This is Bloomberg Law with June Brusso from Bloomberg Radio. The United States versus Google, the first trial pitting the federal government against a US technology company in more than two decades, began in a DC federal court on Tuesday.
The Justice Department and state attorneys general alleged that Google illegally monopolized the online search market by paying billions of dollars to tech rival smartphone makers and wireless providers in exchange for being the default search engine on browsers and mobile devices. But Google's top lawyer, Kent Walker, told CBS News that consumers use the search engine because it's helpful and it's easy to switch to another search engine. It really couldn't be easier. You can sit at home on
your couch and change what search engine you're using. It's as easy as changing your shoes. My guest is antitrust expert Harry First, a professor at YU Law School. Harry, just how important is this case?
This is an important case, at least symbolically and maybe practically so symbolically, it's important. It is the first case in more than two decades to challenge a durable, high tech monopoly. So the last case was brought in May of nineteen ninety eight, so that's a quarter of a century since the last one, and that was against Microsoft,
and since that time nothing. So it is symbolically important because it shows the federal government and the state any trust enforces turning their attention to big power in our economy.
Does it focus on the company paying more than ten billion dollars a year for exclusive agreements with smartphonemakers, web browsers and wireless providers in exchange for it being you know, the pre selected option, the default on mobile phones and browsers. Is that the focus of the government's case.
Yeah, So it was a mixture of things with the mobile distribution channel the Android OEMs like Samsung. It started out as a licensing agreement, the mobile Application distribution agreement MADA. I guess you get mad or MATA. I don't know. If the handset manufacturer wanted to download any of the Android apps, Google Maps, Chrome Browser, they had to download all of them, and they had to put the Google Search widget on the home screen. So that originally was
not for money. It was if you want to use the Android system, you have to take this basically. It later changed into some sort of revenue share agreement where you know, if you had Google Search on exclusively, then you would share advertising revenues that Google got from that. So those were those payments. The other side was the browser with Apple and Safari, and those agreements were pretty confidential.
I'm not sure the exact number has come out or how much will come out, but they basically paid for the default position on Safari browser and then you know, on a few other browsers to be the default search engine. So I keep wanting to say Netscape, but of course nextscape right, so it would just be the default but for which Google is willing to pay apparently quite large sums of money.
Is there anything wrong with that? With the company saying I'll pay you if you do this and we both benefit.
Well, the definition of an agreement is we both benefit. So the question is whether these agreements helped to maintain
Google's monopoly position. So firms entered into lots of agreements across the economy, of course, and most of them are lawful, But when it comes to monopoly firms, firms that have a monopoly position, they can't use agreements to unreasonably exclude competitors and that's what the government plaintiffs are arguing that these agreements unreasonably excluded good competitors who were foreclosed from getting their search engines in front of consumers so they
could use them, and so that they could get more and more searches done on them and continuously do what Google had been able to do, and they were monopolists more and more data, more and more data, and so get better results, have a better search engine. So the argument is that they excluded competitors through these agreements.
Does the Justice Department have to prove that there was harm to consumers or to the.
Market, So the answer is no, yes. How's that? So technically the government plaintiffs don't have to prove injury. Private plaintiffs, if they want to collect money, have to prove they've been harmed and by how much. Government plaintiffs just have to prove harm to competition, which is a rather more abstract thing than you know, proving an exact dollar figure something.
So this is why I say no, they don't have to have some clear proof that this caused you know, prices to go off things like that, but they do have to have an argument for why competition was restricted, why sort of the normal rivalry in the marketplace was impeded, and they will make an argument that that harm consumers and deprive them of certain things. So they may make an argument that prices were higher, maybe not saved by
exactly how much, but advertising prices were higher. Apparently they're going to make some sort of argument like that. They'll argue that competitors were unable to innovate and provide maybe different kinds of or better searches, or push Google to be more innovative, and that consumers were harmed because by preventing competition you have less innovation. So that will be the rough argument for why consumers were injured, simply beyond you know, having only one choice the monopolist.
In the opening statements, Google's lawyer argued that consumers don't use Google because they have to. They use it because they want to, and if they want to switch, it's easy enough, right.
