TRANSCRIPT of defendant's motion to dismiss held on 4/28/23, before Judge Leonie M. Brinkema, Court Reporter Stephanie Austin, Telephone number 571-298-1649. NOTICE RE REDACTION OF TRANSCRIPTS:The parties have thirty(30) calendar days to file with the Court a Notice of Intent to Request Redaction of this transcript. If no such Notice is filed, the transcript will be made remotely electronically available to the public without redaction after 90 calendar days. The policy is located on our website at www.vaed.uscourts.gov Transcript may be viewed at the court public terminal or purchased through the court reporter before the deadline for Release of Transcript Restriction. After that date it may be obtained through PACER Redaction Request due 5/30/2023. Redacted Transcript Deadline set for 6/28/2023. Release of Transcript Restriction set for 7/27/2023.(Austin, Stephanie)
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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF VIRGINIA
ALEXANDRIA DIVISION
---------------------------x
UNITED STATES, et al.,
:
:
Plaintiffs,
:
versus
:
:
GOOGLE LLC,
:
:
Defendant.
:
---------------------------x
Civil Action No.:
1:23-cv-Friday, April 28, Alexandria, Virginia
Pages 1 -
The above-entitled motion to dismiss was heard
before the Honorable Leonie M. Brinkema, United States
District Judge. This proceeding commenced at 10:00 a.m.
A P P E A R A N C E S:
FOR THE PLAINTIFFS:
GERARD MENE, ESQUIRE
OFFICE OF THE UNITED STATES ATTORNEY
2100 Jamieson Avenue
Alexandria, Virginia (703) 299-
JULIA WOOD, ESQUIRE
DANIEL GUARNERA, ESQUIRE
AARON TEITELBAUM, ESQUIRE
UNITED STATES DEPARTMENT OF JUSTICE
ANTITRUST DIVISION
450 Fifth Street, NW
Washington, D.C. (202) 894-TYLER HENRY, ESQUIRE
OFFICE OF THE ATTORNEY GENERAL
OFFICE OF THE SOLICITOR GENERAL
202 North Ninth Street
Richmond, Virginia (804) 786-
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 2 PageID#
A P P E A R A N C E S:
FOR THE DEFENDANT:
CRAIG REILLY, ESQUIRE
LAW OFFICE OF CRAIG C. REILLY
209 Madison Street
Suite Alexandria, Virginia (703) 549-
ERIC MAHR, ESQUIRE
SARA SALEM, ESQUIRE
FRESHFIELDS BRUCKHAUS DERINGER, LLP
700 13th Street, NW
10th Floor
Washington, D.C. (202) 777-
DANIEL BITTON, ESQUIRE
AXINN, VELTROP & HARKRIDER LLP
55 Second Street
Suite San Francisco, California (415) 490-
COURT REPORTER:
STEPHANIE M. AUSTIN, RPR, CRR
Official Court Reporter
United States District Court
401 Courthouse Square
Alexandria, Virginia (571) 298-S.AustinReporting@gmail.com
COMPUTERIZED TRANSCRIPTION OF STENOGRAPHIC NOTES
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 3 PageID#
P R O C E E D I N G S
THE DEPUTY CLERK:
States of America, et al. versus Google LLC.
Would counsel please note their appearances for
the record.
Civil Action 23-108, United
MR. MENE:
Good morning, Your Honor.
Gerard Mene
with the U.S. Attorney's Office.
THE COURT:
MS. WOOD:
Good morning.
Good morning, Your Honor.
Julia Tarver
Wood on behalf of the United States.
colleagues, Aaron Teitelbaum and Mr. Dan Guarnera.
MR. TEITELBAUM:
THE COURT:
With me today are my
Good morning, Your Honor.
And I recognize we probably have a
fair number of other attorneys in the courtroom.
MS. WOOD:
THE COURT:
We do, Your Honor.
I'm only going to hear from the main
spokespeople which are from the federal government and the
Commonwealth of Virginia.
MS. WOOD:
THE COURT:
All right.
MR. HENRY:
Good morning, Your Honor.
Yes.
Is there someone here from
Virginia?
Tyler Henry
from the Office of the Attorney General of Virginia on
behalf of the plaintiff states.
THE COURT:
Good morning.
All right.
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 4 PageID#
And for the defense.
MR. REILLY:
Good morning, Your Honor.
Craig Reilly here for the defendant Google, together with my
co-counsel Eric Mahr, Sara Salem and Daniel Bitton.
with the Court's permission, Mr. Mahr will address the
Court.
THE COURT:
Very good.
And
Thank you, Mr. Reilly.
Good morning.
All right.
defendant's motion to dismiss.
well-briefed motion.
papers, but I'm going to give each side a brief opportunity
to focus on any of the highlights that they really want to
stress today.
This is before the Court on the
Obviously this has been a
So I had a chance to go over the
And Mr. Mahr, you, I believe, filed early this
morning some new authority.
I don't know if the plaintiff
had a chance yet to respond to that.
if they feel they need to respond, as well; all right?
So they should also,
MR. MAHR:
THE COURT:
The podium is yours.
MR. MAHR:
Thank you, Your Honor.
Eric Mahr on behalf of Google.
Yes, Your Honor.
And again,
We appreciate your time, especially since Google's
motion to dismiss is really directed to the critical
gatekeeping function that the district court plays in all
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 5 PageID#
cases, but we think especially in complex antitrust cases,
and especially critical as that function in a district where
we obviously move so quickly.
different standard for antitrust cases under 12(b)(6), but
the Supreme Court in Twombly made clear that in general and
particularly in antitrust cases, a district court must
retain the power to insist on some specificity in pleading
before allowing a potentially massive factual controversy to
proceed.
Certainly there's not a
In words that directly address what we think is
the let's-just-wait-and-see-what-happens-in-discovery
approach that the plaintiffs are asking you to take in this
case, the Supreme Court in Twombly went on to say:
answer to say that a claim just shy of a plausible
entitlement to relief can, if groundless, be weeded out
early in discovery."
"It's no
We're just going too fast here.
The first time we met with you, you said -- you
talked about running shoes, but you also talked about laser
focus on the issues that matter.
after a three-and-a-half-year investigation, the Department
of Justice ought to be able to provide the detail this
circuit requires with respect to their alleged market
shares, ought to be able to plead the minimum market share
to meet the Fourth Circuit's threshold for monopoly power,
and ought to be able to plead, in a straightforward manner,
And we think, especially
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 6 PageID#
facts as simple as whether any of the federal agency
advisers on -- advertisers on whom they seek relief are
actually direct purchasers entitled to damages.
With the Court's permission, I'd like to first
focus on three issues which -- I guess before turning to the
more comprehensive one, market definition, which would
result in the complaint's dismissal completely, but we have
three points that, while not complete dismissals, I think
are very clear on the face of the complaint, very different
than the Southern District of New York cases, and would
significantly narrow the issues in the case.
The first I mentioned earlier is the complaint's
admission that Google's market share in AdX -- this is the
ad exchange, the kind of middle part of the ad tech stack --
is only around 50 percent, nowhere close to the Fourth
Circuit's 70 percent threshold for monopoly power.
THE COURT:
Well, you know, I think you
overemphasize this bright-line or threshold matter.
I agree with you that the case law strongly
suggests that it's unusual to find illegal monopolization if
there's not at least a 70 percent, if not more, market
share.
At the same time, however, as I've looked at that
issue, and New York also looked at that similar type of
argument, these types of complex cases look at multiple
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 7 PageID#
factors.
share that could result in a finding of illegal monopolistic
activity, such as, you know, really rapacious conduct with
rivals, destruction of rivals, for no good economic reason.
And so there are factors other than simply market
And, I mean, there are allegations in this
complaint that Google went out and specifically targeted and
purchased rivals and then cannot show that there was a good
economic reason for doing so other than to basically
eliminate the rival.
Again, whether the evidence will support that at
the end of the day is a totally different matter.
terms of pleading, you know, you've got over 300 paragraphs.
It's a horrendously long complaint.
disagree with you that probably a good portion of that
complaint frankly could be cut.
this would be a robust motion to dismiss in this case, I
think that the plaintiff, you know, loaded up that complaint
with an awful lot of detail.
But in
And I certainly don't
But obviously knowing that
And so the argument about the market share, I
don't believe that the case law actually supports the
argument that you've made.
which I think is sufficiently fact-specific, that it would
not be appropriate to resolve it on a motion to dismiss.
MR. MAHR:
And certainly this is an issue
If I can make just two points in
response, and then I'll move to my next point, having heard
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you.
THE COURT:
MR. MAHR:
All right.
The first point is, I think when you
talk about -- there are two elements here, it's monopoly
power --
THE COURT:
MR. MAHR:
Right.
-- and then conduct.
And when you
refer to rapacious conduct, which we obviously contest,
that's a separate element.
