Category: competition

Competition and antitrust

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Google Discovery Violations in United States v. Google (Ad Tech)

This post is part of Revisiting Litigation Alleging Google Discovery Violations.

United States of America v. Google LLC – docket.  1:23-cv-00108-LMB-JFA (E.D. Va.).

Filed January 24, 2023. First filing as to discovery violations: August 2, 2024.

Case allegation: Google used unlawful methods to dominate the ad tech stack, including buying control of key tools, locking out rivals, buying and killing a burgeoning competitor, and “drying out” other competition.  Complaint.

Case disposition: Bench trial complete.  Awaiting decision.

United States’ Memorandum of Law ISO Plaintiffs’ Motion for an Adverse Inference and referenced documents.

On document preservation generally: “Aware of the risk of ‘several significant legal and regulatory matters’, Google … trained its employees to channel discussion of ‘hot topics’ that ‘may be used against [Google]’ … to Google’s internal instant-message chat tools [where] absent manual intervention by business employees on a chat-by-chat basis, all internal chat communications would be automatically destroyed after 24 hours.  Google adopted this auto-delete policy knowing that its employees’ communications could someday be scrutinized by a Court such as this one.”

On purpose and intent of preservation failures: “Google’s spoliation is the predictable and intended result of the intersection of Google’s broader policies and culture with its specific litigation choices here.  Google’s stated goal … was to avoid having its ‘sensitive’ communications ‘discovered by an adversary and used against … Google.’”  “[N]ot only did Google choose to continue its policy of auto-deletion of chats after 24 hours, Google also chose to delay placing many of its employees on a litigation on hold in this case until months (or even years) after Google was required to preserve their documents.”  “Employees … chose to make chats ‘history off’ … for the express purpose of evading discovery.”  “Despite Google’s anticipation of litigation on [specified] subjects …, and Google’s agreement to produce relevant documents… Google continued its policy of automatically deleting chats.”  “Google’s document production contains numerous examples of employees seeking to make chats ‘history off’ to ensure they were not discoverable.”

On effects of preservation failures: “Plaintiffs were deprived of valuable, likely irreplaceable, discovery. … The total volume of chats produced by Google in this case is remarkably low in proportion to the volume of other communications (e.g. emails) produced from the same employees.”  “Chats are an important window into the candid thought processes, intentions, and observations of [employees … by design, one of the only places in which employees were free to write down candid observations or opinions relating to the core issues in this case.”  “Google’s conduct … is deeply troubling.  Google has stretched and weaponized the attorney-client privilege and its protections; it has intentionally spoliated evidence; and despite branding itself as a world-class technology innovator, it has engaged in a series of repeated errors and delays in the production of discovery, all of which have served Google’s broader, strategic ends of impeding its adversaries’ access to information to which they are entitled.”

On “Communicate with Care” training: Remarked that this training “advised Google employees that discussing sensitive topics via ‘off the record’ chats was ‘[b]etter than sending [an] email’ because such charts ‘are not retained by Google as emails are’.”  “Second, ‘Communicate with Care’ cultivated a corporate culture of hiding documents from discovery by training Google employees to leverage pretextual claims of privilege, including detailed instructions on how to craft an email that will appear to be subject to the attorney-client privilege.”

On remedy: “The Court should presume the spoliated chats were unfavorable to Google.”  “The Court may limit the testimony of witnesses who participated in the spoliation conduct at issue by precluding them from offering testimony supportive of Google on issues such as intent, procompetitive justifications, and the effect of Google’s challenged conduct on competition.”  “The Court may preclude Google from arguing that a paucity of direct, contemporaneous evidence supports an inference that no additional evidence exists.” “The Court may sanction Google by admonishing, censuring, or otherwise publicly reprimanding it.”  “When, as here, a litigant violates those obligations in ways that compromise or undercut the truth-seeking function of the judicial process, they must be held accountable. If not, Google and other companies aware of this litigation will continue to encourage employees to adopt careless or evasive discovery-related practices, particularly when faced with similar high-stakes litigation.”

Kent Walker Memo (September 16, 2008).  “Please do think twice before you write about hot topics.”  “To help avoid inadvertent retention of instant messages, we have decided to make ‘off the record’ the Google corporate default setting for Google Talk.”

Employee training as to “Communicate With Care.”  Discusses what an employee might do when seeking to communicate on a sensitive subject.  To a suggestion to send an email, remarks “Don’t send the email. Chat ‘off the record’ via Hangouts instead.”  The training instructs that off the record chat is “Better than sending the email” because such chats are “not retained by Google as emails are.”  See also Antitrust Basics for Search Team (March 2011).

Appendix C: Examples of Google Employees Spoliating Chats.  Nine single-spaced pages listing spoliation by Google CEO Sundar Pichai (“can we change the setting of this group to history off”) as well as numerous employees:

Vip Andleigh: “lets keep confi, we can also turn off history. if i see something important, i’ll note it down somewhere”

Amin Charaniya: “btw didnt realize history is on for us” “mind if I turn it off?” “sure” [end of chat]

Amin Charaniya with dardelean@ and touma@: “this group is on record . . . we should kill it and create one that is single threaded and off the record” “who is in charge with creating this room? I really feel super uncomfortable us continuing this on the record” “im gonna create a new room and kill this one” “I copied everyone into a new room . . . let’s stop using this one” [end of chat]

Anthony Chavez: “separate topic – this chat room has history / is persisted? . . . can we configure it to be transient” “okay, let me create a new one right now. It’ll still be a space.” [end of chat]

Nash Islam: “too sensitive for email so keep on ping?”

Adam Juda: “I see that History is on in this chat. If that can’t be changed, can I please be removed from this discussion?”

Adam Juda: “My preference is history off”

Adam Juda: “How do we turn History off? I don’t do History on” [end of chat]

Roshan Khan: “Can you turn history off . . . Otherwise let’s chat in Vcs” [end of chat]

Woojim Kim: “can you turn off history?”

Chris Lasala: “maybe start an off the record ping thread”

Chris Lasala: “start a ping with history turned off”

Wendy Logan: “We can pivot to group chat with history off — or — keep the current setup and only reserve this space for non-sensitive discussions”

Uchechi Okereke: “Please can we turn history off?”

Aparna Pappu: “Please keep history off on this legally sensitive chat room”

Martin Pal with tris@ :”We want chat history on? I would generally prefer for us to keep history off.” … “let’s turn it off then” [end of chat]

Prabhakar Raghavan: “ugh pl stop this chat, for some reason History is on”

Prabhakar Raghavan: “I’m going to kill this room and re-create as a group chat with History OFF.”

Danielle Romain: “I’m not supportive of turning history on. The discussion that started this thread gets into legal and potentially competitive territory, which I’d like to be conscientious of having under privilege. So that you’re aware, when history is on, it’s discoverable. Sometimes that’s totally fine but I’d like to stick to the default of history off.”

Vidhya Srinivasan: “we should turn history off”

Vidhya Srinivasan: “pls turn off history”

Bonita Stewart and Jason Washing: “btw you might want to turn your chat history off” “geez . . . for sure! . . . thank you!” [end of chat]

Bonita Stewart and Cyrus Beagley: “on your chats you have the history turned on. we are advised to turn history off so messages are cleared after 24 hours” “oh I didn’t know that … I’ll turn it off then…”

Appendix D: Plaintiffs’ Timeline of Google’s Spoliation.

Appendix E: Plaintiffs’ chart showing a sharp increase of chats produced after Google suspended auto-delete.  Plaintiffs remark on “at least two trial witnesses whose volume of substantive chats dramatically increased (eight times over) when Google suspended auto-deletion (Nirmal Jayaram and George Levitte).”

