with that. Because at that point, you're sitting there telling the judge, you're not doing all this aggressive behavior that the government's claiming you're doing. And, you know, if you're reading contemporary news reports of that, I could see how that would make a judge, a judge annoyed. So I hope that this has a chilling effect on some of their ongoing aggressive behavior. I'm going to stand up for Google Meet. I think it's better than Zoom, but that's just

me. Oh, do you have to run or we have another couple minutes? We can do four more minutes. Okay, so Bill Barr, obviously he's a political actor. There has been some worry that this will be something that's going to, you know,

regulate Google from, you know, a political standpoint versus like what's the right thing to do on antitrust. Do you have any worry on that front? No, I mean, listen, it's this, the people that we interacted with the DOJ are upstanding nonpartisan career staff. I bet you a lot of them personally are in their heart

apart. They probably vote Democrat. These are career lawyers that work at the DOJ through various administrations. And I think some of the reporting about, you know, this being some kind of political vendetta is overblown. I feel like we're in a tense partisan environment. That's may be expected. But the truth is, is there is a bipartisan, you know, energy around these issues. You see Congressman Cicillini, Elizabeth Warren, praised the DOJ case. You've got a bipartisan group of state AGs saying, hey, this looks good and we might even consolidate our case with it. So I don't think it's fair to, I mean, and then, you know, finally, in the case, in the substance of the case itself, nobody, you know, there's not any mention of, like, conservative bias or any of

the stuff that I think maybe there was the most paranoid we're fearing. But this is a above board process and, you know, we're heartened to see some form of enforcement here. You don't think it was rushed? I mean, there were some stories saying that career lawyers were upset about how fast it was going out the door and they weren't fully ready. Yeah, I mean, that original meme, it seems like, came about from the New York Times reporting on it.

And I just disagree with the characterization. I think that tension between the political appointees and the staff is a natural thing. You saw that actually, I mean, the decision to enforce is always going to be somewhat political, right? And so, you know, it's a totally discretionary area of enforcement. I mean, just like the decision to not enforce is political. Look at the FTC investigation of Google that the Obama administration really shut down. And that today is, you know, it's clearly looking back on that, the decision to close that case has not aged well. here we are with a case that, you know, identifies all types of evidence and conduct with respect to monopolization.

So I think that once that kind of high-level decision of, hey, an enforcement case should be made for all the facts and law where it leads them, you know, the ball rolls. And it's not like these antitrust lawyers can, you know, jam in a bunch of conservative bias crap without getting laughed out of court. I mean, this is a substantive case. with bipartisan support. Okay, we have about a minute left, so I just want to ask you, like, where it goes? What happens next? So, again, I would say don't sleep on the state AGs. They have parallel investigations that could be filed in the next weeks or months on ad tech and other dimensions of search.

You know, this is the opening salvo. It's a strong one. I think, you know, it's not a good day for Google, but certainly, we're in we got to buckle up because this is going to be a long ride sure will all right luther low thank you for stopping by for this emergency podcast i'm sure it's a busy day for you but looking forward to keeping in touch on this issue and and more as we go forward thanks alex appreciate the invitation