And part of what the plaintiffs
do, they try to conflate the two elements.
power is a separate element.
But monopoly
With respect to monopoly power, I agree,
70 percent is not like an absolute barrier, but there's no
case that I'm aware of where these other factors have done
the work to get a share of 50 percent up to 70 percent.
That's kind of something that when it's close, these other
factors can come in and affect how you look at the market
share, but to make that kind of jump, there's no case out
there that does it.
Moreover, the points that they try to say are
additional factors are like super competitive pricing.
But
that's exactly the kind of conclusory statement that Twombly
said, it's not enough.
pricing when other places in the complaint, like
paragraph 224, Google -- they say Google's AdX price is only
You just can't say super competitive
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one of the highest in the industry.
One of the highest in the industry is not super
competitive monopolistic prices above everybody else; it
just means some have high prices, some have lower prices,
and Google has the higher prices.
with that.
So they can't do the work
The same on this point they stress about we've had
a 20 percent price on AdX for 15 years.
itself said we started that 20 percent price in 2008 when
AdX, the ad exchange, was nascent.
nothing, we charge 20 percent.
Well, the complaint
So when you have
The fact that in 15 years of allegedly unlawful
conduct, that -- and alleged going from a nascent to a
50 percent market share, Google hasn't been able to raise
price once.
power; not the existence of it.
That's an indication of the lack of market
I appreciate you --
THE COURT:
MR. MAHR:
The other two points -- or the second point is
All right.
-- giving me time on that.
plaintiffs' attempt to re-examine two transactions the
federal government cleared well over a decade ago.
THE COURT:
And they admit in the complaint -- at
least from the Department of Justice's standpoint, they
admit mea culpa that they made a mistake.
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You know, I don't think that argument -- it may --
whether or not it's permitted during the trial, should we
have a trial, whether I would allow that to come in, but the
fact that a decision is made at one point, and then as
things evolve problems occur, I don't think that makes a big
difference.
at the time the Department of Justice approved those two
purchases or mergers, the evidence was different than it is
now.
I mean, at the time, what, the FTC and the --
So, looking back, I mean, the Government has
admitted that the Department of Justice made a mistake in
letting you purchase AdMeld.
they were talking about.
MR. MAHR:
I think that's the one that
Yeah.
Well, take DoubleClick back to 2008.
What they're doing is extending discovery back from 2013 to
2016, which is really where the crux of the anticompetitive
conduct they allege took place.
discovery back to 2008 to ask you essentially to re-examine
transactions that were found lawful after an eight-month
investigation in the case of DoubleClick, and a six-month
investigation in the case of AdMeld.
eight-month and six-month, we're going to go back and look
at them 15 years later when we don't have contemporaneous
documents, we don't have a contemporaneous understanding of
the market then.
And they're stretching
And so this
That's what those mergers would be judged
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on then.
There's no problem to say they've set the stage.
Of course.
analogy that you buy a fancy sports car, you're setting the
stage for maybe reckless driving and speeding years later,
but that doesn't make the purchase of the sports car
unlawful.
And they haven't explained why -- the transactions
themselves.
And we give a very simple, but I think very apt,
It's still the reckless driving that's unlawful.
They haven't alleged it.
They just said it's
table setting and setting the stage.
We think, on that basis, that there's no reason to
go back -- to have the parties go back and try to redo what
the Department of Justice and the Federal Trade Commission
already comprehensively addressed 15 years ago.
THE COURT:
MR. MAHR:
All right.
The third point, the Illinois Brick
indirect purchaser bar.
The plaintiffs do not contest that the indirect
purchaser bar applies to the federal government, and yet all
they said for their damages claims is in paragraph 278.
"United States departments and agencies, including ones in
this district such as the Army, purchased open web display
advertising using Google and non-Google ad tech tools."
That is not an allegation that they directly purchased
anything from Google.
And they don't even say they
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 12 PageID#
purchased from Google, but just that the display advertising
uses those tools.
We think that to -- you know, we think this
matters, because, as you obviously know, lawyers preparing a
case for a jury compared to preparing a case for an
experienced sophisticated federal judge, it's a very
different question, especially in cases as complex as this
and an injury as complex as this.
can't make a simple, straightforward allegation that we
And the fact that they
directly purchased X from Google, I think is really telling.
They obviously know this is a requirement for damages; it's
black-letter antitrust law, and, yet, they haven't said it.
Now, they also admit -- and this is important --
that you -- that the key for Illinois Brick is to look at
every stage of the ad tech products.
an advertiser -- and that's what the federal government
agency advertisers are, advertisers.
purchase anything from publisher ad servers.
advertisers don't publish -- purchase anything from ad
exchanges.
And so there can be no direct purchaser relationship with
those two parts of the stack at all.
Well, there is no way
Advertisers don't
And
They are on the other end of the ad tech stack.
And when you get to the publisher -- the buyer's
side, the advertising side, the advertising tools in the ad
tech stack, they don't do any better there.
Theoretically,
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 13 PageID#
an advertiser could work -- purchase directly from a
demand-side platform, but there's no allegations here of
monopolization in demand-side platforms, so that's out.
And that leaves them with ad networks.
And,
again, theoretically, they could purchase directly from ad
networks, but they haven't said.
a large part of our five-and-a-half months with these eight
federal agency advertisers finding out what they bought,
from whom, when.
That requires us to spend
What kind of relationship did they have.
Were they direct purchasers.
between.
ownership of the inventory and then resell it, or were
they -- it's a mystery, and they could have easily pled it,
and they failed to.
Was there an ad agency in
Did the ad network from which they purchased take
So, again, we think this matters, we think this is
a way of narrowing the case, and it's an important ground
for dismissal.
THE COURT:
MR. MAHR:
All right.
With that, I'll turn to market
definition.
Now, this is obviously -- there's a lot of
complexity, three market definitions.
They have put a lot
of adjectives in front of their market definition, and there
are different reasons for each of the markets as to why
those aren't valid.
But I'm going to try to focus on just a
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 14 PageID#
few of the fundamental cross-cutting flaws in their market
definitions.
And, first, we recognize that, more times than
not, market definition is a fact issue.
change the fact that the Fourth Circuit has recognized
dismissal is appropriate when the complaint fails to even
attempt to plausibly explain why a proposed market should be
limited in a particular way.
But that doesn't
And if that weren't enough, and if Twombly's
general direction for specific facts and conclusions were
not enough, the plaintiffs in this case had the benefit of
the first motion to dismiss in the ad tech constellation of
the case -- the cases, and that was a ruling by
Judge Freeman.
clearer that the market alleged in that case, which was
online display advertising services on the open web, like
here, particularly concerned her because they excluded
social media advertising and direct negotiations.
ruled that if plaintiffs wanted to make -- to exclude those
obvious substitutes -- and there might be a basis to exclude
them, but they have to plead under Twombly additional facts
that indicate that the categories accepted from the
identified market are not economic substitutes.
And Judge Freeman could not have been
They haven't even tried here.
And she
They --
Judge Labson so -- Labson Freeman also specifically
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admonished plaintiffs in that case that it is not sufficient
for plaintiffs to allege, for example, that close-ended
advertising services like Facebook, Amazon, Twitter, we can
add TikTok and Snapchat to that, are not reasonable
substitutes by just saying it's so.
explain, with factual allegations, not conclusions, why it's
so.
Instead, they have to
I think the plaintiffs completely ignored -- and I
know they're not bound by it, but they completely ignored
that these obvious substitutes need to be -- you have to
explain at least why they -- you don't believe that they're
in the market.
And one reason we didn't challenge market
definition in the Texas case in the Southern District of
New York is there were twice as many paragraphs devoted to
market definition that made those explanations.
agree with them, we think they're absolutely wrong, but we
can't fight the allegations at a motion to dismiss stage.
We can fight, under Twombly, the complete lack of any
allegations, is what we have here.
Just to take a couple of these.
We don't
You know, they
exclude web -- they tried to limit it to web, that's one of
the adjectives.
advertising on mobile apps as opposed to the Internet.
That excludes advertisers that placed
So take the New York Times.
If you're a New York
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Times reader, you can access the New York Times either by
doing a search for it.
could do a search for it and go onto the New York Times web
page and read the New York Times there.
app on your phone, which is also the New York Times, and you
can read it through the app.
If you can find a search engine, you
Or you can have the
If an advertiser is looking to seek a New York
Times reader, there's no explanation in the complaint as to
why they would find advertising on the Internet site any
different than advertising on the app.
all.
they get a free pass into discovery.
Same with open.
No explanation at
We're just supposed to take their word for it, and
That one little adjective,
"open," limits, very transparently -- excludes, very
transparently, Facebook, TikTok, Amazon, the very companies
Judge Freeman said if you're going to take this market
definition seriously, you've got to at least explain why
these people aren't included, and they ignored it all.