Google’s Memorandum of Law in Opposition to Plaintiffs’ Motion for an Adverse Inference. “Plaintiffs’ motion is barred because it is untimely.” “Plaintiffs have not demonstrated, by clear and convincing evidence, that Google acted with the specific intent to deprive them of evidence.”  “Plaintiffs have not demonstrated prejudice, a prerequisite to any form of sanction under Rule 37(e)(1).”  “Plaintiffs have not demonstrated that any ESI—much less ESI relevant to their claims—was lost.”  “Plaintiffs’ request for sanctions pursuant to the court’s inherent authority should be denied because Rule 37 controls.”

Reply Memorandum of Law in Further Support of Plaintiffs’ Motion for an Adverse Inference.  “Google does not dispute that it failed to meet that obligation and destroyed relevant chats. Google does not deny that witnesses, including senior executives, used chats to discuss their work, including work relevant to this case. Nor does Google deny that it: (i) made ‘history off’ the default setting for chats, such that they would be deleted automatically after 24 hours; (ii) required individual employees to make cumbersome, in-the-moment decisions about a chat’s relevance to a litigation hold in order to preserve them; and, most concerning, (iii) trained employees to discuss ‘sensitive’ matters in ‘history off’ chats so they would not be ‘discovered by an adversary,’ all of which facilitated and encouraged destruction of work-related chats. Google does not dispute that this conduct went on for years, stopping only after this case was filed.”  “When Google was faced with increasing exposure from litigation by government enforcement agencies, it took a calculated risk to create a system that would deprive its litigation adversaries of evidence. The Court need not guess or make an inference about that goal; the Walker Memo expressly stated it. Over time, Google (including witnesses here) consistently underscored and reinforced the messages from the Walker Memo with mandatory corporate trainings about avoiding ‘discoverable’ communications. Consistent with that corporate training, Google employees, including witnesses here, deliberately turned to ‘off the record’ chats to discuss sensitive material they did not want preserved and turned over in litigation.”

Identifies six distinct facts Google failed to disclose to the United States about its document destruction practices:

1. “History off” chats (an undefined term) were automatically deleted after 24 hours;
2. “History off” was the default chat setting, absent manual intervention;
3. Google employees were asked to manually override this default on a chat-by-chat basis;
4. Google conducted no oversight of whether employees were manually preserving chats;
5. Google trained its employees to use “history-off” chats as preferable to email to discuss “sensitive” topics, so that such discussions would not be discoverable; and
6. Google’s in-house lawyers instructed employees to keep their chats “history off” so that they would be automatically deleted

Flags specific instances of Google employees failing to preserve relevant documents:

document custodian “Ms. [Chetna] Bindra, whom Plaintiffs now know was on litigation hold in December 2019, proposed the next month that a group discussing Google’s ad targeting policies, including trial witness Nitish Korula, ‘do a ping thread with history off and without Nitish’ because Mr. Korula was on litigation hold.” – source

document custodian “Bindra in Feb. 2020: ‘The thread has history on. Using the other one.’” – source

document custodian Jason Washing “turning ‘history off’ while on litigation hold” – source

“relevant history-off chats from [Haskell] Garon in 2020, copied into email by another custodian but not found in Garon’s files” – source

“trial witness and then-head of ads business [Jerry] Dischler successfully proposing ‘a group chat that disappears after 24h’ for business discussion in 2020” – source

trial witness “[Aparna] Pappu’s efforts in 2020 to turn history off” – sources 1, 2, 3, 4

trial witness “Pappu in 2020 participating in a chat that abruptly ends when colleague states, ‘I could see this being done in a way that leads to law suits . . . Omfg . . . History is on, jesus . . . Sigh [end of chat]’” – source

trial witness “Pappu in Oct. 2019: ‘so weird I realized this one random topic is history on!’ [end of chat]” – source (thereby indicating that many other topics have history off)

trial witness “LaSala in Dec. 2020: ‘Jeff turned history on! . . . I should be careful now’)” – source

trial witness “LaSala proposing ‘history off’ chats for sensitive business discussions with trial witness Duke Dukellis months after new lit hold dates.” – source

Adam Lasnik explaining why he avoids “discoverable medium[s]” for “especially sensitive” topics, including “competitive landscape (monopoly, crushing competition, etc.)” and instead uses “off-the-record chats” to avoid messages “ending up in court” – source

then-CEO of YouTube Susan Wojcicki proposed that then-Chief Business Officer of YouTube Robert Kyncl “send via Hangouts” because that is “off the record” or if not she “can change to off the record” – source

Plaintiffs’ Post-Trial Proposed Findings of Fact and Conclusions of Law at heading “The Court Should Sanction Google for Its Spoliation of Chats.”  “Google’s conduct has thwarted the Court’s truth-seeking function not only in this case but in several other cases” (citing Google Search [update caption]).  Flags “Google’s repeated and persistent efforts to ensure its employees’ chats were deleted despite its known discovery obligations.”   On that basis, argues that “The Court should … go beyond mere condemnation to ensure Google’s ‘contempt’ for its ‘discovery obligations’ receives the appropriate sanctions.”  “Because Google acted ‘with the intent to deprive’ Plaintiffs of the use of chats in this litigation, the Court may ‘presume that the lost information was unfavorable’ to Google.  Specifically, the Court may reasonably infer that intentionally deleted chats about ‘sensitive’ topics relevant to the claims in this case would have been unfavorable to Google on the core issues that were disputed at trial, including market definition, monopoly power, Google’s intent, the anticompetitive nature of Google’s conduct, and the harm Google’s conduct caused its competitors and customers.”

August 27, 2024 hearing.  Transcript not publicly available, but quoted in part in Plaintiffs’ Post-Trial Proposed Findings of Fact and Conclusions of Law at heading “The Court Should Sanction Google for Its Spoliation of Chats.”  Court called Google’s conduct “very serious” “clear abuse of the [attorney-client] privilege” and “absolutely inappropriate and improper.”  “Had Google set the default settings for chats to history on, ‘the government could see … in this particular case somebody deleted [a chat], then you could focus on why was that deleted.’”  “Because Google kept its default settings for chats to history off, ‘You’ve lost that ability in this case because everything is deleted unless it’s saved’.”   “[T] his record creates a very serious problem for Google in terms of how much credibility the Court will be able to apply. Intent is a serious issue in this case, and I think it’s going to be a problem given this history.”

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Google Discovery Violations in United States v. Google (Search)

This post is part of Revisiting Litigation Alleging Google Discovery Violations.

United States of America v. Google LLC – docket.  1:20-cv-03010-APM. (D.D.C.)

Filed October 20, 2020.  First filing as to discovery violations: February 23, 2023.

Case allegation: Google unlawfully maintained monopolies in the markets for general search services, search advertising, and general search text advertising through anticompetitive and exclusionary practices. Complaint.

Case disposition: Opinion of August 5, 2024 finds Google has monopoly power in the general search text ads market, Google’s exclusive agreements foreclose a substantial share of the text ads market and allow Google to charge supra-competitive prices and degrade quality.

Memorandum ISO United States’ Motion for Sanctions Against Google and an Evidentiary Hearing to Determine the Appropriate Relief.

“By intentionally destroying employee chats and making repeated misleading disclosures to the United States, Google violated Rule 37(e) and is subject to sanctions for spoliation.”

“For years, Google empowered, and even encouraged, its employees to engage in ‘history off’ written communications—known by Google employees as ‘off the record’ chats—which were then automatically destroyed after 24 hours. Google even trained employees that ‘off the record’ chats, also known as Google Hangouts or instant messages, are ‘[b]etter than sending [an] email’ and ‘not retained by Google as emails are.’”  “Google routinely destroyed these written communications. In fact, Google continued automatically deleting these ‘off the record’ chats after it reasonably anticipated litigation, throughout the United States’ investigation, and even when the company became a defendant in this litigation—every 24 hours up until February 8, 2023.”  “Google repeatedly misrepresented its document preservation policies, which conveyed the false impression that the company was preserving all custodial chats.”

