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Microsoft Chief Executive Satya Nadella said the idea that users have a choice in online searches is “bogus” because of a contract that makes Google the default search engine on mobile devices.
Testifying on Monday in Google’s antitrust trial with the U.S. Department of Justice, Nadella took aim at the agreements challenged in the U.S. government’s case. Washington accuses Google of maintaining its dominance of online searches by paying more than $10 billion a year to ensure it becomes the default search engine on mobile phones and computers.
The company denies wrongdoing, saying it faces stiff competition and its market share depends on the strength of its products.
“Breach of contract is a key factor in the network effects of digital products,” Nadella said in testimony as the trial in Washington entered its fourth week. “A user can really like a product but not change the default.”
“The whole concept of users having a choice . . . is completely bogus. Defaults are the only thing that matters in terms of changing search behavior,” he added. “You get up in the morning, brush your teeth, and then search on Google. The only way to change is to change the default.”
Microsoft is seen as the most prominent large technology group in the trial, trying to break Google’s control of the online search market through its engine Bing.
Nadella also talked about Google’s agreement with Apple to make its search engine the default search engine in Apple’s Safari browser. The agreement has become a central part of the government’s case.
Nadella said that during his tenure as CEO, he “watched every year” whether Apple was willing to accept the default agreement with Bing, which would be a “big move” for Microsoft.
A federal prosecutor asked Nadella how much Microsoft would pay to replace Google as Apple’s default search engine. He said the cost for Microsoft to do so, plus any additional costs, could be nearly $15 billion a year.
Google argued that users can easily change the default settings. John Schmidtlein, a lawyer representing Google, said during cross-examination of Nadella on Monday that although Microsoft has sufficient financial resources, it has not invested enough in developing its search business. Nadella said that while he ran Microsoft’s search business, he sought more investment but overall felt “well supported and well funded.”
Schmidtling also argued that Microsoft’s past distribution deals “failed to increase Bing’s scale because users preferred Google and the vast majority of users.” . . Search on Google instead of Bing.”
Judge Amit Mehta, who is hearing the case, asked Nadella to comment on whether artificial intelligence could help solidify the “delta” between Google and Bing. Nadella confirmed that Microsoft has invested more than $13 billion in OpenAI, the developer behind the chatbot ChatGPT.
But Nadella said the “vicious cycle” of Google-dominated search “could become even more vicious” if default protocols were strengthened. There may be new approaches that “lock in on what powers (large language models), which is content,” he said.
The LL.M. is the foundation of generative artificial intelligence, the technology behind tools like ChatGPT.
The case, being heard in federal court in Washington, D.C., is the most high-profile monopoly trial since the U.S. Department of Justice accused Microsoft in the 1990s of trying to use Windows’ dominance to overthrow then-web browser pioneer Netscape. A judge ordered Microsoft to be broken up, but the ruling was eventually overturned on appeal.
The case was initially brought by Donald Trump’s administration and later taken over by Jonathan Kantor, now the head of the Justice Department’s antitrust division. It’s a major test of Kanter’s stance on tougher antitrust enforcement. Kantor was appointed by President Joe Biden to combat corporate overreach. He has previously likened technology to the “new oil” in the U.S. economy.
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