All of these are addressed in basically a
footnote, Footnote 4, where they lay out all the different
competitive constraints and all these other methods of
digital advertising, and then say, but our focus is open web
advertising.
focus; markets are defined by reasonable substitutes.
again, the law is clear that if you're going to exclude
Markets aren't defined by the plaintiffs'
And,
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 17 PageID#
reasonable substitutes, you need to explain, in facts, not
conclusions, why.
So those are my main points, Your Honor.
could -- I could talk more, but I think that's --
THE COURT:
I think you've done a good job of
focusing on what are the key points.
I
So now we'll give Ms. Wood a chance to respond.
I
assume you're going to be the main spokesperson.
MS. WOOD:
Actually, Mr. Guarnera is going to
respond, Your Honor.
THE COURT:
Start with the last question first, because that,
All right.
That's fine.
obviously, is the absolutely core central issue, and that is
the market.
MR. GUARNERA:
The market definition issue, Your
Honor?
THE COURT:
Yes.
MR. GUARNERA:
So Google's arguments on market definition fail
Yes, Your Honor.
because we've taken the three markets -- the three markets
at issue as they exist in the real world, as they are
recognized by industry participants, including Google's own
employees and Google's own internal documents, as we cite in
the complaint.
stack exactly as we've pleaded it, Your Honor.
Figure 1, for example, lays out the ad tech
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 18 PageID#
Google questions and quibbles with the precise
degree of substitution that might be possible in our
markets, but that's a fact-intensive question that does not
approach the kind of glaring deficiency that the Fourth
Circuit has said would be needed to grant a motion to
dismiss on market definition.
Google referenced mobile advertising, for example,
as an alternative form of digital advertising, but Google
has a different product to -- Google, itself, uses a
different product to sell -- to sell advertising on mobile
apps, AdMob, as we allege.
And, Facebook, Your Honor, we -- firstly, it's
important to note that all of Google's arguments about the
markets assume the advertiser perspective.
exchange, for example, it has to attract and appeal to both
publishers and advertisers.
that publishers, for example -- it would be an alternative
for a publisher to use Facebook's ad tech products, because,
of course, Facebook's products are just for Facebook.
publisher has no alternative to turn to if a monopolist were
to raise the cost of a publisher ad server or an ad
exchange.
But here, the ad
And Google doesn't even allege
A
We also allege that there are differences from an
advertiser's perspective with respect to social media, for
example.
Such as the fact that social media has different
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 19 PageID#
reach.
Again, if you are buying into Facebook, that means
your ad will appear on Facebook as opposed to the thousands
upon thousands of other websites that are on the Internet,
which allow opportunities for advertisers to reach -- to
reach potential customers in a broad range of settings,
including, you know -- again, on different types of
websites, at different times, depending on, for example, if
a customer just visited an advertiser's own website and the
advertiser wants to target that user again in the near term.
If that user is not on Facebook, then the advertiser won't
be able to reach them at the time that doing so would be
most valuable to the advertiser.
Google also mentioned Judge Freeman's opinion in
the Northern District of California.
now a part of the broader MDL in front of Judge Castel.
the key distinction in that case, from our point of view,
Your Honor, is that the advertiser plaintiffs in that case
alleged an online display ad services on the open web
market.
products in one market.
to replead, it appears that she essentially asked them to
replead more facts about the specific products that the
advertisers used in the ad tech stack.
products that we've already alleged.
Obviously that case is
And
In other words, they combined all of the ad tech
And when Judge Freeman asked them
In other words, the
Again, Your Honor, all of Google's market
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 20 PageID#
definition arguments are ultimately fact-specific questions
that are premature on a motion to dismiss.
THE COURT:
All right.
Then he raised several
other issues of the direct purchase argument.
MR. GUARNERA:
Yes, Your Honor.
We've alleged that the federal agency advertisers
purchased display ads using Google's tools.
allegation is sufficient because federal agency advertisers
are, therefore, direct purchasers of Google services and
are, therefore, entitled to recover the overcharges that
Google imposed on them as a result of its monopolies.
And this
In other words, the 20 percent take rate, the
super competitive take rate that Google charges for its ad
exchange, for example, that's money that is paid by the
advertiser.
It's taken out of the advertiser's payments.
Apple v. Pepper, Your Honor, provides a similar
situation where there was a platform, in this case, Apple,
that was charging an allegedly super competitive take rate,
and the buyers on that platform were entitled, according to
the Supreme Court, to seek damages as direct purchasers
because they were the ones who were paying the overcharge.
And it's -- it's the same situation here, Your Honor.
THE COURT:
Well, I think the Supreme Court
bricklayer case, which is the one everybody cites for this
concept of direct versus indirect purchaser, the facts in
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that case are so different from what they are here.
Again, the Court was properly concerned about the
multiple layers between the anticompetitive conduct, I guess
the manufacturer of the bricks themselves, and the ultimate
purchaser.
would sell to the general contractor, who then would sell to
the State of Illinois.
does Illinois sue?
they pay their general contractor at an inflated rate, but
That there was a masonry contractor, who then
And the problem is, you know, who
I mean, yes, Illinois is being -- when
that inflation is due two or three steps back.
This is, in my view, a completely different
situation.
Google, you know, ad server or Google exchange or Google
publisher, it's still all Google.
As you said, you pay Google.
Whether it's
I think the only argument that defendants might
have down the road -- which, again, is a fact situation --
is if you all had used a real middleman, then there might be
a problem, or two middlemen.
require discovery.
difficult.
now.
and a couple of quickie interrogatories should probably
flesh that out rather quickly.
So, unfortunately, that will
But, I mean, discovery shouldn't be that
You ought to have that data at your hands right
I would think probably almost a request for admissions
So I don't think the direct/indirect issue has any
real clout on this one.
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 22 PageID#
Go ahead.
ones then.
Let me hear you respond to the other
Market share.
MR. GUARNERA:
Yes, Your Honor.
As Your Honor indicated, we completely agree that
the Supreme Court has been explicit that there is no
50 percent cutoff.
Fourth Circuit cases proves that the Fourth Circuit doesn't
think there's a hard cutoff either.
And I think a careful reading of the
Rather, when a plaintiff has alleged direct
evidence of the ability to control price and exclude
competitors, that's the ultimate question.
functional test of whether a defendant has monopoly power,
and we've pleaded both here.
That is the
Google claimed that our allegations that Google
charges super competitive prices are conclusory, that is
certainly not true.
paragraphs 149, 196, 224, 230, 266, where, for example, we
allege that real-time bidding technology has become largely
commoditized.
become commoditized.
we describe AdMeld which charged a 7 percent fee to provide
similar real-time bidding technology.
again, are more than sufficient on a motion to dismiss.
I would direct the Court to
In fact, Google itself is concerned that it's
And, additionally, paragraph 149 where
These allegations,
And, similarly, we also allege extensive examples
of how Google has used -- has rigged auctions, has excluded
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 23 PageID#
competitors in order to, again, control its monopoly
positions in each of these markets.
the various forms of conduct that we have alleged are
unlawful, show direct evidence that Google has been able to
exclude competitors from the ad exchange market.
THE COURT:
All right.
And that, again -- all
And the last issue is the
use of -- or reference in the complaint to the acquisition
of DoubleClick and AdMeld, which were events that occurred,
you know, quite a few years ago in a different context,
frankly.
The Internet was, you know, different then than it
is now.
now.
to trial, you intend to focus on those two acts.
they occurred.
approved them, did not see an anticompetitive problem, and
things changed.
The online commerce was different then than it is
And so I am curious as to how, if the case were to go
I mean,
The Government, at the time they occurred,
I sort of agree on this one with defense counsel,
that there shouldn't be a whole lot of time spent, other
than this is a historical event, it sort of led us to where
we are today.
Do you expect to do more than that with those two
events?
MR. GUARNERA:
Firstly, I -- it's not -- when an agency reviews
I think so, Your Honor.
an acquisition, it does not approve the acquisition.
It's
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 24 PageID#
not a blank check to get out of jail free on any subsequent
use of the acquired asset.
The question here in a Section 2 case allows the
Court, allows the jury to look back and to see what Google
has actually done with the assets that it acquired.
is just at war with the Supreme Court's precedent on this
point to say that the use of an acquired asset, after it's
been acquired, is not actionable under Section 2.
Google
There are numerous Supreme Court decisions that
look back on acquisitions as evidence of a course of
anticompetitive conduct, as enabling anticompetitive
conduct.
Grinnell.
occurred, acquisitions that had happened in the past, but
were still considered relevant to the -- to causes of
actions, to anticompetitive conduct subsequently.
The 1957 du Pont case, ITT Continental Baking,
All these cases involve, again, mergers that had
With respect to the significance of the agency
review, Your Honor, just a few years ago, the Fourth Circuit
in Steves & Sons v. Jeld-Wen specifically agreed with the
district court who had prohibited the jury from hearing any
evidence that the Department of Justice had investigated the
merger previously because it was considered irrelevant.