“Google’s refusal to suspend its auto-deletion policy earlier is especially notable in light of the sanctions motion filed in the Epic proceedings. Even after the plaintiffs in that case confronted Google with spoliation concerns, Google still withheld its 24-hour auto-deletion policy from the United States and continued to destroy written communications in this case.”

“Google knows that its employees use the ‘off-the-record’ functionality to avoid discovery.”  Quoting an internal Google analysis: “when… History is Off, … there’s a higher likelihood that sensitive information is being discussed” and “[p]eople don’t want chat to be discoverable.”

Quotes Google policies and remarks purporting to preserve and produce all relevant documents.  Quotes a Google Records Retention Policy which Google provided as part of an ESI Questionnaire from the Department of Justice: “With respect to legal holds, the policy states that “[a] legal hold suspends all deletion procedures in order to preserve appropriate records under special circumstances, such as litigation or governmental investigations.” (emphasis added by Plaintiffs in the filing)  “Neither [that] policy, nor Google’s ESI Questionnaire responses, (1) discusses the existence of ‘off the record’ written communications; (2) explains how ‘off the record’ or history-off chats are treated; or (3) refers to a default, 24-hour deletion of any ESI.”  Quotes Google’s claim that it was preserving all documents: “Google has put a legal hold in place. The legal hold suspends auto-deletion.”  Explains that Google only admitted “off the record” chat deletion after the United States requested further materials incidental to the Epic sanctions motion.

On the importance of the deleted documents: “These deleted chats may have contained especially probative information and revealed candid discussions between key Google executives on relevant topics. As a result, the prejudice to the United States is substantial.”  “[C]hats are often a rich source of evidence: employees tend to be more candid in informal modes of communication than they are over email or in presentations and memos.”  “Chats are an even more significant source of evidence under the circumstances here, because Google has instructed employees to avoid discussing sensitive issues over email, including issues related to competition.”

On intentionality: “Google and its employees intentionally exploited its ‘off the record’ chat policy.” “[T]he company’s employees knew that history-off chats were not being preserved and exploited that fact to shield sensitive information from discovery.”  “When Google warned employees against discussing sensitive matters over email, the company encouraged them to do so instead through off-the-record chats.”  “Google’s exploitation of off-the-record chats belies any notion that this destruction was an honest mistake or an oversight.”

Calls out specific employees who used “history off” chat and employee discussions evading document retention obligations:

CEO Sundar Pichai: “can we change the setting of this group to history off”

Meg Campbell: “It needs to be history off.”

Anna Kartasheva and Jim Kolotouros: “[W]e should chat live so you can get the history; best to not put in email.”

Purnima Kochikar: “the conversations in Rooms on Meet remain in perpetuity so please don’t discuss either topics in Rooms.”

Margaret Lam: “I’d prefer to have history off. … I talk about RSA related things all day and I don’t have history on for all my chats 🙂 … Ok maybe I take you off this convo”

Margaret Lam: “can I ask you to turn off history :)”

Christopher Li: “Is there no way to turn history off for these spaces?”  “I don’t even see the option as an administrator.”  “I’ll deprecate this group so we can use the other.”

Prabhakar Raghavan: “used “a ‘history off’ chat” in discussions about ‘how Chrome has affected our query volume.””

Sameer Samat: “pls keep in mind this chat history is not off”

David Sun: “If anyone wants to hear horror stories of chat histories being used in depositions at Google … just ask me and I can speak generally. … It’s bad news.”

Larry Yang: “Reminder: do not speculate on legal matters over email or (saved) chat”

“Since it’s a sensitive topic, I prefer to discuss offline or over hangout.”

“Let’s not talk about markets and market share via email.”

“When you want to talk about stuff that has legal ramifications, such as privacy, the way to discuss it is in person, and not in email / writing of any form (unless you consult with the lawyer cats/pm first :)”

“We should chat live so you can get the history; best to not put in email.”

“maybe we should discuss this ‘off the record’, I think [there’s] a lot to unpack here.”

Schramm: “Should we have history off for this?” “I think our chats about google products are more likely to come up in court”

Cdimon: “Since history is turned on, be mindful of putting anything discoverable here.”

Bill Richardson: “We have history off so that we can speak (more) freely.”

William Furr: “It’s easy to get carried away in chat and communicate with less care than you might with email.”

(Citations provided where findable.  Many cited documents are under seal, so available only to the extent quoted in the memorandum.)

Memorandum in Support of Plaintiffs States’ Motion for Sanctions against Google and an Evidentiary Hearing to Determine Appropriate Relief.

“Google did not disclose its chat destruction policy until January 2023.”  “Google’s chat destruction policy was not reasonable.”  “Deleting its preservation obligations to employees was unreasonable.”  “Auto-deletion was unreasonable.”  “It was inherently unreasonable for Google to default most chats to ‘history off’ and then automatically delete those chats for custodians under a litigation hold. That is especially true because Google recognized its employees’ use of ‘history off’ chats ‘to discuss sensitive topics’ and avoid discovery.“  “The United States was presumptively prejudiced because Google acted with an intent to deprive.”  “[E]mployees discussed sensitive topics via chat because they knew other communication methods were subject to production. “

Quotes additional employees about hiding conversations from legal scrutiny: “I prefer not to be deposed for the contents of kappa chat… It needs to be history off”, “should we have history off for this?”, “Since history is turned on, be mindful of putting anything discoverable here…”

Google’s Memorandum in Opposition to Plaintiffs’ Motions for Sanctions.  “Plaintiffs’ unreasonable delay in raising any objections bars their motions.”  “Google took reasonable steps to preserve relevant documents.” “Plaintiffs were not prejudiced.”  “Google did not act with an ‘intent to deprive.’”  “No additional discovery is required or appropriate.”

United States’ Reply in Support of Its Motion for Sanctions Against Google.  “Motion for sanctions is timely.”  “Google did not disclose its chat destruction policy until January 2023.”  “Google’s instruction to its employees to turn ‘history on’ is not reasonable” because “delegating its preservation obligations to employees was unreasonable” and “auto-deletion was unreasonable.”  “The United States was prejudiced.”

Plaintiff States’ Reply in Support of Their Motion for Sanctions Against Google, LLC and an Evidentiary Hearing to Determine Appropriate Relief.

Order on Plaintiffs’ Motion for Sanctions.

“On the present record, the court cannot make a finding that Google acted ‘with the intent to deprive’ Plaintiffs of the ‘use’ of certain chats ‘in the litigation.’  Nor can it determine whether Google ‘failed to take reasonable steps to preserve’ such information.”

Ordered Google to produce for in camera review all litigation hold and reminder memoranda.  Ordered Google to produce declarations from 20 custodians to be selected by the United States as to their practices in preserving chats, and what communications they held with chat history turned off.

Plaintiff’s Proposed Conclusions of Law at heading “Google’s Systematic Destruction Of Unfavorable Evidence Warrants Sanctions Under Rule 37(e).”  “A party fails to take reasonable steps to preserve ESI when it (1) adopts a document destruction system that erases chats from production in litigations and investigations and then (2) continues to automatically delete the electronic communications of employees involved with the subject matter of a lawsuit and gives its employees ‘carte blanche to make his or her own call about what might be relevant in [a] complex antitrust case and whether a Chat communication should be preserved.’” (citing Google Play Store Antitrust Litigation)

Plaintiff’s Proposed Findings of Fact at heading “Google Adopted Policies For Destroying Or Hiding Documents To Avoid Producing Them To Regulators And Litigants.”

