Google’s MADAs And RSAs Are Not Necessary For Android’s Success And Do Not Benefit Search Consumers

C. Google’s MADAs And RSAs Are Not Crucial For Android’s Success And Do Not Profit Search Customers By Enhancing System High quality

1310. Google has failed to indicate that MADA and RSA phrases granting Google default exclusivity on Android units—together with the MADA’s preinstallation and placement necessities and the RSA’s default and search exclusivity clauses—are vital for Google’s ongoing help of the Android ecosystem, infra ¶¶ 1310–1320 (§ X.C.1), or have benefited customers by enhancing the Android person expertise, infra ¶¶ 1321–1344 (§ X.C.2).

1. The “Android Mannequin” Would Not Collapse Absent Google’s Restrictive Contract Phrases

1311. Google’s enterprise mannequin for the Android ecosystem (the “Android Mannequin”) wouldn’t collapse if MADAs and RSAs didn’t require search default exclusivity. Google has quite a few causes for supporting the Android ecosystem, together with the substantial revenues Google earns from Play Retailer gross sales. Google’s assertion that Android can not compete in opposition to iOS with out the MADAs and RSAs is inconsistent with the proof and undermined by the substantial sums that Google pays Apple yearly to be the unique default on iPhones and different Apple units.

a) Google Has Different Causes To Help Android And License The Play Retailer For Free

1312. Google has a powerful incentive to spend money on Android, no matter whether or not search rivals have their GSEs pre-installed on these units. Google makes use of the Android platform to distribute flagship, non-search purposes that generate substantial income for the corporate, together with YouTube, Google Maps, Gmail, and Google Drive. Tr. 9572:1–16 (Rosenberg (Google)) (agreeing that Google selects apps for the MADA bundle primarily based partially on whether or not they “generate income for Google”); Tr. 7716:12–18, 7717:2–12 (Pichai (Google)) (Google generates income by means of distribution of core purposes required by the MADA, together with Gmail and Google Drive.); UPX0296A at -500 (itemizing “generate income for Google” as the primary tenet for figuring out which new apps to incorporate within the MADA bundle); UPX0286 at -211 (“Safe extra customers for Google companies by means of the Android cell platform by way of preloads, default intents, and/or exclusivity for over 30 Google cell web companies.”); UPX6059 at -034 (Google’s 2021 10-Okay displaying that YouTube advertisements income elevated from roughly $20 billion in 2020 to greater than $28 billion in 2021).

1313. Google’s Play Retailer, which is simply accessible on Android units, is without doubt one of the core apps that generates income for Google. Tr. 9553:12–16, Tr. 9551:5–18 (Rosenberg (Google)) (Google generates income from the Play Retailer by means of transaction charges on funds for and inside apps, along with income from displaying advertisements within the Play Retailer). In a single 2020 estimate, Google projected it could earn upwards of $[redacted]billion from Play Retailer gross sales on Samsung telephones over a four-year deal. UPX2111 at -120; UPX0317 at -155 (displaying $[redacted] billion in Play Retailer income in 2019).

1314. The extra customers purchase Android telephones the more cash Google makes from Play Retailer gross sales. Tr. 9553:17–19 (Rosenberg (Google)). If customers swap from an Android telephone to an iPhone, Google loses all potential Play Retailer income from that person, though the ISA permits Google to retain these customers’ search queries on iOS. Id. 9553:20–23; UPX2111 at -099 (“If we lose share, we lose Play income, and our Search TAC goes as much as regardless of the Apple charge is. We nonetheless get Search income; it’s simply costlier.”).

As Mr. Rosenberg defined, “[Google] definitely ha[s] industrial curiosity in seeing Android succeed due to Play.” Tr. 9556:10–25 (Rosenberg (Google)).

1315. Gross sales of Google-manufactured Pixel telephones, which run on Android, generate substantial income for the corporate. UPX0317 at -159 (displaying Pixel’s “OEM cargo share” in United States elevated from 17% in 2018 to twenty% in 2019); UPX6059 at -007 (Google 10-Okay noting, below the “{Hardware}” class, that Google generates revenues from Pixel telephones).

These merchandise collectively make Android extremely profitable for Google, even unique of income Google earns from searches run on Android units. UPX6059 at -031, -034 (Google’s 2021 10-Okay displaying that the “Google different” class—which incorporates Play Retailer revenues, Pixel telephone gross sales, and YouTube non-advertising revenues—generated $28 billion).