And the HSR Act, which permits the agencies to
conduct premerger review, has a provision that specifically
says that the agencies, in fact, anyone, can challenge a
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 25 PageID#
merger at any time after it closes, even if the agency
reviewed it prior to closing.
And in this case, Your Honor, the DoubleClick and
AdMeld conduct itself had significant effects on Google's
ability to control and maintain monopolies in these three
markets.
On AdMeld, for example, AdMeld offered a competing
technology that would have undermined the power of AdX, and,
therefore, given publishers the ability to substitute other
technologies that would allow broad real-time bidding for
Google's otherwise must-have ad exchange.
acquired AdMeld, it shut down that competing technology,
taking it out of the market, taking away a nascent
competitor that publishers could have turned to as an
alternative to Google's monolithic control of the ad tech
stack.
And, similarly, DoubleClick.
And when Google
Google, which
already had incredible power on the ad network side of the
stack, acquired DoubleClick, which had 60 percent share on
the publisher ad server side, as well as an ad exchange, and
then, through that acquisition, had, again, a leading
position across the entire ad tech stack, which Google
proceeded to reinforce and cement by making Google ads
demand, advertiser demand, exclusive to Google's own
products.
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 26 PageID#
So we think that both of these forms of conduct
are important to the overall case and do play an important
role, both as a history of how Google came to be the
dominant player that it is, but also because the
acquisitions themselves were anticompetitive.
THE COURT:
MR. GUARNERA:
THE COURT:
Thank you.
Thank you, Your Honor.
All right.
Mr. Mahr, do you want to
respond to any of that?
All right.
MR. MAHR:
I do, Your Honor.
I'll be brief, but
I'll take them in reverse order.
The last point, that's exactly why we provided you
with the New York Meta decision that was handed down
yesterday by the D.C. circuit, in which they make clear that
past transactions don't become part of the course of conduct
just because there was allegedly later anticompetitive
conduct.
If they have an anticompetitive conduct case, they
can bring that -- they're going to bring that
anticompetitive conduct case.
treating the original mergers as an independently
anticompetitive act as part of the course of conduct versus
just a stage-setting fact is significant here because it
requires us to go back five extra years in an already
15-year scope of discovery just to try to redo what the
But the difference in
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 27 PageID#
federal government did comprehensively 15 years ago.
On the monopoly power, I heard something about
real-time bidding being commoditized.
doesn't say anything about monopoly power.
Google has had the ad exchange.
been able to raise its price from 20 percent.
15 years, it only has a 50 percent market share, which means
it loses one out of every two, and after 15 years, its
prices are only among the higher prices in the market,
according to paragraph 224.
But, again, that
Fifteen years
Fifteen years it hasn't
After
That is not monopoly power.
In terms of the Illinois Brick argument, I
understand that in the Brick case, one company creates the
materials for the bricks, then makes the bricks, and then
sells the bricks.
whole time, and that's why Illinois Brick only looked at the
direct purchaser in that case.
It's all the same company controlling the
But, in this case, it's not an ineluctable path
from publisher to advertisers.
Among other things, we know
that there's only a 50 percent market share at that ad
exchange level.
going through things other than Google's ad exchange.
it's not like the Illinois Brick facts where they're all
going through the same actor, but, instead, 50 percent are
going through ad exchange.
advertiser tools, they don't even seek monopoly power, even
So half of the sales from any publisher are
So
And then when you get to the
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 28 PageID#
under their strained and narrow market definitions for
demand-side platforms, because there's so many of them.
there's just not this direct line that was present in
Illinois Brick.
So
Finally, on the market definition, I hear that --
criticism that we are assuming the advertising perspective.
First, the DOJ comes here to you on behalf of the United
States as advertisers.
advertisers.
They're the federal agency
And then they say, well, don't look at the
advertiser perspective, but that is the perspective that
they come to you as.
And, again, we think after a three-and-a-half-year
investigation, with Judge Freeman specifically saying that
if you're going to talk about these markets, you've got to
be able to deal with these obvious substitutes that are
throughout the complaint -- mentioned throughout the
complaint.
something else.
You can't just say, we've decided to focus on
They've come to the rocket docket, they want to
move faster than any other court in the country moves, they
want to leap in front of the Southern District of New York
cases, they had a three-and-a-half year investigation, and
we think they need to be held to a higher standard and not
given a pass on a motion to dismiss.
THE COURT:
All right.
Well, I appreciate the
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 29 PageID#
argument, and I recognize that the discovery burden is
heavy, but I know that Judge Anderson is working with you to
make sure that, Number 1, their discovery requests are
appropriate; and, Number 2, that the responses are coming in
promptly and appropriately.
But I've looked carefully at this case, and, as I
said, it's a very, very long and technical complaint.
At
this point, though, the Court must draw all inferences in
favor of the plaintiff, even though it's an antitrust case,
and I am satisfied that there are enough specific
allegations, including various quotes from people within
Google, you know, referring to some competitors as
presenting existential threats.
Now, again, a business has a right, in our, you
know, competitive capitalistic society, to try to protect
itself and to try to maximize profits.
economic system.
You know, that's our
But, at the same time -- this is, again -- as
almost all cases that ultimately wind up in this court, it's
a balance.
innovation and reward people and companies that are able to
come up with new ways of doing things, to reward them by
making a good profit.
There's a balance between trying to encourage
At the same time, sometimes programs that begin
completely benignly, perfectly appropriately, we want to
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 30 PageID#
maximize our profit.
of the way things evolve, at some point, it goes over the
line, and it now becomes so successful that it's basically
stifling innovation and competition, and the market is
closing down.
Nothing wrong with that.
But because
I mean, that's the essence of antitrust law is to
try to keep -- you know, nothing is static, to try to keep
the system working by recognizing that, at certain points,
some companies may get too big for their own good, they're
self-imploding, or the technology may become so dominant
that it's just crushing all other elements where there can
be innovation.
the plaintiff that has the burden of proof can show that,
that's another question.
And whether or not, at the end of the day,
Obviously whether the market has been properly
described here or defined here is a very legitimate
question, but I'm still satisfied, at this point, it's been
adequately alleged; and B, that it's fact-specific.
whether these other markets are equivalent is going to be a
question of fact, in my view; it's not a question of law.
And
Again, on the direct/indirect, there -- I think,
at least as the allegations are, there's a very strong case
that this was a direct purchase because of the nature of how
the Google system is set up.
any, result from that is a completely different question.
Again, how much damages, if
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649Page 31 PageID#
And so, I'm satisfied.
Now, some things, like the degree to which
discussion about DoubleClick and AdMeld and the way in which
they were first -- when it thought about in terms of, you
know, Google's planning about acquiring them and whether or
not back then it had an improper anticompetitive intent, I
don't know what the evidence is going to show.
limine can address how, if at all, that is going to be
addressed during a trial, should we get to that point.
Motions in
But, at this point, I'm going to deny the
defendant's motion to dismiss.
complaint read as we must with the deference given to the
allegations are sufficiently specific to support all five of
the claims, which are three specific claims as to each of
these three markets, the fourth claim being the tying
allegation, and the fifth claim being the one for direct
damages to the federal plaintiff.
I'm finding that the
So I'm denying the motion, and I hope that you all
can continue to work well on the discovery issues.
We'll recess court for the day.
(Proceedings adjourned at 10:40 a.m.)
---------------------------------I certify that the foregoing is a true and accurate
Case 1:23-cv-00108-LMB-JFA Document 164 Filed 04/28/23 Page 1 of 31 PageID# 1217
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UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF VIRGINIA
ALEXANDRIA DIVISION
---------------------------x
UNITED STATES, et al.,
:
:
Plaintiffs,
:
versus
:
:
GOOGLE LLC,
:
:
Defendant.
:
---------------------------x
Civil Action No.:
1:23-cv-108
Friday, April 28, 2023
Alexandria, Virginia
Pages 1 - 31
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The above-entitled motion to dismiss was heard
before the Honorable Leonie M. Brinkema, United States
District Judge. This proceeding commenced at 10:00 a.m.