So that is a factual argument in essence, but it's also an appeal to framing the case in a way favorable to Google and in a way that they hope will appeal to the judge. So Google's basic argument is, are you kidding me? This is the greatest product ever. Why do people use it? You know, nobody's holding a gun to their head. They use it because it's darn good. And you know, nothing is stopping consumers from changing those the falls. They could do it. You know, it's easy
enough to do. So tell me why they don't do it. I'll tell you why they don't do it. They don't do it because they get a great product and they're happy with it. And in the end, Google says, and this is true. The purpose of the any trust laws is to serve consumers. That's what markets are for, and consumers are being very well served. So why are you bringing this case government?
Is that the only argument you think they're going to make.
Well, there are lots of legal arguments along the way. They may argue that search actually isn't a product because it's on price free. You know, you can't raise its price. You can't lower its price the product if there's a product involved as advertising, you know, and then what's the advertising market? They'll argue that, okay, if search is a product, you know, there are lots of ways to search for information,
even on the Internet. There are lots of ways to search for in so, for example, you know, people search for information on TikTok. Maybe not you or me, but younger people do. People search for information on Amazon, you know, if they are looking for a product, lots of people just go right to Amazon and.
Look for it.
They don't look for it on Google. So there are lots of different ways to search for things. And so Google is if search is a product. Google doesn't control it. Consumers control it. They sit those keyboards and make their choices.
The judge asked Google's lawyer to respond to the Justice Department's allegation that quote, what you say are competition for defaults are not really competition at all. That really only Google can be selected for the default. Do you know what he meant by that?
So Google was selected for the default because they paid for it in one way or another, either through the revenue share or for saying, you know, if you want all these apps, you've got to make it the fault, or they paid Apple large sums of money. The question is more, what does a fault mean? The fault is an exclusivity. It's just a start. It's where things start. It's the fault. So you know, Google wants to say there's still plenty of consumer choice. So Google isn't controlling it,
consumers are controlling it. I think the judge has already shown a little skepticism about an argument that the faults don't matter, which is I think what Google wants to say, you know, it don't matter because they're changeable, and I think, you know, the judge is my recollection was pressing Google's counsel already for saying, well, give me some examples to consumers changing.
Harry, as a lawyer, which side would you rather be on, the governments or Googles.
I think the government's case is strong. Actually, now I say that in part because there's been a test run in a way, the European Commission already found a lot of this stuff to be in European competitional abusive dominance, the agreements relating to mobile distribution, not the browser part. And you know, one good reasoning and that doesn't compel the same results in the United States, but it's pretty similar.
It's similar to arguments that were made in the Microsoft case about contracts that were exclusive and effectively excluded Netscape the browser, even though you know you could still get a browser in different ways. Now you may remember, I remember, you know it used to be, well, if you couldn't get the browser pre installed on the LPC, they came in the mail, right, you could mail them. You know, I still have some of those discs in my office.
Get rid of them, right.
So, Hey, there's plenty of distribution in the courts that they're you know, it doesn't have to completely foreclose you, but it's it just shuts off basically the easiest part of the most efficient way of distribution. And in that old day, the OEMs, the Dells of the world compacts didn't want to put a second browser on because of cost, and here they get that same default, even though they technically don't call it exclusive, it's the same sort of thing.
So I think the government has a strong case. Obviously, it's not a lay down case. I haven't heard any talk of settlement. So Google presumably feels that it might be able to win a trial. And there's a long time between here and there, as they say, before there's some resolution of this case, because this is really we're just at the beginning of it.
In its lawsuit against Google, the Justice Department pointed to that Microsoft case and said that Google deploys the same playbook as Microsoft. Did How much does this case borrow from the Microsoft case or echo the Microsoft case?
I think there are there are a lot of similarities. You know, Microsoft, a lot of the exclusionary work was done by exclusive contracts that they had with Internet service providers, with AOL so forth. They paid the money, So there are a lot of factual similarities. I don't think there's the same sort of technological effort of tying Google Search to something, which is what Microsoft did with the Internet Explorer browser, but it's quite similar. And the District Court
has already followed the legal playbook as well. I mean, the government, I think has tried to say, hey, this is Microsoft, and you know how that came out, and legally, the District Court judges already followed the way the Court of Appeals set out the structure for analyzing the problem. The District Court has already chosen that in an earlier decision that made the case. So Microsoft is going to be very important in this case. But you know, in
the end, facts are very important. So we'll see yet how the judge about the arguments on default and how much of the market was really foreclosed by this or you know, how you figure that out. So that's yet to be seen.