As to preservation: “Google employees interchangeably refer to ‘history off’ chats as ‘off the record’ chats. Google permanently deletes all ‘off the record’ communications after 24 hours if both users in a one-on-one chat have their retention history set to ‘off,’ or if history is set to ‘off’ in a group chat.”  “In September 2008, Google changed the default retention setting for many chats to ‘history off’.”  Google’s Kent Walker said this would “help avoid inadvertent retention of instant messages.”  “Google employees at all levels of responsibility—from the CEO to vice presidents to product managers—use ‘off the record’ chats for business purposes.” Lists specific purposes for which SVP Prabhakar Raghavan, SVP Jonathan Rosenberg, and VP Kolotouros used “history off” chats.  “Google employees intentionally took chats to ‘history off’ to avoid preserving them.”

As to defaults: “Google has the technical capability to override default retention rules and set legal holds for all employees’ chats.” “Seven days [after] the United States informed Google that it intended to move for spoliation sanctions … Google changed its chat default settings and began to default chats to ‘history on’ for individuals on legal hold.”

As to improper claims of privilege: “Google trains its employees to shield emails and other documents from review and production in investigations and litigation.”  “Google has long trained its employees to include attorneys on ‘any written communication regarding RevShare and MADA.’”  “Google employees follow their training and include attorneys on ‘any written communication regarding revshare and MADA,’ even when not requesting legal advice.”  “Google’s attempts to shield discovery include the company’s CEO. Mr. Pichai testified that he sometimes copied Chief Legal Officer Kent Walker on emails and asked for legal advice when he was not ‘really seeking legal advice, but … seeking confidentiality for the document’” and quoting his remarks: “There have been occasions where I’ve just marked [emails] privileged to indicate it’s confidential.”  “After multiple rounds of re-review of ‘silent attorney’ emails, Google abandoned privilege on 12% (26 of 210 documents) of the random sample the Court requested for review in chambers, when it was clear it would be held accountable.”

As to employee use of terminology: “Google has cautioned its employees since at least 2003 to be careful about what they put in writing because it might be discoverable, and employees heed that caution.”  (Referring to Antitrust Basics for Search Team.)

August 5, 2024 opinion discusses the allegations of Google discovery violations:

As to “Google’s long-time practice (since 2008) of deleting chat messages among Google employees after 24 hours”: “This failure to retain chats continued even after Google received the document hold notice at the start of the investigative phase of this case.”

As to Google’s “flagrant misuse of the attorney-client privilege”: Google “trained its employees to add its in-house lawyers on ‘any written communication regarding Rev Share [RSA] and MADA’” which, the Court says, led Google to initially withhold tens of thousands of records on the grounds of privilege, only to later deem them not privileged.

Says the Court need not make a finding of intent in Google’s failure to preserve these documents or its incorrectly marking them as privileged, because intent is not an element of the underlying antitrust claims.  “Still, the court is taken aback by the lengths to which Google goes to avoid creating a paper trail for regulators and litigants. It is no wonder then that this case has lacked the kind of nakedly anticompetitive communications seen in Microsoft and other Section 2 cases.”  After quoting other companies’ improper statements indicating antitrust violations, the Court continues: “Google clearly took to heart the lessons from these cases. It trained its employees, rather effectively, not to create ‘bad’ evidence.”

As to remedy: “On the request for sanctions, the court declines to impose them. Not because Google’s failure to preserve chat messages might not warrant them. But because the sanctions Plaintiffs request do not move the needle on the court’s assessment of Google’s liability.”  “The court’s decision not to sanction Google should not be understood as condoning Google’s failure to preserve chat evidence. Any company that puts the onus on its employees to identify and preserve relevant evidence does so at its own peril. Google avoided sanctions in this case. It may not be so lucky in the next one.”

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Google Discovery Violations in Epic Games v. Google and In Re Google Play Store Antitrust Litigation

This post is part of Revisiting Litigation Alleging Google Discovery Violations.

Epic Games, Inc. v. Google LLC / In Re Google Play Store Antitrust Litigation – docket.  3:20-cv-05671-JD (N.D. Cal.).  /and/ In Re Google Play Store ANtitrust Litigation – docket. 3:21-md-02981-JD.

Filed August 13, 2020.  First proceedings as to discovery violations: October 13, 2022.

Case allegation: Google acquired a monopoly in Android in-app payments, and Google unlawfully maintains a monopoly in Android mobile app distribution and payments.  Complaint.

Case disposition: Jury ruled in Epic’s favor.  Remedy on appeal to Ninth Circuit.

Plaintiffs’ Motion for Sanctions.

On the scope of deleted documents: “Google has destroyed—irretrievably—an unknown but undoubtedly significant number of communications by its employees about relevant business conversations, including on topics at the core of this litigation. Google permanently deletes Google Chats1 every 24 hours—and did so even after this litigation commenced, after Plaintiffs repeatedly inquired about why those chats were missing from Google’s productions, and after Plaintiffs submitted a proffer on this exact issue at the Court’s direction.”

On autodeletion: “Disabling an autodeletion function is universally understood to be one of the most basic and simple functions a party must do to preserve [Electronically Stored Information]” (quoting and citing DR Distribs).  “It is difficult to imagine a litigant better situated to prevent automatic deletion on its own platforms than Google. When Google, whose stated mission is to ‘organize the world’s information and make it accessible,’ irretrievably destroys information despite multiple warnings, its conduct is intentional.”

Google’s Opposition to Motion for Sanctions.  “Google took reasonable steps to preserve relevant ESI. … Rule 37(e) ‘does not call for perfection’.”  “Plaintiffs do not show they suffered any prejudice. … Plaintiffs fail to explain why any unique evidence regarding their claims would be found in chats rather than in the massive corpus of contracts, emails, presentations, strategy documents, and transactional data produced by Google.”

Partial transcript of January 12, 2023 hearing including hearing exhibits.   Additional transcript section.

Judge Donato on Google’s failing to preserve chats: “I think there’s little doubt on the evidence that we’ve heard so far that Chat, Google’s Chat function could, in fact, have contained evidence relevant … to this case. … Google did not systematically preserve those chats but, instead, left the preservation of chats to the discretion of each individual who received a hold notice. … Google never monitored the chats to see if relevant evidence was possibly being lost. … I’m concerned about all this for a variety of reasons [including] at our very first case management conference in October of 2020, Docket Number 45, Google represented to me that it had taken all appropriate steps to preserve all evidence relevant to the issues reasonably evident in this action. I’m finding that representation to the Court to be hard to square with what appears to have been failure to preserve the chats. … [I]f Google didn’t intend to preserve the chats, they should have told me about that in October of 2020.”

On remedy: “I’m not going to let Google get away with this is. There is going to be a substantial trial-related penalty”

Plaintiffs’ Reply ISO Motion for Sanctions.

On deletions generally: “Google’s argument that its efforts were reasonable is irreconcilable with the systematic and avoidable destruction of relevant Chats as well as its continued failure to explain why it did not suspend automatic deletion, including after being expressly put on notice.”

On prejudice: “Google’s contention that Plaintiffs have not suffered prejudice is refuted by evidence showing that Chats are just as substantive as (and often more candid than) email.”

On intent: “Google’s argument that it lacked the requisite intent ignores the facts that Google still, to this day, continues the wholesale destruction of Chats, that Google withheld information about the company’s destruction of Chats for months, and that Google’s custodians intentionally divert sensitive conversations to Chat to avoid discovery.”  “Google employees intentionally divert sensitive conversations to ‘history off’ Chats, and chide others for honesty in ‘history on’ Chats.”  “If Google truly believed that the wholesale destruction of all communications on one of the two communications platforms its employees routinely use was reasonable, it could have raised this position with Plaintiffs.  It did not.”  “Google’s conduct has the purpose of providing its employees a place to communicate free from discovery in litigation.”