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A P P E A R A N C E S:
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FOR THE PLAINTIFFS:
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GERARD MENE, ESQUIRE
OFFICE OF THE UNITED STATES ATTORNEY
2100 Jamieson Avenue
Alexandria, Virginia 22314
(703) 299-3700
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JULIA WOOD, ESQUIRE
DANIEL GUARNERA, ESQUIRE
AARON TEITELBAUM, ESQUIRE
UNITED STATES DEPARTMENT OF JUSTICE
ANTITRUST DIVISION
450 Fifth Street, NW
Washington, D.C. 20530
(202) 894-4266
TYLER HENRY, ESQUIRE
OFFICE OF THE ATTORNEY GENERAL
OFFICE OF THE SOLICITOR GENERAL
202 North Ninth Street
Richmond, Virginia 23219
(804) 786-7704
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A P P E A R A N C E S:
FOR THE DEFENDANT:
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CRAIG REILLY, ESQUIRE
LAW OFFICE OF CRAIG C. REILLY
209 Madison Street
Suite 501
Alexandria, Virginia 22314
(703) 549-5354
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ERIC MAHR, ESQUIRE
SARA SALEM, ESQUIRE
FRESHFIELDS BRUCKHAUS DERINGER, LLP
700 13th Street, NW
10th Floor
Washington, D.C. 20005
(202) 777-4500
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DANIEL BITTON, ESQUIRE
AXINN, VELTROP & HARKRIDER LLP
55 Second Street
Suite 200
San Francisco, California 94105
(415) 490-2000
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COURT REPORTER:
STEPHANIE M. AUSTIN, RPR, CRR
Official Court Reporter
United States District Court
401 Courthouse Square
Alexandria, Virginia 22314
(571) 298-1649
S.AustinReporting@gmail.com
COMPUTERIZED TRANSCRIPTION OF STENOGRAPHIC NOTES
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P R O C E E D I N G S
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THE DEPUTY CLERK:
States of America, et al. versus Google LLC.
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Would counsel please note their appearances for
the record.
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Civil Action 23-108, United
MR. MENE:
Good morning, Your Honor.
Gerard Mene
with the U.S. Attorney's Office.
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THE COURT:
9
MS. WOOD:
Good morning.
Good morning, Your Honor.
Julia Tarver
10
Wood on behalf of the United States.
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colleagues, Aaron Teitelbaum and Mr. Dan Guarnera.
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MR. TEITELBAUM:
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THE COURT:
14
With me today are my
Good morning, Your Honor.
And I recognize we probably have a
fair number of other attorneys in the courtroom.
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MS. WOOD:
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THE COURT:
We do, Your Honor.
I'm only going to hear from the main
17
spokespeople which are from the federal government and the
18
Commonwealth of Virginia.
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MS. WOOD:
20
THE COURT:
All right.
MR. HENRY:
Good morning, Your Honor.
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Yes.
Is there someone here from
Virginia?
Tyler Henry
23
from the Office of the Attorney General of Virginia on
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behalf of the plaintiff states.
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THE COURT:
Good morning.
All right.
3
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And for the defense.
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MR. REILLY:
Good morning, Your Honor.
3
Craig Reilly here for the defendant Google, together with my
4
co-counsel Eric Mahr, Sara Salem and Daniel Bitton.
5
with the Court's permission, Mr. Mahr will address the
6
Court.
7
8
THE COURT:
Very good.
And
Thank you, Mr. Reilly.
Good morning.
9
All right.
10
defendant's motion to dismiss.
11
well-briefed motion.
12
papers, but I'm going to give each side a brief opportunity
13
to focus on any of the highlights that they really want to
14
stress today.
15
This is before the Court on the
Obviously this has been a
So I had a chance to go over the
And Mr. Mahr, you, I believe, filed early this
16
morning some new authority.
I don't know if the plaintiff
17
had a chance yet to respond to that.
18
if they feel they need to respond, as well; all right?
So they should also,
19
MR. MAHR:
20
THE COURT:
The podium is yours.
21
MR. MAHR:
Thank you, Your Honor.
22
Eric Mahr on behalf of Google.
23
Yes, Your Honor.
And again,
We appreciate your time, especially since Google's
24
motion to dismiss is really directed to the critical
25
gatekeeping function that the district court plays in all
4
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cases, but we think especially in complex antitrust cases,
2
and especially critical as that function in a district where
3
we obviously move so quickly.
4
different standard for antitrust cases under 12(b)(6), but
5
the Supreme Court in Twombly made clear that in general and
6
particularly in antitrust cases, a district court must
7
retain the power to insist on some specificity in pleading
8
before allowing a potentially massive factual controversy to
9
proceed.
10
Certainly there's not a
In words that directly address what we think is
11
the let's-just-wait-and-see-what-happens-in-discovery
12
approach that the plaintiffs are asking you to take in this
13
case, the Supreme Court in Twombly went on to say:
14
answer to say that a claim just shy of a plausible
15
entitlement to relief can, if groundless, be weeded out
16
early in discovery."
17
"It's no
We're just going too fast here.
The first time we met with you, you said -- you
18
talked about running shoes, but you also talked about laser
19
focus on the issues that matter.
20
after a three-and-a-half-year investigation, the Department
21
of Justice ought to be able to provide the detail this
22
circuit requires with respect to their alleged market
23
shares, ought to be able to plead the minimum market share
24
to meet the Fourth Circuit's threshold for monopoly power,
25
and ought to be able to plead, in a straightforward manner,
5
And we think, especially
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facts as simple as whether any of the federal agency
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advisers on -- advertisers on whom they seek relief are
3
actually direct purchasers entitled to damages.
4
With the Court's permission, I'd like to first
5
focus on three issues which -- I guess before turning to the
6
more comprehensive one, market definition, which would
7
result in the complaint's dismissal completely, but we have
8
three points that, while not complete dismissals, I think
9
are very clear on the face of the complaint, very different
10
than the Southern District of New York cases, and would
11
significantly narrow the issues in the case.
12
The first I mentioned earlier is the complaint's
13
admission that Google's market share in AdX -- this is the
14
ad exchange, the kind of middle part of the ad tech stack --
15
is only around 50 percent, nowhere close to the Fourth
16
Circuit's 70 percent threshold for monopoly power.
17
18
THE COURT:
Well, you know, I think you
overemphasize this bright-line or threshold matter.
19
I agree with you that the case law strongly
20
suggests that it's unusual to find illegal monopolization if
21
there's not at least a 70 percent, if not more, market
22
share.
23
At the same time, however, as I've looked at that
24
issue, and New York also looked at that similar type of
25
argument, these types of complex cases look at multiple
6
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factors.
2
share that could result in a finding of illegal monopolistic
3
activity, such as, you know, really rapacious conduct with
4
rivals, destruction of rivals, for no good economic reason.
5
And so there are factors other than simply market
And, I mean, there are allegations in this
6
complaint that Google went out and specifically targeted and
7
purchased rivals and then cannot show that there was a good
8
economic reason for doing so other than to basically
9
eliminate the rival.
10
Again, whether the evidence will support that at
11
the end of the day is a totally different matter.
12
terms of pleading, you know, you've got over 300 paragraphs.
13
It's a horrendously long complaint.
14
disagree with you that probably a good portion of that
15
complaint frankly could be cut.
16
this would be a robust motion to dismiss in this case, I
17
think that the plaintiff, you know, loaded up that complaint
18
with an awful lot of detail.
19
But in
And I certainly don't
But obviously knowing that
And so the argument about the market share, I
20
don't believe that the case law actually supports the
21
argument that you've made.
22
which I think is sufficiently fact-specific, that it would
23
not be appropriate to resolve it on a motion to dismiss.
24
25
MR. MAHR:
And certainly this is an issue
If I can make just two points in
response, and then I'll move to my next point, having heard
7
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you.
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THE COURT:
3
MR. MAHR:
All right.
The first point is, I think when you
4
talk about -- there are two elements here, it's monopoly
5
power --
6
THE COURT:
7
MR. MAHR:
Right.
-- and then conduct.
And when you
8
refer to rapacious conduct, which we obviously contest,
9
that's a separate element.
And part of what the plaintiffs
10
do, they try to conflate the two elements.
11
power is a separate element.
12
But monopoly
With respect to monopoly power, I agree,
13
70 percent is not like an absolute barrier, but there's no
14
case that I'm aware of where these other factors have done
15
the work to get a share of 50 percent up to 70 percent.
16
That's kind of something that when it's close, these other
17
factors can come in and affect how you look at the market
18
share, but to make that kind of jump, there's no case out
19
there that does it.
20
Moreover, the points that they try to say are
21
additional factors are like super competitive pricing.
But
22
that's exactly the kind of conclusory statement that Twombly
23
said, it's not enough.
24
pricing when other places in the complaint, like
25
paragraph 224, Google -- they say Google's AdX price is only
8
You just can't say super competitive
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2
one of the highest in the industry.
One of the highest in the industry is not super
3
competitive monopolistic prices above everybody else; it
4
just means some have high prices, some have lower prices,
5
and Google has the higher prices.
6
with that.
7
So they can't do the work
The same on this point they stress about we've had
8
a 20 percent price on AdX for 15 years.
9
itself said we started that 20 percent price in 2008 when
10
AdX, the ad exchange, was nascent.
11
nothing, we charge 20 percent.
12
Well, the complaint
So when you have
The fact that in 15 years of allegedly unlawful
13
conduct, that -- and alleged going from a nascent to a
14
50 percent market share, Google hasn't been able to raise
15
price once.