1316. Google has not proven that Android smartphone gross sales would undergo if Google may now not exclude competing GSEs from these units. The proof signifies the other; after Google carried out a selection display screen in Europe, Android’s market share has declined much less there than it has in america. Tr. 10593:2–10594:15 (Whinston (Pls. Knowledgeable)). Equally, Android’s market share in Russia has elevated since Google carried out a selection display screen there. Id.

1317. Google’s competitors with Apple additionally gives Google an incentive to proceed investing in Android. If Apple launched its personal GSE and set it because the default on all Apple units, Google would make considerably much less cash from searches run by Apple customers. Tr. 10538:5–10539:13 (Whinston (Pls. Knowledgeable)); supra ¶¶ 1093–1124 (§ VIII.B.3). That may drastically improve Google’s incentive to spend money on Android, as a result of it makes more cash on Android telephones than on Apple units. Id.

b) Google’s Purported Curiosity In Selling Android’s Competitiveness Is Undermined By Its ISA Funds To Apple

1318. Google’s income share agreements with Apple undermine its search-based incentive to spend money on Android. Tr. 10538:5–10539:13 (Whinston (Pls. Knowledgeable)).

1319. Google’s revenue-share funds to Apple below the ISA present billions in capital to Google’s chief competitor within the smartphone market, but Google is blithely unconcerned about strengthening Apple as an Android rival. Tr. 4974:9–14 (Braddi (Google)) (Google has by no means mentioned any concern over how sharing billions in income with Apple makes Apple a stronger competitor in telephone market.); Tr. 9566:20–9567:2 (Rosenberg (Google)) (recalling no discussions about halting Google funds to Apple); UPX0643 at -305 (noting Samsung’s argument that Google is giving Apple a greater deal than Samsung, making it harder for Samsung to compete with Apple).

1320. By controlling the search defaults on each Apple and Android units, Google Search bears little danger. When Android customers swap to the iPhone, Google nonetheless will get substantial income because the default search engine on iPhones. UPX2111 at -099 (If an Android person switches to the iPhone, Google “nonetheless get[s] search income; it’s simply costlier.”); UPX0076 at -215 (displaying iOS search income as roughly equal to Android search income).

c) Absent Exclusivity, Google Would Proceed To Pay Income Share

1321. That Google’s search rivals pay for nonexclusive search suggests Google would have an incentive to proceed paying for search distribution absent default exclusivity on Android units. Bing, DuckDuckGo, and Yahoo pay for non-exclusive distribution in america, together with for searches on Apple units and Mozilla’s Firefox browser. Supra ¶¶ 38, 1307. In Russia, Yandex pays a 20% income share when customers choose Yandex from the Android selection display screen. UPX0170 at -975 (“Yandex . . . pays Google a 20% TAC for search visitors on new units if a person chooses Yandex . . . as default . . . and clicks on advertisements served by them.”).

2. There Is No Compelling Proof That MADAs And RSAs Profit Customers In The Search Market

1322. Google has not proven that MADA and RSA phrases that grant Google default search exclusivity on Android units profit customers, together with by enhancing the person expertise and thus the competitiveness of Android units. Even when Google had, these purported procompetitive justification don’t justify harms to customers within the common search companies market.

a) The MADA And RSA Do Not Profit Customers

i. The MADA’s And RSA’s Preinstallation, Placement, Default, And Exclusivity Phrases Do Not Enhance The Buyer Expertise On Android Gadgets

1323. Google has not proven that its preload, placement, and default provisions enhance the shopper expertise on Android units.

1324. On the contrary, Google’s MADA and RSA phrases result in a poorer person expertise in a number of methods. Each Android OEMs and Android customers have complained in regards to the placement of the Google Search Widget throughout the house display screen of Android smartphones. UPX0128 at – 547 (e-mail from Hiroshi Lockheimer stating, “1) Customers typically are drained (visually) of our widget. It’s in the midst of the display screen, obscures your loved ones image, and so on.” and “2) OEMS are VERY drained (visually) of our widget, due to 1) and in addition as a result of they really feel like they don’t get to distinguish.”); Tr. 10099:2–23 (Murphy (Def. Knowledgeable)) (OEMs might not wish to preinstall Google’s widget however accomplish that in alternate for the advantages gained below the MADA.); UPX0653 at -053 (“If detachable, [around] 20% of customers delete widget inside 3 months of gadget activation.”).