Partial transcript of January 31, 2023 hearing.  Judge Donato: “It’s plain as day to any objectively reasonable lawyer, any objectively reasonable lawyer, that Chat is going to contain possibly relevant evidence.”

Plaintiffs’ Supplemental Brief on Google’s Chat Production.  “Google employees, including those in leadership roles, routinely opted to move from history-on rooms to history-off Chats to hold sensitive conversations, even though they knew they were subject to legal holds … even when discussing topics they knew were covered by the litigation holds in order to avoid leaving a record that could be produced in litigation..”  Provides specific examples of substantive discussions in chat.

As to the reason why Google employees use chat, quoting from a preserved message: “Historically (ha) [Google employees] have history off so that [they] can speak (more) freely.” “[H]istory is a liability.” “Dont editorialize/comment in this group chat because it is long-lived.”

When employees realized history was on, they joked about turning it off: “heeeey . . . also just realized our history is [on] . . . can we turn it off? haha.”

As to discovery violations by Google CEO Sundar Pichai: “In one Chat, Mr. Pichai began discussing a substantive topic, and then immediately wrote: “also can we change the setting of this group to history off. Then, nine seconds later, Mr. Pichai apparently attempted (unsuccessfully) to delete this incriminating message. When asked under oath about the attempted deletion of the message, Mr. Pichai had no explanation, testifying ‘I definitely don’t know’ and ‘I don’t recall.'” (citing Pichai deposition transcript)

Quotes from specific employees evading document retention obligations:

Bill Richardson: “Historically (ha) we have history off so that we can speak (more) freely.”

Margaret Lam and Ethan Young: “I talk about RSA related things all day and I don’t have history on for all my chats :)”   “we cannot delete it. I am also on multiple legal hold” “Ok maybe I take you off this convo”

Margaret Lam and Tim McDowell: “can I ask you to turn off history :)” “sure, I understand just feeling forgetful”

Margaret Lam: “do you mind turning history off”

Margaret Lam: “would it be too much to ask you to turn history off?” “lots of sensitivity with legal these days :)”

Margaret Lam and Shadia Walsh: “also just realized our history is [on]. can we turn it off? haha” “yes let’s turn it off”

Ambarish Kenghe: “Folks, *Please do consider if we nee to start a HISTORY OFF chat for this?* Threaded chats you can’t turn off history”

Talia Fernandes and Romin Malkan: “Since this is a sensitive discussion, I’m going to move it to a smaller room” “Group chat.. with the history off ;)”

Lyra Schramm: “should we have history off for this?”

Meg Campbell: “It needs to be history off”

Santiago Scully: “if super sensitive you need to use a GVC because  they could look at your recent ping history and that could go into court”

Divya Chandra to Otto Jan: “I am on legal hold.” “Prefer to keep chat history off.” “i’ll turn off” [chat ends]

Edvill@, Sherle@, and Tris Warkentin: “quick aside – do we want history on?” “NO” “History is on. I suggest everyone leave the room and create a new one with history off. I am happy to punt everyone out”

Cdimon@: “please do not share sensitive information here where possible. Rather, you can flag documents, email threads, etc. for
attention. Until we fix the room architecture, content here is searchable/discoverable within the corp.”

Marcel Folaron: “We can’t turn history on due to potential sensitive information being shared”

Nentl@ and Thao Nguyen: “I’d imagine history is intentionally off” “Yes, history is intentionally turned off for all our war rooms.”

Brandon Barbello and Arpit Midha: “history is a liability” “the more we chat the more threads we need and the more history on gets dangerous”

Stephan Somogyi: ” if we create a new room from scratch we can disable history. We should find a way to do that rather than continuing in perma-history mode”

Tian Lim: “not sure why history is on for our chat, but can you turn it off”

Tian Lim: “hey history is on in this chat, needs to be off”

Court’s Findings of Fact and Conclusions of Law re Chat Preservation.

“Google trains employees to ‘communicate with care’.”  (Training materials.)  “[I]nternal communications actively expressed concerns about the possibility of disclosure in litigation and the risks of preserving Chats” (quoting seven specific employee discussions on this subject, e.g. “should we have history off for this?”). Employees specifically sought to evade retention obligations: “please do not share sensitive information here where possible . . . Until we fix the room architecture, content here is searchable/discoverable.”

On efficacy of Google’s approach to production and alternatives:  “Google has the technical ability to set Chat history to ‘on’ as the default for all employees who are subject to a legal hold, but it chooses not to.”  “Google did not check to see if custodians were actually preserving relevant Chats as directed by the hold notice, and did nothing in the way of auditing or monitoring Chat preservation.”  “Overall, the record demonstrates that Google employees who received a litigation hold in this case were unable or unwilling to follow the Chat preservation instructions, and sometimes disregarded the instructions altogether.”  Quotes a two-page chat between Google employees, which one recognizes as requiring preservation, to which the other says he will “take you off” the discussion rather than proceed with preservation.  In another quoted chat, one employee said he was “on legal hold” but nonetheless “prefer[red] to keep chat history off”.

On scope and intent: Says Google “fell strikingly short” as to preservation, calls Google’s tactic “troubling” and a “worrisome” “substantial problem”, and says Google “did not reveal [its practices] with candor or directness to the Court or … plaintiffs.”  Criticizes Google’s efforts to “downplay the problem” including its “dismissive attitude ill tuned to the gravity of its conduct.”  Criticizes Google’s false claim that it was unable to change default chat history settings for individual employees, which the court says was “not truthful”.  Concludes that “Google did not take reasonable steps to preserve electronically stored information that should have been preserved.” As to “intentionality,” concludes “that Google intended to subvert the discovery process, and that Chat evidence was “lost with the intent to prevent its use in litigation” and “with the intent to deprive another party of the information’s use in the litigation.”  Rejects Google’s arguments about impact of the failure to preserve.

On remedy: “The determination of an appropriate non-monetary sanction requires further proceedings. The Court fully appreciates plaintiffs’ dilemma of trying to prove the contents of what Google has deleted. Even so, the principle of proportionality demands that the remedy fit the wrong, and the Court would like to see the state of play of the evidence at the end of fact discovery. At that time, plaintiffs will be better positioned to tell the Court what might have been lost in the Chat communications.”

On monetary sanctions: “[I]t is entirely appropriate for Google to cover plaintiffs’ reasonable attorneys’ fees and costs in bringing the Rule 37 motion, including the joint statement that preceded the motion and the evidentiary hearing and related events.”

Plaintiffs’ Proposed Remedy for Destruction of Evidence.

On retention: “The record contains example after example of Google employees beginning to discuss topics highly relevant to this litigation and then quickly agreeing to turn history off to trigger automatic deletion and shield further discussion from discovery. … These interrupted Chats are the tip of the iceberg and are powerful evidence of key information—which by any reasonable inference is information that Google thought would be harmful to its legal position if disclosed—being deliberately and permanently destroyed, and thus hidden from Plaintiffs and the Court.”  Says the destroyed information was “the most candid and unsanitized discussions regarding Google’s anticompetitive conduct.”  Quotes additional specific examples of employees turning off chat to avoid document preservation, including Google CEO Sundar Pichai.

On privilege Calls out “fake privilege” in which Google “encouraged” employees “to copy… counsel to apply attorney-client privilege” although not genuinely seeking legal advice.

On remedy: Seeks a permissive adverse inference, directing the jury that it “may” infer that Google destroyed evidence which would have been harmful to Google and helpful to Plaintiffs.