16
power; not the existence of it.
That's an indication of the lack of market
17
I appreciate you --
18
THE COURT:
19
MR. MAHR:
20
The other two points -- or the second point is
All right.
-- giving me time on that.
21
plaintiffs' attempt to re-examine two transactions the
22
federal government cleared well over a decade ago.
23
THE COURT:
And they admit in the complaint -- at
24
least from the Department of Justice's standpoint, they
25
admit mea culpa that they made a mistake.
9
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You know, I don't think that argument -- it may --
2
whether or not it's permitted during the trial, should we
3
have a trial, whether I would allow that to come in, but the
4
fact that a decision is made at one point, and then as
5
things evolve problems occur, I don't think that makes a big
6
difference.
7
at the time the Department of Justice approved those two
8
purchases or mergers, the evidence was different than it is
9
now.
10
I mean, at the time, what, the FTC and the --
So, looking back, I mean, the Government has
11
admitted that the Department of Justice made a mistake in
12
letting you purchase AdMeld.
13
they were talking about.
14
MR. MAHR:
I think that's the one that
Yeah.
Well, take DoubleClick back to 2008.
15
What they're doing is extending discovery back from 2013 to
16
2016, which is really where the crux of the anticompetitive
17
conduct they allege took place.
18
discovery back to 2008 to ask you essentially to re-examine
19
transactions that were found lawful after an eight-month
20
investigation in the case of DoubleClick, and a six-month
21
investigation in the case of AdMeld.
22
eight-month and six-month, we're going to go back and look
23
at them 15 years later when we don't have contemporaneous
24
documents, we don't have a contemporaneous understanding of
25
the market then.
And they're stretching
And so this
That's what those mergers would be judged
10
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on then.
2
There's no problem to say they've set the stage.
3
Of course.
4
analogy that you buy a fancy sports car, you're setting the
5
stage for maybe reckless driving and speeding years later,
6
but that doesn't make the purchase of the sports car
7
unlawful.
8
And they haven't explained why -- the transactions
9
themselves.
10
11
And we give a very simple, but I think very apt,
It's still the reckless driving that's unlawful.
They haven't alleged it.
They just said it's
table setting and setting the stage.
We think, on that basis, that there's no reason to
12
go back -- to have the parties go back and try to redo what
13
the Department of Justice and the Federal Trade Commission
14
already comprehensively addressed 15 years ago.
15
THE COURT:
16
MR. MAHR:
17
18
All right.
The third point, the Illinois Brick
indirect purchaser bar.
The plaintiffs do not contest that the indirect
19
purchaser bar applies to the federal government, and yet all
20
they said for their damages claims is in paragraph 278.
21
"United States departments and agencies, including ones in
22
this district such as the Army, purchased open web display
23
advertising using Google and non-Google ad tech tools."
24
That is not an allegation that they directly purchased
25
anything from Google.
And they don't even say they
11
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purchased from Google, but just that the display advertising
2
uses those tools.
3
We think that to -- you know, we think this
4
matters, because, as you obviously know, lawyers preparing a
5
case for a jury compared to preparing a case for an
6
experienced sophisticated federal judge, it's a very
7
different question, especially in cases as complex as this
8
and an injury as complex as this.
9
can't make a simple, straightforward allegation that we
And the fact that they
10
directly purchased X from Google, I think is really telling.
11
They obviously know this is a requirement for damages; it's
12
black-letter antitrust law, and, yet, they haven't said it.
13
Now, they also admit -- and this is important --
14
that you -- that the key for Illinois Brick is to look at
15
every stage of the ad tech products.
16
an advertiser -- and that's what the federal government
17
agency advertisers are, advertisers.
18
purchase anything from publisher ad servers.
19
advertisers don't publish -- purchase anything from ad
20
exchanges.
21
And so there can be no direct purchaser relationship with
22
those two parts of the stack at all.
23
Well, there is no way
Advertisers don't
And
They are on the other end of the ad tech stack.
And when you get to the publisher -- the buyer's
24
side, the advertising side, the advertising tools in the ad
25
tech stack, they don't do any better there.
Theoretically,
12
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an advertiser could work -- purchase directly from a
2
demand-side platform, but there's no allegations here of
3
monopolization in demand-side platforms, so that's out.
4
And that leaves them with ad networks.
And,
5
again, theoretically, they could purchase directly from ad
6
networks, but they haven't said.
7
a large part of our five-and-a-half months with these eight
8
federal agency advertisers finding out what they bought,
9
from whom, when.
That requires us to spend
What kind of relationship did they have.
10
Were they direct purchasers.
11
between.
12
ownership of the inventory and then resell it, or were
13
they -- it's a mystery, and they could have easily pled it,
14
and they failed to.
15
Was there an ad agency in
Did the ad network from which they purchased take
So, again, we think this matters, we think this is
16
a way of narrowing the case, and it's an important ground
17
for dismissal.
18
THE COURT:
19
MR. MAHR:
20
21
All right.
With that, I'll turn to market
definition.
Now, this is obviously -- there's a lot of
22
complexity, three market definitions.
They have put a lot
23
of adjectives in front of their market definition, and there
24
are different reasons for each of the markets as to why
25
those aren't valid.
But I'm going to try to focus on just a
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few of the fundamental cross-cutting flaws in their market
2
definitions.
3
And, first, we recognize that, more times than
4
not, market definition is a fact issue.
5
change the fact that the Fourth Circuit has recognized
6
dismissal is appropriate when the complaint fails to even
7
attempt to plausibly explain why a proposed market should be
8
limited in a particular way.
9
But that doesn't
And if that weren't enough, and if Twombly's
10
general direction for specific facts and conclusions were
11
not enough, the plaintiffs in this case had the benefit of
12
the first motion to dismiss in the ad tech constellation of
13
the case -- the cases, and that was a ruling by
14
Judge Freeman.
15
clearer that the market alleged in that case, which was
16
online display advertising services on the open web, like
17
here, particularly concerned her because they excluded
18
social media advertising and direct negotiations.
19
ruled that if plaintiffs wanted to make -- to exclude those
20
obvious substitutes -- and there might be a basis to exclude
21
them, but they have to plead under Twombly additional facts
22
that indicate that the categories accepted from the
23
identified market are not economic substitutes.
24
25
And Judge Freeman could not have been
They haven't even tried here.
And she
They --
Judge Labson so -- Labson Freeman also specifically
14
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admonished plaintiffs in that case that it is not sufficient
2
for plaintiffs to allege, for example, that close-ended
3
advertising services like Facebook, Amazon, Twitter, we can
4
add TikTok and Snapchat to that, are not reasonable
5
substitutes by just saying it's so.
6
explain, with factual allegations, not conclusions, why it's
7
so.
8
Instead, they have to
I think the plaintiffs completely ignored -- and I
9
know they're not bound by it, but they completely ignored
10
that these obvious substitutes need to be -- you have to
11
explain at least why they -- you don't believe that they're
12
in the market.
13
And one reason we didn't challenge market
14
definition in the Texas case in the Southern District of
15
New York is there were twice as many paragraphs devoted to
16
market definition that made those explanations.
17
agree with them, we think they're absolutely wrong, but we
18
can't fight the allegations at a motion to dismiss stage.
19
We can fight, under Twombly, the complete lack of any
20
allegations, is what we have here.
21
Just to take a couple of these.
We don't
You know, they
22
exclude web -- they tried to limit it to web, that's one of
23
the adjectives.
24
advertising on mobile apps as opposed to the Internet.
25
That excludes advertisers that placed
So take the New York Times.
If you're a New York
15
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Times reader, you can access the New York Times either by
2
doing a search for it.
3
could do a search for it and go onto the New York Times web
4
page and read the New York Times there.
5
app on your phone, which is also the New York Times, and you
6
can read it through the app.
7
If you can find a search engine, you
Or you can have the
If an advertiser is looking to seek a New York
8
Times reader, there's no explanation in the complaint as to
9
why they would find advertising on the Internet site any
10
different than advertising on the app.
11
all.
12
they get a free pass into discovery.
13
Same with open.
No explanation at
We're just supposed to take their word for it, and
That one little adjective,
14
"open," limits, very transparently -- excludes, very
15
transparently, Facebook, TikTok, Amazon, the very companies
16
Judge Freeman said if you're going to take this market
17
definition seriously, you've got to at least explain why
18
these people aren't included, and they ignored it all.
19
All of these are addressed in basically a
20
footnote, Footnote 4, where they lay out all the different
21
competitive constraints and all these other methods of
22
digital advertising, and then say, but our focus is open web
23
advertising.
24
focus; markets are defined by reasonable substitutes.
25
again, the law is clear that if you're going to exclude
Markets aren't defined by the plaintiffs'
And,
16
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reasonable substitutes, you need to explain, in facts, not
2
conclusions, why.