If Google loses, there'll be a second stage of the trial to determine the remedy. Is a breakup likely or unlikely?
I mean, so I'll take the other side of the coin of Google lair enough, not not of the company, but of the case. So the Microsoft case on whether Microsoft violated the Sherman Act, the Court of Appeals that ultimately decided the case unanimously basically decided in favor of the government on the monopolization arguments and a very important
and strong decision. On the other hand, when it came to remedy, the Court of Appeals was not so gong ho and the key line I think is their view that the remedy had to be tailored to fit the wrong. So although the Court of Appeals never directly opined on whether a breakup would be allowed, because eventually there was a settlement, it was pretty clear that they were not clined to a breakup would have not been inclined in Microsoft.
So for this case, the government is going to have to show some sort of systemic approach to how Google operates. That requires that is, you know, they are so deeply into maintaining their monopoly. That the only way to deal with this is somehow to restructure the company. That's a heavy lift. And it will depend on how the government presents its case. If its focuses, as it seems to be, on the specifics of these contracts, well then it seems to me the remedy is likely to be let's do
something about the contracts. So breaking up Google? Are we going to see goog as Google? I think it's pretty unlikely. But you know, again that's going to depend on the kind of case the government presents, I think, even before the remedies trial, but at the trial and liability, what do they do wrong? Because remedy remedies the wrong.
Thanks so much, Harry has always it's a pleasure to have you on the show. That's NYU law professor Harry.
First, the money is there, the cause is righteous, the world is watching in the UAW is ready to stand up. This is our defining moment.
It certainly was an unprecedented moment, as the United Auto Workers went on strike Friday against all three Detroit automakers, a strategy announced by its president Sean Fain. Of course, TESLA doesn't have to worry about strikes it's the only major US auto manufacturer not represented by a union. The electric car makers' legal disputes over union organizing are no secret, and the legal fight over Tesla's ban on workers wearing union shirts on its electric car production line has reached
the Fifth Circuit Court of Appeals. Joining me is labor law expert Kate Andreas, a professor at Columbia Law School. Kate tell us about this Tesla ban.
So Tesla banned union shirts, it required workers in the plant to only wear Tesla's shirt black shirts in particular or with supervisors permission. I think they were also able to wear plain black shirts. What the workers did is they wanted to wear UAW shirts that were also black, that looks basically the same as the Tesla shirts, but instead of having the Tesla logo on them, they had the UAW logo.
Is that an unusual kind of ban? I mean, don't a lot of places have uniforms.
So since the nineteen forties, the NLRB has held, with Supreme Court approval, that workers are allowed to wear union insignia, including union T shirts, unless there's a special business reason for an employer to prohibit it. So it is the case that a lot of employers have uniform requirements, but they have to permit workers to wear union buttons, union stickers, union shirts unless there's some business reason why doing so
is detrimental to the business. The reason for that is the board has recognized that showing your support for the union is an important part of how workers organized unions, and it's an important part of workers' right to accession at work right. It's their right to communicate their support for the union, and that is protected by the MLRA.
The NLRB made a decision against the Tesla Band last year. Tell us about that.
So the board's decision was consistent with the doctrine going all the way back to nineteen forty five really old case called Republic aviation. In that case held that workers can wear union insignia on their shirts, on buttons, things like that, as long as it's not causing a problem for the business. So the presumption is that it's okay
to wear union insignia, the business has to show. The employer has to show that there's a specific business reason why wearing union messages is impermissible is damaging to the business, And in this case, the boardsound that Tesla wasn't able to do that. It wasn't able to show why wearing a UAW logo and a black shirt versus a Tesla logo on a black shirt caused any problem for the business.
Did it factor in at all that Tesla adopted this policy in twenty seventeen during a campaign by the UAW to organize production workers.