Google’s Opposition to Plaintiffs’ Proposed Remedy.  Criticizes Plaintiffs’ proposal as “severe.”  “Plaintiffs’ submission does not show that Google’s post-August 13, 2020 chat preservation practices deprived them of evidence that would have strengthened their case.”  “Plaintiffs offer nothing more than rank speculation that any missing chats would have been relevant—let alone helpful—to their case.”  “The vast majority of the conduct discussed in Plaintiffs’ motion took place before this lawsuit was filed—in many cases years before this lawsuit was filed—and therefore any chats on these topics would have been permissibly deleted pursuant to Google’s document retention policy long before Google’s preservation obligations arose.”  “Plaintiffs say that [certain] chats would have revealed Google’s subjective motivation for the challenged conduct, but the inquiry in this antitrust case focuses on effect, not intent.”

Plaintiffs’ Reply ISO Proposed Remedy.  “The time has come for Google to bear the consequences of its longstanding, deliberate policy of instructing its employees to conduct their most sensitive business communications in ‘history off’ Chats and then destroying those Chats despite pending litigation to which they were relevant, including this case and related investigations and regulatory actions.”  “Plaintiffs’ requested remedy is appropriately tailored to attempt to ameliorate the prejudice and harm resulting from Google’s calculated choice to evade discovery obligations and destroy evidence.”  “Plaintiffs have shown—as far as is possible without the benefit of the documents Google destroyed—that the thousands upon thousands of deleted Chats contained probative evidence that would have supported Plaintiffs’ case.”  “Google’s plea for ‘lesser measures’ fails because Google has not identified any ‘lesser measures’ that would be sufficient to redress Plaintiffs’ loss.”

Remedy in pretrial order.  Orders a permissive adverse inference jury instruction, consistent with Plaintiffs’ proposal.

Evidentiary hearing as to discovery violations summarized in Epic’s Opposition to Google’s Renewed Motion for Judgment as a Matter of Law under Rule 50(B) or for a New Trial under Rule 59.  “Trial testimony from Google witnesses … confirmed the destruction of hundreds of thousands of Chats.”  Judge called Kent Walker’s testimony “evasive” and “materially inconsistent with testimony given by Google’s witnesses”, saying his testimony “did not do anything to assuage [the Court’s concerns.”  Judge remarked that “a mandatory adverse inference instruction would be amply warranted.”  Judge continued: “this presents the most serious and disturbing evidence I have ever seen in my decade on the bench with respect to a party intentionally suppressing potentially relevant evidence in litigation” and remarked on “rampant and systemic culture of evidence suppression at Google.”  Judge said he intended to conduct his own independent investigation into “who is responsible within Google for tolerating this culture of suppression.”

Order re Google’s Renewed Motion for Judgment as Matter of Law or for New Trial in EPIC Case.

As to abuse of privilege designations: “[M]ore evidence emerged at trial of a frankly astonishing abuse of the attorney-client privilege designation to suppress discovery.  CEO Pichai testified that there were occasions when he ‘marked e-mails privileged, not because [he was] seeking legal advice but just to indicate that they were confidential,’ as he put it. He knew this was a misuse of the privilege.  Emily Garber, a Google in-house attorney, testified that there was a practice at Google of ‘loop[ing] in’ a lawyer based on a ‘misapprehension about the rules of privilege,’ and that Google employees ‘believed that including [an in-house lawyer] would make it more likely that the email would be considered privileged.’  Garber called this ‘fake privilege,’ a practice that she appears to have found amusing rather than something a lawyer should have put an immediate and full stop to.  On this record, there was no error in the Court’s evidentiary ruling that Epic could ‘present fake privilege’ and make arguments to the jury about it.”

As to adverse inference: “The Court determined after an evidentiary hearing held before trial that Google had willfully failed to preserve relevant Google Chat communications, and allowed employees at all levels to hide material evidence. The evidence presented at trial added more fuel to this fire. As discussed, Google in-house attorney Garber testified about the company practice of asserting a fake privilege to shield documents and communications from discovery. Other witnesses also amplified the seriousness and pervasiveness of Google’s preservation abuse.  For example, Google employee Margaret Lam, who worked on RSA issues, said in a Chat message that she didn’t have a specific document because ‘competition legal might not want us to have a doc like that at all :).’ She was a party to other Chats where, in a discussion about MADA, she asked to turn history off because of ‘legal sensitivity’; she requested to turn history off in a different conversation about RSAs, so there would be no ‘trail of us talking about waivers, etc.’”  “Overall, there was an abundance of pretrial and trial evidence demonstrating ‘an ingrained systemic culture of suppression of relevant evidence within Google.’”

As to the Court’s evidentiary hearing to evaluate a mandatory adverse inference about Google’s suppression of evidence: “The results of this hearing were disappointing. Google’s chief legal officer, Kent Walker, was the main witness. Despite the seriousness of these issues, and the likelihood that they could affect other litigation matters where Google is a party, Walker showed little awareness of the problems and had not investigated them in any way. Much of his testimony was in direct opposition to the facts established at the prior Google Chat hearing. Overall, Walker did nothing to assuage the Court’s concerns.” “Even so, the Court took the conservative approach of permitting the jury to make an adverse inference rather than requiring it to.” “Google’s complaints about the inference instruction are wholly misdirected. It has not provided anything close to a good reason to conclude otherwise.”

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An Introduction to the Competition Law and Economics of “Free” with Damien Geradin

Benjamin Edelman and Damien Geradin. An Introduction to the Competition Law and Economics of ‘Free’.  Antitrust Chronicle, Competition Policy International.  August 2018.

Many of the largest and most successful businesses today rely on providing services at no charge to at least a portion of their users. Consider companies as diverse as Dropbox, Facebook, Google, LinkedIn, The Guardian, Wikipedia, and the Yellow Pages.

For consumers, it is easy to celebrate free service. At least in the short term, free services are often high quality, and users find a zero price virtually irresistible.

But long-term assessments could differ, particularly if the free service reduces quality and consumer choice. In this short paper, we examine these concerns.  Some highlights:

First, “free” service tends to be free only in terms of currency.  Consumers typically pay in other ways, such as seeing advertising and providing data, though these payments tend to be more difficult to measure.

Second, free service sometimes exacerbates market concentration.  Most notably, free service impedes a natural strategy for entrants: offer a similar product or service at a lower price.  Entrants usually can’t pay users to accept their service.  (That would tend to attract undesirable users who might even discard the product without trying it.)  As a result, prices are stuck at zero, entry may be more difficult, effectively shielding incumbents from entry.

In this short paper, we examine the competition economics of “free” — how competition works in affected markets, what role competition policy might have and what approach it should take, and finally how competitors and prospective competitors can compete with “free.” Our bottom line: While free service has undeniable appeal for consumers, it can also impede competition, and especially entry. Competition authorities should be correspondingly attuned to allegations arising out of “free” service and should, at least, enforce existing doctrines strictly in affected markets.

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On Uber Selling Southeast Asia Business to Grab

Uber and Grab provide much the same service — ride-hailing that lets casual drivers, using their personal cars, transport passengers in on-demand service. In the markets where both operate, in Southeast Asia, they’ve been locked in a price war. Grab has local expertise and, in many countries, useful product customizations to suit local needs. Uber is an international powerhouse. It hasn’t been obvious which would win, and both firms have spent freely to attract drivers and passengers. Today the companies announced that Uber would sell its Southeast Asia assets to Grab.

It’s clear why both companies like the deal. They’d end costly competition with each other — saving billions on incentives to both drivers and passengers. Diving the world market — with Grab dominating Southeast Asia, Didi in China (per a 2016 transaction), and Uber most everywhere else — they can improve their income statements and begin to profit.

But for every dollar of benefit to Grab and Uber, there is corresponding cost to drivers and passengers. Free of competition from each other, neither company will see a need to pay bonuses to drivers who complete a target number of rides at target quality. Nor will they see a reason to offer discounts to passengers who direct their business to the one company rather than the other. And with drivers and passengers increasingly dependent on a single intermediary to connect them, Grab will be able to charge a higher markup — a price increase that harms both sides.