3
4
So those are my main points, Your Honor.
could -- I could talk more, but I think that's --
5
6
THE COURT:
I think you've done a good job of
focusing on what are the key points.
7
8
I
So now we'll give Ms. Wood a chance to respond.
I
assume you're going to be the main spokesperson.
9
MS. WOOD:
Actually, Mr. Guarnera is going to
10
respond, Your Honor.
11
THE COURT:
12
Start with the last question first, because that,
All right.
That's fine.
13
obviously, is the absolutely core central issue, and that is
14
the market.
15
16
MR. GUARNERA:
The market definition issue, Your
Honor?
17
THE COURT:
Yes.
18
MR. GUARNERA:
19
So Google's arguments on market definition fail
Yes, Your Honor.
20
because we've taken the three markets -- the three markets
21
at issue as they exist in the real world, as they are
22
recognized by industry participants, including Google's own
23
employees and Google's own internal documents, as we cite in
24
the complaint.
25
stack exactly as we've pleaded it, Your Honor.
Figure 1, for example, lays out the ad tech
17
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Google questions and quibbles with the precise
2
degree of substitution that might be possible in our
3
markets, but that's a fact-intensive question that does not
4
approach the kind of glaring deficiency that the Fourth
5
Circuit has said would be needed to grant a motion to
6
dismiss on market definition.
7
Google referenced mobile advertising, for example,
8
as an alternative form of digital advertising, but Google
9
has a different product to -- Google, itself, uses a
10
different product to sell -- to sell advertising on mobile
11
apps, AdMob, as we allege.
12
And, Facebook, Your Honor, we -- firstly, it's
13
important to note that all of Google's arguments about the
14
markets assume the advertiser perspective.
15
exchange, for example, it has to attract and appeal to both
16
publishers and advertisers.
17
that publishers, for example -- it would be an alternative
18
for a publisher to use Facebook's ad tech products, because,
19
of course, Facebook's products are just for Facebook.
20
publisher has no alternative to turn to if a monopolist were
21
to raise the cost of a publisher ad server or an ad
22
exchange.
23
But here, the ad
And Google doesn't even allege
A
We also allege that there are differences from an
24
advertiser's perspective with respect to social media, for
25
example.
Such as the fact that social media has different
18
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reach.
Again, if you are buying into Facebook, that means
2
your ad will appear on Facebook as opposed to the thousands
3
upon thousands of other websites that are on the Internet,
4
which allow opportunities for advertisers to reach -- to
5
reach potential customers in a broad range of settings,
6
including, you know -- again, on different types of
7
websites, at different times, depending on, for example, if
8
a customer just visited an advertiser's own website and the
9
advertiser wants to target that user again in the near term.
10
If that user is not on Facebook, then the advertiser won't
11
be able to reach them at the time that doing so would be
12
most valuable to the advertiser.
13
Google also mentioned Judge Freeman's opinion in
14
the Northern District of California.
15
now a part of the broader MDL in front of Judge Castel.
16
the key distinction in that case, from our point of view,
17
Your Honor, is that the advertiser plaintiffs in that case
18
alleged an online display ad services on the open web
19
market.
20
products in one market.
21
to replead, it appears that she essentially asked them to
22
replead more facts about the specific products that the
23
advertisers used in the ad tech stack.
24
products that we've already alleged.
25
Obviously that case is
And
In other words, they combined all of the ad tech
And when Judge Freeman asked them
In other words, the
Again, Your Honor, all of Google's market
19
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definition arguments are ultimately fact-specific questions
2
that are premature on a motion to dismiss.
3
4
THE COURT:
All right.
Then he raised several
other issues of the direct purchase argument.
5
MR. GUARNERA:
Yes, Your Honor.
6
We've alleged that the federal agency advertisers
7
purchased display ads using Google's tools.
8
allegation is sufficient because federal agency advertisers
9
are, therefore, direct purchasers of Google services and
10
are, therefore, entitled to recover the overcharges that
11
Google imposed on them as a result of its monopolies.
12
And this
In other words, the 20 percent take rate, the
13
super competitive take rate that Google charges for its ad
14
exchange, for example, that's money that is paid by the
15
advertiser.
16
It's taken out of the advertiser's payments.
Apple v. Pepper, Your Honor, provides a similar
17
situation where there was a platform, in this case, Apple,
18
that was charging an allegedly super competitive take rate,
19
and the buyers on that platform were entitled, according to
20
the Supreme Court, to seek damages as direct purchasers
21
because they were the ones who were paying the overcharge.
22
And it's -- it's the same situation here, Your Honor.
23
THE COURT:
Well, I think the Supreme Court
24
bricklayer case, which is the one everybody cites for this
25
concept of direct versus indirect purchaser, the facts in
20
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that case are so different from what they are here.
2
Again, the Court was properly concerned about the
3
multiple layers between the anticompetitive conduct, I guess
4
the manufacturer of the bricks themselves, and the ultimate
5
purchaser.
6
would sell to the general contractor, who then would sell to
7
the State of Illinois.
8
does Illinois sue?
9
they pay their general contractor at an inflated rate, but
10
That there was a masonry contractor, who then
And the problem is, you know, who
I mean, yes, Illinois is being -- when
that inflation is due two or three steps back.
11
This is, in my view, a completely different
12
situation.
13
Google, you know, ad server or Google exchange or Google
14
publisher, it's still all Google.
15
As you said, you pay Google.
Whether it's
I think the only argument that defendants might
16
have down the road -- which, again, is a fact situation --
17
is if you all had used a real middleman, then there might be
18
a problem, or two middlemen.
19
require discovery.
20
difficult.
21
now.
22
and a couple of quickie interrogatories should probably
23
flesh that out rather quickly.
24
25
So, unfortunately, that will
But, I mean, discovery shouldn't be that
You ought to have that data at your hands right
I would think probably almost a request for admissions
So I don't think the direct/indirect issue has any
real clout on this one.
21
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2
Go ahead.
ones then.
Let me hear you respond to the other
Market share.
3
MR. GUARNERA:
Yes, Your Honor.
4
As Your Honor indicated, we completely agree that
5
the Supreme Court has been explicit that there is no
6
50 percent cutoff.
7
Fourth Circuit cases proves that the Fourth Circuit doesn't
8
think there's a hard cutoff either.
9
And I think a careful reading of the
Rather, when a plaintiff has alleged direct
10
evidence of the ability to control price and exclude
11
competitors, that's the ultimate question.
12
functional test of whether a defendant has monopoly power,
13
and we've pleaded both here.
14
That is the
Google claimed that our allegations that Google
15
charges super competitive prices are conclusory, that is
16
certainly not true.
17
paragraphs 149, 196, 224, 230, 266, where, for example, we
18
allege that real-time bidding technology has become largely
19
commoditized.
20
become commoditized.
21
we describe AdMeld which charged a 7 percent fee to provide
22
similar real-time bidding technology.
23
again, are more than sufficient on a motion to dismiss.
24
25
I would direct the Court to
In fact, Google itself is concerned that it's
And, additionally, paragraph 149 where
These allegations,
And, similarly, we also allege extensive examples
of how Google has used -- has rigged auctions, has excluded
22
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competitors in order to, again, control its monopoly
2
positions in each of these markets.
3
the various forms of conduct that we have alleged are
4
unlawful, show direct evidence that Google has been able to
5
exclude competitors from the ad exchange market.
6
THE COURT:
All right.
And that, again -- all
And the last issue is the
7
use of -- or reference in the complaint to the acquisition
8
of DoubleClick and AdMeld, which were events that occurred,
9
you know, quite a few years ago in a different context,
10
frankly.
The Internet was, you know, different then than it
11
is now.
12
now.
13
to trial, you intend to focus on those two acts.
14
they occurred.
15
approved them, did not see an anticompetitive problem, and
16
things changed.
The online commerce was different then than it is
And so I am curious as to how, if the case were to go
17
I mean,
The Government, at the time they occurred,
I sort of agree on this one with defense counsel,
18
that there shouldn't be a whole lot of time spent, other
19
than this is a historical event, it sort of led us to where
20
we are today.
21
22
Do you expect to do more than that with those two
events?
23
MR. GUARNERA:
24
Firstly, I -- it's not -- when an agency reviews
25
I think so, Your Honor.
an acquisition, it does not approve the acquisition.
It's
23
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not a blank check to get out of jail free on any subsequent
2
use of the acquired asset.
3
The question here in a Section 2 case allows the
4
Court, allows the jury to look back and to see what Google
5
has actually done with the assets that it acquired.
6
is just at war with the Supreme Court's precedent on this
7
point to say that the use of an acquired asset, after it's
8
been acquired, is not actionable under Section 2.
9
Google
There are numerous Supreme Court decisions that
10
look back on acquisitions as evidence of a course of
11
anticompetitive conduct, as enabling anticompetitive
12
conduct.
13
Grinnell.