The Tesla's position was that ad adopted the ban because there were problems with production, that Tesla vehicles were getting harmed in some way in production, so it tightened up this uniform rules. But what the board said was, well, if you had, for example, made a proguson on wearing sharp implements, that would be understandable, right because you might rip a our seed if you're wearing a sharp implement. But what you can't do is adopt a rule that
really doesn't in any way. There's no special business reason for it, and you certainly can't do it if there's the possibility that you're doing it in order to coerce workers and exercise of their union organizing rights, that you're trying to discriminate against union activity. So it is especially illegal if it's adopted in order to retaliate against union activity. But even if it's not right, even if it's adopted for other reasons, it's not permissible unless the employer can
show that there's a need for it. And there are lots of cases where the board has held that a band is permissible because there's a special business need. For example, hospitals can tell our nurses they have to wear a scrups right. Grocery stores can tell workers who are cashier workers, you know, who are pub facing workers, that they have to wear a particular uniform. Nursing homes can tell workers that they have to wear uniforms and patient care areas.
But this is really different. These are workers who are working, not facing the public in a plant, and there was no business reason why they couldn't wear a UAW logo instead of a Tesla logo on their shirt, and so the board said that violates their right to organize.
But it seemed like the Fifth Circuit judges were concentrating on the difference between dress codes that don't allow any expression of union support and those like Tesla's that permit workers to wear union stickers and the like on their company's shirt. One of the judges said, a sticker says, go union union is good or whatever. In what way is that an insufficient means of communication? So were these judges ignoring that precedent you just told us about.
Right, So one of the judges seemed to be saying, if the employer give workers some way to communicate their support, that's enough that the employer gets to decide how workers can communicate their support for the union. That is not what the president has held since nineteen forty five, with the exception of a very brief period during the Trump administration when the board kind of clamped down on workers'
ability to express themselves. But other than that brief perio during the Trump administration, since nineteen forty five, the Board has said the employer doesn't get to decide that it doesn't like union shirts or it doesn't like union buttons unless there's a business reason for that. So if this circuit ends up adopting the reasoning that was suggested in oral argument, that would be a real retrenchment of where workers' rights have been for a long time.
And the opinion you were referring to was a Supreme Court opinion.
Yeah, so it's a Supreme Court opinion called Republic aviation, and it was the court in that case upholding what the board had decided. That's important too. So there's sort of two things that are worry some about what the Fifth Circuit judges are suggesting. One is that it suggests that there's at least some interest or possibility of narrowing workers' rights to express themselves in their effort to organize. But the other is a question of how much will court
defer to the expertise of the board. And so in this nineteen forty five case from the Supreme Court, Supreme Court deferred to the board, and that the board is really the one that's expert in how workers organize unions. If the board thinks that it's appropriate to have this rule, we're going to defer to it. We think it's a reasonable interpretation of the statute. So this seems to suggest less different to the board than the Supreme Court was willing to give in this old precedent.
Tell me your general impressions of the oral arguments or the concerns of the judges.
Well, you never want to read too much into oral arguments. The judges, I know, read briefs carefully and take a close look at the law. However, based on the oral argument, I have some concern that the judges were misreading existing precedent and seemed to be suggesting that they were going to retail important expressive rights of workers in a way that's really troubling.
What was Tesla's argument about why they should be allowed.
So just basically had two arguments. One was that there has been a problem with damage to vehicles, for example, car seats ripping against in items, and as a result of that, they needed to adopt a stricter uniform policy that limited for example, metal on clothing. That's a legitimate business reason, right, they're worried about the quality of the cars. What was the board said was that reason doesn't connect to not wearing a black UAW shirt, so it's not
enough of a reason. The second reason Tesla gave was that employers needed to have visual control, so they needed to be able to spot who's a worker, who's a manager, and all the workers had to wear black Tesla shirts in order to enable that kind of control over the production line. But there again the board said, that's fine, right,
that's a legitimate business reason. But as long as they're wearing a BLACKAW shirt in the brief, there's pictures of shirts you know that essentially looks the same, it just has a different logo on it. Then again, the rule isn't advancing the business interest, and you can't just have a rule that is, we don't want you to wear the union shirt.