Some will protest that aggrieved passengers can take taxis, buses, bikes, or private cars, or just walk. Indeed. But there’s always a substitute. If Coca Cola and Pepsi merged, customers could still drink water. Antitrust law is, prudently, not so narrow-minded. The relevant question under law is the SSNIP test, assessing customer response to a small but significant and non-transitory increase in price. Facing such an increase, would passengers truly go elsewhere? In my travels in Southeast Asia, I’ve often found Grab and Uber to be 30% cheaper than taxis. There’s plenty of room for them to increase price without me, and other passengers similarly situated, finding it profitable to switch to taxis. That means Grab and Uber are, under the relevant test, in a separate market from taxis. Then they can’t seek shelter from having (maybe) a small market share relative to taxis and other forms of transportation.

Separately, it’s not apparent what alternative is available to Grab and Uber drivers. Facing higher fees from Uber, what exactly are they supposed to do? They certainly can’t become taxi drivers (requiring special licenses, special vehicles, and more). There’s no obvious easy alternative for them. For drivers, ride-hailing is plainly distinct from other forms of transportation and other work.

The short of it is, ride-hailing is different from alternatives. Grab, Uber, passengers, and regulators know this instinctively, and extended economic and legal analysis will confirm it. With Grab and Uber in a distinct market, they jointly have near-complete market share in the markets where both operate. Under antitrust law, they should not and cannot be permitted to merge. No one would seriously contemplate a merger of Lyft and Uber in the US, and sophisticated competition regulators in Southeast Asia should be equally strict.

Additional concerns arise from the special role of SoftBank, the Japanese investment firm that held shares in both Grab and Uber. Owning portions of both companies, SoftBank cared little which one prevailed in the markets where both operated. But more than that, SoftBank specifically sought to broker peace between Grab and Uber: When investing in Uber in December 2017, SoftBank sought a discount exactly because it could influence Uber’s competitors across Asia. Such overlapping ownership — intended to reduce competition — raises particularly clear concerns under competition law. A Grab spokesman tried to allay these concerns by claiming the transaction was “a very independent decision by both companies [Grab and Uber]” — yet in the next sentence noted that Masa [SoftBank CEO Masayoshi Son] was highly supportive of the” transaction (emphasis added).

The Grab-Uber transaction follows Uber’s summer 2016 agreement to cede China to Didi, which led that firm to an unchallenged position in that market. News reports indicate higher prices and inferior service after the Didi-Uber transaction — the same results likely to arise in the Southeast Asia markets where Uber and Grab propose to combine.

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Uber Can’t Be Fixed — It’s Time for Regulators to Shut It Down

Edelman, Benjamin G. “Uber Can’t Be Fixed — It’s Time for Regulators to Shut It Down.” Harvard Business Review (digital) (June 21, 2017). (Translations: Japanese, Russian.)

From many passengers’ perspective, Uber is a godsend — lower fares than taxis, clean vehicles, courteous drivers, easy electronic payments. Yet the company’s mounting scandals reveal something seriously amiss, culminating in last week’s stern report from former U.S. Attorney General Eric Holder.

Some people attribute the company’s missteps to the personal failings of founder-CEO Travis Kalanick. These have certainly contributed to the company’s problems, and his resignation is probably appropriate. Kalanick and other top executives signal by example what is and is not acceptable behavior, and they are clearly responsible for the company’s ethically and legally questionable decisions and practices.

But I suggest that the problem at Uber goes beyond a culture created by toxic leadership. The company’s cultural dysfunction, it seems to me, stems from the very nature of the company’s competitive advantage: Uber’s business model is predicated on lawbreaking. And having grown through intentional illegality, Uber can’t easily pivot toward following the rules.

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Three Problems in Protecting Competition (teaching materials) with Lena Goldberg

Edelman, Benjamin, and Lena Goldberg. “Three Problems in Protecting Competition.” Harvard Business School Case 917-012, November 2016. (Revised March 2017.) (educator access at HBP. request a courtesy copy.)

In three mini-cases, readers see a range of disputes in competition law—and apply legal principles to assure fair competition.

Teaching Materials:

Three Problems in Protecting Competition – Teaching Note (HBP 917014)

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English Translation of FAS Russia Decision in Yandex v. Google

In September 2015, the Russian Federal Antimonopoly Service announced its decision that Google had violated Russian law by tying its mobile apps to Google Play and setting additional restrictions on mobile device manufacturers, including limiting what other apps they install and how they configure those apps and devices. These topics are of great interest to me since I was the first to publicly distribute the Mobile Application Distribution Agreements, and because I explored related questions at length in my 2015 article Does Google Leverage Market Power Through Tying and Bundling? and more recently my working paper Android and Competition Law: Exploring and Assessing Google’s Practices in Mobile (with Damien Geradin).

For those who wish to understand the reasoning and conclusions of Russia’s FAS, one key limitation is that the September 2015 decision is available only in Russian. While the case document library summarizes key facts, allegations, and procedural developments, that’s no substitute for the full primary source documents.

In the course of expanding my Android and Competition Law paper, I recently obtained an English translation of the September 2015 decision. The decision is unofficial but, as best I can tell, accurate and reliable. It suffers redactions, but the original in Russian has the same limitation. I offer it here to anyone interested:

Yandex v. Google – Resolution on Case No. 1-14-21/00-11-15 – resolution of September 18, 2015 – unofficial English translation

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Exploring and Assessing Google’s Practices in Mobile

Since its launch in 2007, Android has become the dominant mobile device operating system worldwide. In light of this commercial success and certain disputed business practices, Android has come under substantial attention from competition authorities. In a paper Damien Geradin and I posted this week, we present key aspects of Google’s strategy in mobile, focusing on Android-related practices that may have exclusionary effects. We then assess Google’s practices under competition law and, where appropriate, suggest remedies to right the violations we uncover.

Many of Google’s key practices in mobile are implemented through Mobile Application Distribution Agreements, confidential contracts that became available to the public through Oracle litigation and are available, to this day, only on my site. But we also evaluate Google restrictions embodied in other documents including Google’s Anti-Fragmentation Agreement as well as supplemental contracts with device manufacturers and mobile carriers providing for exclusive preinstallation of Google search.

If one accepts our conclusion that certain Google practices violate competition laws, it’s important to turn to the question of remedies–what changes Google must make. The natural starting point is to end Google’s contractual ties, allowing device manufacturers to install Google apps in whatever configurations they find convenient and in whatever way they believe the market will value. One might expect to see low-cost devices that feature Yahoo Search, MapQuest maps, and other apps that vendors are willing to pay to distribute. Other developers would retain a “pure Google” experience, foregoing such payments from competing app makers but offering apps from a single vendor, which some users may prefer.

Beyond that, remedies might seek to affirmatively restore competition. Because much of Google’s dominance in mobile seems to come from its powerful app store, Google Play, an intervention might seek to shore up other app stores–for example, letting them copy in Google’s APK’s so that they can offer Google apps to users who so choose. A full remedy would also attempt to restore competition for key apps. Just as Europe previously required Microsoft to show a screen promoting five different web browsers when a user booted Windows for the first time, a similar screen could provide users with a genuine choice of Android apps in each area where Google has favored its own offering. We suspect some users would favor a more privacy-protecting location service if that were prominent and easily available. Other users would probably find competing local services, such as TripAdvisor and Yelp, more trustworthy than Google’s offerings. These developments would increase choices for both users and advertisers, reduce the sphere of Google’s dominance, and begin to restore a competitive marketplace in fundamental mobile apps.

Our working paper:

Android and Competition Law: Exploring and Assessing Google’s Practices in Mobile

(Updated October 26, 2016: This article, as revised, is forthcoming in the European Competition Journal.)