14
occurred, acquisitions that had happened in the past, but
15
were still considered relevant to the -- to causes of
16
actions, to anticompetitive conduct subsequently.
17
The 1957 du Pont case, ITT Continental Baking,
All these cases involve, again, mergers that had
With respect to the significance of the agency
18
review, Your Honor, just a few years ago, the Fourth Circuit
19
in Steves & Sons v. Jeld-Wen specifically agreed with the
20
district court who had prohibited the jury from hearing any
21
evidence that the Department of Justice had investigated the
22
merger previously because it was considered irrelevant.
23
And the HSR Act, which permits the agencies to
24
conduct premerger review, has a provision that specifically
25
says that the agencies, in fact, anyone, can challenge a
24
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merger at any time after it closes, even if the agency
2
reviewed it prior to closing.
3
And in this case, Your Honor, the DoubleClick and
4
AdMeld conduct itself had significant effects on Google's
5
ability to control and maintain monopolies in these three
6
markets.
7
On AdMeld, for example, AdMeld offered a competing
8
technology that would have undermined the power of AdX, and,
9
therefore, given publishers the ability to substitute other
10
technologies that would allow broad real-time bidding for
11
Google's otherwise must-have ad exchange.
12
acquired AdMeld, it shut down that competing technology,
13
taking it out of the market, taking away a nascent
14
competitor that publishers could have turned to as an
15
alternative to Google's monolithic control of the ad tech
16
stack.
17
And, similarly, DoubleClick.
And when Google
Google, which
18
already had incredible power on the ad network side of the
19
stack, acquired DoubleClick, which had 60 percent share on
20
the publisher ad server side, as well as an ad exchange, and
21
then, through that acquisition, had, again, a leading
22
position across the entire ad tech stack, which Google
23
proceeded to reinforce and cement by making Google ads
24
demand, advertiser demand, exclusive to Google's own
25
products.
25
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So we think that both of these forms of conduct
2
are important to the overall case and do play an important
3
role, both as a history of how Google came to be the
4
dominant player that it is, but also because the
5
acquisitions themselves were anticompetitive.
6
THE COURT:
7
MR. GUARNERA:
8
THE COURT:
9
Thank you.
Thank you, Your Honor.
All right.
Mr. Mahr, do you want to
respond to any of that?
10
11
All right.
MR. MAHR:
I do, Your Honor.
I'll be brief, but
I'll take them in reverse order.
12
The last point, that's exactly why we provided you
13
with the New York Meta decision that was handed down
14
yesterday by the D.C. circuit, in which they make clear that
15
past transactions don't become part of the course of conduct
16
just because there was allegedly later anticompetitive
17
conduct.
18
If they have an anticompetitive conduct case, they
19
can bring that -- they're going to bring that
20
anticompetitive conduct case.
21
treating the original mergers as an independently
22
anticompetitive act as part of the course of conduct versus
23
just a stage-setting fact is significant here because it
24
requires us to go back five extra years in an already
25
15-year scope of discovery just to try to redo what the
But the difference in
26
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1
2
federal government did comprehensively 15 years ago.
On the monopoly power, I heard something about
3
real-time bidding being commoditized.
4
doesn't say anything about monopoly power.
5
Google has had the ad exchange.
6
been able to raise its price from 20 percent.
7
15 years, it only has a 50 percent market share, which means
8
it loses one out of every two, and after 15 years, its
9
prices are only among the higher prices in the market,
10
11
according to paragraph 224.
But, again, that
Fifteen years
Fifteen years it hasn't
After
That is not monopoly power.
In terms of the Illinois Brick argument, I
12
understand that in the Brick case, one company creates the
13
materials for the bricks, then makes the bricks, and then
14
sells the bricks.
15
whole time, and that's why Illinois Brick only looked at the
16
direct purchaser in that case.
17
It's all the same company controlling the
But, in this case, it's not an ineluctable path
18
from publisher to advertisers.
Among other things, we know
19
that there's only a 50 percent market share at that ad
20
exchange level.
21
going through things other than Google's ad exchange.
22
it's not like the Illinois Brick facts where they're all
23
going through the same actor, but, instead, 50 percent are
24
going through ad exchange.
25
advertiser tools, they don't even seek monopoly power, even
27
So half of the sales from any publisher are
So
And then when you get to the
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under their strained and narrow market definitions for
2
demand-side platforms, because there's so many of them.
3
there's just not this direct line that was present in
4
Illinois Brick.
So
5
Finally, on the market definition, I hear that --
6
criticism that we are assuming the advertising perspective.
7
First, the DOJ comes here to you on behalf of the United
8
States as advertisers.
9
advertisers.
They're the federal agency
And then they say, well, don't look at the
10
advertiser perspective, but that is the perspective that
11
they come to you as.
12
And, again, we think after a three-and-a-half-year
13
investigation, with Judge Freeman specifically saying that
14
if you're going to talk about these markets, you've got to
15
be able to deal with these obvious substitutes that are
16
throughout the complaint -- mentioned throughout the
17
complaint.
18
something else.
19
You can't just say, we've decided to focus on
They've come to the rocket docket, they want to
20
move faster than any other court in the country moves, they
21
want to leap in front of the Southern District of New York
22
cases, they had a three-and-a-half year investigation, and
23
we think they need to be held to a higher standard and not
24
given a pass on a motion to dismiss.
25
THE COURT:
All right.
Well, I appreciate the
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argument, and I recognize that the discovery burden is
2
heavy, but I know that Judge Anderson is working with you to
3
make sure that, Number 1, their discovery requests are
4
appropriate; and, Number 2, that the responses are coming in
5
promptly and appropriately.
6
But I've looked carefully at this case, and, as I
7
said, it's a very, very long and technical complaint.
At
8
this point, though, the Court must draw all inferences in
9
favor of the plaintiff, even though it's an antitrust case,
10
and I am satisfied that there are enough specific
11
allegations, including various quotes from people within
12
Google, you know, referring to some competitors as
13
presenting existential threats.
14
Now, again, a business has a right, in our, you
15
know, competitive capitalistic society, to try to protect
16
itself and to try to maximize profits.
17
economic system.
18
You know, that's our
But, at the same time -- this is, again -- as
19
almost all cases that ultimately wind up in this court, it's
20
a balance.
21
innovation and reward people and companies that are able to
22
come up with new ways of doing things, to reward them by
23
making a good profit.
24
25
There's a balance between trying to encourage
At the same time, sometimes programs that begin
completely benignly, perfectly appropriately, we want to
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maximize our profit.
2
of the way things evolve, at some point, it goes over the
3
line, and it now becomes so successful that it's basically
4
stifling innovation and competition, and the market is
5
closing down.
6
Nothing wrong with that.
But because
I mean, that's the essence of antitrust law is to
7
try to keep -- you know, nothing is static, to try to keep
8
the system working by recognizing that, at certain points,
9
some companies may get too big for their own good, they're
10
self-imploding, or the technology may become so dominant
11
that it's just crushing all other elements where there can
12
be innovation.
13
the plaintiff that has the burden of proof can show that,
14
that's another question.
15
And whether or not, at the end of the day,
Obviously whether the market has been properly
16
described here or defined here is a very legitimate
17
question, but I'm still satisfied, at this point, it's been
18
adequately alleged; and B, that it's fact-specific.
19
whether these other markets are equivalent is going to be a
20
question of fact, in my view; it's not a question of law.
21
And
Again, on the direct/indirect, there -- I think,
22
at least as the allegations are, there's a very strong case
23
that this was a direct purchase because of the nature of how
24
the Google system is set up.
25
any, result from that is a completely different question.
Again, how much damages, if
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2
And so, I'm satisfied.
Now, some things, like the degree to which
3
discussion about DoubleClick and AdMeld and the way in which
4
they were first -- when it thought about in terms of, you
5
know, Google's planning about acquiring them and whether or
6
not back then it had an improper anticompetitive intent, I
7
don't know what the evidence is going to show.
8
limine can address how, if at all, that is going to be
9
addressed during a trial, should we get to that point.
10
Motions in
But, at this point, I'm going to deny the
11
defendant's motion to dismiss.
12
complaint read as we must with the deference given to the
13
allegations are sufficiently specific to support all five of
14
the claims, which are three specific claims as to each of
15
these three markets, the fourth claim being the tying
16
allegation, and the fifth claim being the one for direct
17
damages to the federal plaintiff.
18
I'm finding that the
So I'm denying the motion, and I hope that you all
19
can continue to work well on the discovery issues.
20
We'll recess court for the day.
21
22
(Proceedings adjourned at 10:40 a.m.)
---------------------------------I certify that the foregoing is a true and accurate
23
transcription of my stenographic notes.
24
____________________________
25
Stephanie M. Austin, RPR, CRR
31
Stephanie Austin, RPR, CRR USDC/EDVA (571) 298-1649
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