Did the judges buy into Tesla's argument or were they off on another plane entirely with the ability of the Tesla employees to express themselves.
I think the judges were in large part accepting Tesla's argument in the sense that Tesla was saying, you know, we get to decide what our employees wear as long as they have some opportunity to express their support of the union. And at least one of the judges seem to think that that was what's really important. So as long as there's some way to expressing in support, for example, through a sticker, that that's sufficient. That was one of the arguments that Tesla advanced as well.
Kate, if the Fifth Circuit finds in favor of Tesla, does that mean that it's ignoring Supreme Court precedent?
So it will depend on how they rule. If it's a very sax bound decision that accepts the argument that there is a particular business reason in this case. It's a little hard for me to see what it is, but maybe they'll find one then that wouldn't be in conflict with either the Supreme Court long standing president or
the board's long standing precedent. However, if they establish a new rule something like as long as there's some way to express your support for the union, that's sufficient, that will really push against long standing or precedents.
There was a question about what the remedy would be if they find for Tesla, and the NLRB lawyer wanted them to remand to the NLRB, and the Tesla lawyer said, just dismiss the complaint.
I think again, the judges have a choice in terms of how broad a ruling they wish to pursue. The board's position is that should remand the case for the board to consider in the first instance, how you apply whatever rule the court sets out to these particular facts. And the company's position is well, once to establish that as long as there's another way to show union sport,
then the case is done. And so again, I think what the remedy is will depend in part on how broader ruling the court adopts, and again, how much deference it is willing to exercise to the agency, how much it's willing to kind of recognize that it supports role in the first instance, to figure out whether workers' rights engage in considered activity are protected.
I find it surprising that Tesla would bother to go through these appeals and everything over this issue missing something.
Yeah, I mean, I think there are two things going on. One is that employers like Tesla do everything they can to try to stop workers from organizing unions. And so in every case, if they're able to exert more authority over the workplace and row the ability of workers to engage in organizing activity that is very important to them, that set precedent for future cases. It sends a message to workers, even if it doesn't set precedent, that it's
going to be very difficult to win a union. And so I think that explains why Telos pursuing what seems like a relatively minor issue.
And how important is this case in the grand scheme of things, Well, again, it.
Really will depend on what the court says. It could be a very problematic case for workers rights to organize, or it could be a relatively stacked found opinion. But I think if you step back, what you can see is that there's a real battle going on. There's a very significant effort within the NLRV to protect workers' rights to organize, to really make reels the promise of the statute,
and the Board has issued a series of opinions. This is only one of them, but a series of opinions, a series of rulings where it is working very hard to protect workers right to organize. And there's a big question about what happens when those opinion and get up into the courts of appeals, particularly the very conservative courts of appeals. So it could be part of a broader trend of courts flapping down the board's efforts to protect
workers right. Or it could be an example of where the court recognized that this is what the law has long held, and they allow the Board to do its job in protecting workers right.
And I noticed that although the case originated in California, which is in the Ninth Circuit, Tesla appealed the NLRB's ruling to the Fifth Circuit.
So one of the advantages that you have when you're a party that's appealing is you can pick a circuit in which you are located, and so Tesla determined or judged that it would likely have a more favorable panel in the Fifth Circuit, which has historically been one of the most conservative, if not the most conservative court in the country.
But if this is appealed to the Supreme Court, I mean, have they issued any decisions in the last few years that favor unions, Not.
That I can think of. So there's been a series of cases where the Spoonbird has ruled against both the unions and workers, ranging from the case involving access to farm workers and they're right to organize, to the case about whether or not the NRD gets to decide whether or not a strike is protected or a stake where action could go forward. That's the Glacier case from this year, and those have all come out against workers.
Thanks so much, Kate. That's Professor Kate Andreas of Columbia Law School. And that's it for this edition of the Bloomberg Law Show. Remember you can always get the latest legal news on our Bloomberg Law Podcast. You can find them on Apple Podcasts, Spotify, and at www dot Bloomberg dot com. Slash Podcast, Slash Law and remember to tune into the Bloomberg Law Show every weeknight at ten pm Wall Street Time. I'm June Grosso and you're listening to Bloomberg