1325. The MADAs and RSAs additionally frustrate distribution companions’ potential to distinguish their merchandise. Android OEMs, comparable to Samsung and Motorola, compete in opposition to one another by differentiating their units, which might result in progressive and compelling person experiences. Tr. 9574:22–9575:4 (Rosenberg (Google)) (Android producers compete by differentiating their units, and “innovation is without doubt one of the methods they’ll differentiate.”); Tr. 10098:3–7 (Murphy (Def. Knowledgeable)) (“There definitely are dimension[s] during which [Android OEMs] profit from differentiation.”). For instance, the foldable telephones now supplied by Samsung, Google, and Motorola are an innovation that resulted from OEMs competing by means of differentiation. Tr. 9574:22–9575:4 (Rosenberg (Google)).

1326. Google’s preinstallation, placement, default, and exclusivity phrases thwart differentiation by standardizing options between units. UPX0997 at -059 (discussing Google and AT&T’s “philosophical variations on the UX on Android” and AT&T’s want to “differentiate the experiences so not all Android units look the identical”).

Google’s distribution companions routinely complain that MADAs and RSAs depart them with little management over the person expertise on their units. UPX0482 at -727 (Google Search offers depart T-Cellular “completely no management over the shopper expertise or monetization. Google is the one which controls each.”); UPX1036 at -835 (T-Cellular executives expressing frustration with, amongst different issues, Google “attempting to mandate with exclusivity and management”).

1327. For example, T-Cellular explored constructing a federated search expertise during which it could present search outcomes, if conscious of a person question, from Bing, Amazon, and Department. Des. Tr. 181:4–183:15 (Giard (T-Cellular) Dep.). T-Cellular believed it may have created a greater search expertise for customers, in addition to improved monetization for T-Cellular, however even experimenting with a federated search expertise was blocked by T-Cellular’s 2017 RSA. Id.

Equally, Samsung and AT&T each expressed curiosity in preloading expanded variations of Department’s app-search device that included further performance however had been deterred by issues over violating their RSAs’ search exclusivity clauses. Des. Tr. 247:6–249:25 (Ezell (AT&T) Dep.) (explaining determination to stroll away from expanded Department partnership); UPX1064 at -543 (Samsung e-mail expressing concern over Department options that Google may characterize as “net search”).

1328. Google’s distribution companions have enough incentive to make sure a constant and safe person expertise with out the MADAs and RSAs. Tr. 10539:21–10540:10 (Whinston (Pls. Knowledgeable)); Des. Tr. 273:15–274:23 (Giard (T-Cellular) Dep.) (A constant person expertise is in T-Cellular’s curiosity.); Des. Tr. 291:24–292:22 (Ezell (AT&T) Dep.) (Shopper expertise takes priority in enterprise selections.).

1329. OEMs and carriers know that if customers have a poor expertise on units they buy, customers might blame the accountable OEM and service and customers will shift their enterprise to opponents. Des. Tr. 62:24–63:10 (Giard (T-Cellular) Dep.). Furthermore, customers confused about easy methods to use their units might name carriers’ buyer care strains, which will increase prices to distributors. Id.

1330. Though carriers have an curiosity in incomes income shares from Google, the service gadget sale and companies efforts characterize a small portion of the carriers’ total enterprise. Des. Tr. 289:4–291:11 (Ezell (AT&T) Dep.) (estimating that income share funds AT&T receives complete lower than [redacted]% of its wi-fi service income). As Mr. Ezell defined, AT&T and the opposite carriers’ precedence is being aggressive of their core enterprise of providing wi-fi companies. Id. Carriers wouldn’t take steps that may drive clients to opponents, together with distributing units with poor person interfaces. Des. Tr. 62:24–63:10 (Giard (T-Cellular) Dep.).

ii. The “MADA Barter” Does Not Allow The Sale Of Low-Price Gadgets

1331. Google has not proven that the “MADA Barter” has enabled the sale of low-cost Android units. Google offered no proof of a causal hyperlink between the MADA and the existence of low-priced Android telephones.

1332. Though Prof. Murphy testified that such a hyperlink exists, he acknowledged that he’s not conscious of knowledge displaying one. Tr. 10185:25–10186:13 (Murphy (Google’s Knowledgeable)). He additionally has seen no ordinary-course paperwork linking the MADA with the sale of low-cost Android telephones. Id. 10187:3–8. Prof. Murphy has not quantified what number of, if any, low-priced Android units would go away the U.S. market if the MADA bundle was disallowed. Id. 10187:9–15.

1333. As in comparison with much less restrictive options, the “MADA barter” can also be inefficient as a result of it requires the identical “value” for each Android gadget. Tr. 10540:11–10541:9 (Whinston (Pls. Knowledgeable)). Presently, Google bundles all its GMS companies, requiring the identical placement and preload phrases—e.g., placement of the Google Search Widget on the homepage—for each gadget no matter its options and capabilities.

Each Android smartphone, regardless of its measurement, value, options, or different traits, should settle for these situations as “cost” for the Play Retailer. This makes much less sense for sure units, together with people who have decrease costs, fewer options, and storage and processing constraints. Against this, licensing the Play Retailer separate from different GMS apps would offer Google and Android OEMs better flexibility to tailor any “cost” for the Play Retailer in line with the circumstances of the actual gadget. Id.

1334. Google has unbundled the MADA in Europe, allowing OEMs to license the Play Retailer straight. Tr. 10158:7–10159:1 (Murphy (Google’s Knowledgeable)). Google licensed the Play Retailer for various quantities relying on the nation during which the gadget was being bought and the options that had been accessible on the telephone. Tr. 10540:11–10541:9 (Whinston (Pls. Knowledgeable)).

iii. RSAs Do Not Stop Opportunistic Habits

1335. There isn’t any persuasive proof to help Prof. Murphy’s opinion that RSAs’ search exclusivity clauses forestall Android OEMs and carriers from performing opportunistically.

1336. On stability, Google workers don’t seem involved about distribution companions performing opportunistically. Tr. 10177:21–10178:11 (Murphy (Google’s Knowledgeable)). Supplies shared with senior Google executives, together with Ms. Porat, don’t embody stopping free using or opportunistic conduct among the many rationales in help of RSAs. Id.; UPX1128 at -097 (offering rationales for brand new Android service and OEM RSAs).

1337. Google’s search rivals additionally aren’t involved about distribution companions performing opportunistically. Bing, DuckDuckGo, and Yahoo pay for distribution in america, together with for searches on Apple units, with out the assure of search exclusivity. Supra ¶¶ 38, 1307.

1338. Prof. Murphy’s opinion is inconsistent together with his opinion that Google’s Android agreements don’t hurt competitors for search companies. If Prof. Murphy is appropriate that distribution companions haven’t any want to work with Google’s search rivals, there isn’t a danger that distribution companions would steer queries towards these companies and due to this fact no danger of them performing opportunistically. Likewise, if Prof. Murphy is appropriate that distribution companions aren’t taken with splitting queries between a number of search suppliers, there isn’t a danger of distribution companions performing opportunistically. Tr. 10193:7–17 (Murphy (Google’s Knowledgeable)) (not conscious of any occasion during which a browser break up queries between a number of search engines like google).

b) Even If There Was Proof Of MADA’s And RSA’s Procompetitive Justifications, They Do Not Justify Harms To Search Customers

1339. Even when Google had demonstrated that the MADA and RSA preinstallation, placement, default, and exclusivity phrases enhance the shopper expertise on Android units (which it has not), Google’s purported justifications wouldn’t justify harms Google causes to customers in related markets as a result of (1) advantages to customers within the common search companies market are speculative at finest; and (2) there are much less restrictive means of accelerating consistency and enhancing the person expertise on Android units.

i. Advantages To Search Customers Are Speculative

1340. Enhancements to the person expertise on Android units brought on by the MADA and RSA, if any, inure to customers outdoors the overall search and associated promoting markets. Google has not proven that these alleged enhancements improve search output and, in that case, by how a lot.

1341. Google identifies no proof displaying that the search-related provisions within the MADA and RSA have on stability improved the person expertise on Android units.

ii. Much less Restrictive Means

1342. Google would proceed to earn substantial revenues from Android customers if Google supplied an unconditional income share, or funds conditioned on a selection display screen, and each options would enable Google to encourage gadget enhancements with out foreclosing competitors. Tr. 5776:22–5778:3, 10529:1–10530:17 (Whinston (Pls. Knowledgeable)) (discussing much less restrictive options).

1343. Encouraging Android OEMs and carriers to take user-enhancing actions, like making common safety updates, doesn’t require Google to exclude different GSEs from Android units. Android OEMs and carriers have impartial incentives to push out safety updates and guarantee customers have a high-quality telephone expertise. Tr. 7717:13–7718:15 (Pichai (Google)); id. 7658:17–7659:12.

1344. There isn’t any technical purpose user-enhancing actions, together with safety updates, should be tied to look defaults or exclusivity. Tr. 9564:3–15 (Rosenberg (Google)). As Google acknowledged at trial, it may use different fashions—together with unconditional income shares or different monetary incentive—to encourage Android companions to make well timed safety updates. Tr. 7718:16–7719:1 (Pichai (Google)); Tr. 9564:16–25 (Rosenberg (Google)).

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