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How Uber Uses API Restrictions to Block Price Comparison and Impede Competition updated June 3, 2016

Popular as Uber may be, it isn’t the only way to summon a car for a ride across town. In most US cities, Lyft is a strong number two. Here in Boston, Fasten touts lower fees to drivers, promising cheaper rides for passengers and greater revenue to drivers. Drivers often run multiple apps, and passengers switch between them too. If these apps competed fiercely, Uber might be forced to lower its fee, reducing or eliminating profit. So what justifies Uber’s lofty $68+ billion valuation?

For years, Uber has tried to use its API as a potential barrier against competition. Uber invites third-party developers to connect to its servers to get real-time information about vehicle location (how many minutes until a vehicle can pick up a passenger at a given location) and the current level of surge pricing. But there’s a catch: To access data through Uber’s API, developers must agree not to include Uber API data in any tool that Uber deems competitive.

Uber encourages app developers and the general public to think this API restriction is Uber’s right—that Uber’s data is for Uber to use or restrict as it chooses. But the restriction is calculated and intended to block competition—a purpose considered improper under competition laws, and a special stretch for Uber in light of the company’s positions on related issues of competition and regulation.

Uber’s API restrictions

Uber’s API Terms of Use explains Uber’s purpose in remarkable simplicity:

Be a strong, trustworthy partner to Uber. Please do not:

Compete with Uber or try to drive traffic away from Uber.

…

Aggregate Uber with competitors.

Uber’s API Terms of Use then instruct:

In general, we reserve the sole right to determine whether or not your use of the Uber API, Uber API Materials, or Uber Data is acceptable, and to revoke Uber API access for any Service that we determine is not providing added benefit to Uber users and/or is not in the best interests of Uber or our users.

The following are some, but not all, restrictions applicable to the use of the Uber API, Uber API Materials, and Uber Data:

…

You may not use the Uber API, Uber API Materials, or Uber Data in any manner that is competitive to Uber or the Uber Services, including, without limitation, in connection with any application, website or other product or service that also includes, features, endorses, or otherwise supports in any way a third party that provides services competitive to Uber’s products and services, as determined in our sole discretion.

Uber’s developer documentation specifically warns:

Using the Uber API to offer price comparisons with competitive third party services is in violation of § II B of the API Terms of Use. Please make sure that you familiarize yourself with the API Terms of Use to avoid losing access to this service.

Assessing Uber’s API restrictions

The most favorable reading of Uber’s API restrictions is that Uber alone controls information about the price and availability of its vehicles. From Uber’s perspective, accessing Uber’s API is a privilege, not a right. Indeed, some might ask why Uber might be expected, let alone required, to assist a company that might send users elsewhere. A simple contract analysis shows no reason why the restriction is improper; if Uber prominently announces these requirements, and developers willingly accept, some would argue that there’s no problem.

A strong counterargument begins not with the contract but with Uber’s purpose. One might ask why Uber seeks to ban comparisons with other vehicle dispatch services. Uber doesn’t ban aggregators and price comparison tools because it believes these tools harm passengers or drivers. On the contrary, Uber bans aggregators and price comparison tools exactly because they help passengers and drivers but, potentially, harm Uber by directing transactions onto other platforms. Uber’s purpose is transparently to impede competition —to make it more difficult for competing services to provide relevant and timely offers to appropriate customers. Were such competitors to gain traction, they would push Uber to increase quality and reduce its fees. But blocking competing services positions Uber to retain and indeed increase its fees.

Consider a competitor’s strategy in attempting to compete with Uber: Attract a reasonable pool of drivers, impose a lower platform fee than Uber, and split the savings between drivers and passengers. If Uber’s current fee is, say, 20%, the new entrant might charge 10%—yielding savings which could be apportioned as a 5% lower fare to passengers and a 5% higher payment to drivers.

Crucially, aggregators help the entrant reach passengers at the time when they are receptive to the offer. Every user at an aggregator is in the market for transportation, not just generally but at that very moment, making them naturally receptive to an entrant’s offer. Furthermore, a user who visits an aggregator has all but confirmed his willingness to try an alternative to Uber. So aggregators are the most promising way for an entrant to reach appropriate users.

At least as important, aggregators help an entrant gain momentum despite a small scale of operations. At the outset, a new entrant wouldn’t have many drivers. So if a consumer installs the entrant’s app and opens it to check vehicle availability, the entrant’s proposed vehicle would often be further away, requiring that passengers accept longer wait times and that drivers accept longer unpaid trips to reach paid work. Notably, an aggregator helps the entrant reach users already close to the available vehicles—providing an efficient way for the entrant to begin service.

In contrast, without aggregators, entrants face inferior options for getting started. They could advertise in banners or on billboards to attract some users. But those general-purpose ad channels tend to reach a broad swath of users, only a portion of whom need Uber-style service, and even fewer of whom are ready to try a new service. Meanwhile, any users found through these channels will tend to have diverse requirements for ride timing and location; there is no way for an entrant to reach only the passengers interested in rides at the times and places where the entrant has available drivers. With a low density of drivers and passengers, the entrant’s passengers will face longer wait times and drivers will face longer unpaid positioning trips. Some users may nonetheless be willing to try the entrant’s service. But they’ll have to open the entrant’s app to check, for each trip, whether its availability and pricing meet expectations—extra steps that impose delay and will quickly come to seem pointless to all but the most dedicated passengers. As a whole, these factors reduce the likelihood of the new service taking off. Indeed, small transport services have famously struggled. Consider, for example, the 2015 cessation of Sidecar.

Uber might have tried to explain away its API restrictions with pretextual purposes such as server load or consumer protection. These arguments would have been difficult: Price comparison requests are not burdensome to Uber’s servers; Uber nowhere limits the quantity of requests for other purposes (e.g. through an API fee or through throttling). Nor is there any genuine contention that price comparison services are, say, confusing to users; the difference between an Uber and a Lyft ride can be easily communicated via an appropriate logo, on-screen messaging, and the like. But in any event Uber hasn’t attempted these arguments; as Uber itself admits in the rules quoted above, the API restrictions are designed solely to advance the company’s business interests by blocking competition.

The relevant legal principles

One doesn’t readily find antitrust cases about APIs or facilitating price comparison. But Uber’s API partners act as de facto distributors—telling the interested public about Uber’s offerings, prices, and availability. A long line of cases takes a dim view of dominant firms imposing exclusivity requirements on their distributors. Areeda and Hovenkamp explain the tactic, and its harm, in their treatise (3d ed. 2011, ¶1802c at 76):

[S]uppose an established manufacturer has long held a dominant position but is starting to lose market share to an aggressive young rival. A set of strategically planned exclusive-dealing contracts may slow the rival’s expansion by requiring it to develop alternative outlets for its product, or rely at least temporarily on inferior or more expensive outlets. Consumer injury results from the delay that the dominant firm imposes on the smaller rival’s growth.

Most recently, the FTC brought suit against McWane, the dominant US pipe fitting supplier, which had controversially required distributors to sell only its products, and not products from competitors, by threatening forfeiture of rebates and perhaps loss of access to any McWane products at all. The FTC found that McWane’s exclusionary distribution policy maintained its monopoly power; the Eleventh Circuit upheld the FTC’s finding; and the Supreme Court declined to hear the case. McWane thus confirms the competition concerns resulting from exclusive contracts from distributors. In relevant respects, the parallels between Uber and McWane are striking: Both companies use contracts to raise rivals’ costs to prevent them from growing into effective competitors. Compared to McWane, Uber’s API restrictions are in notable respects more aggressive. For example, McWane’s first response to a noncompliant distributor was to withhold rebates, and in litigation McWane protested that its practice was not literally exclusive dealing but rather a procompetitive inducement (through rebates yielding lower prices). Putting aside McWane’s failure in these arguments, Uber could make no such claims, as its API restrictions (and threats to UrbanHail, discussed below) exactly implement exclusive dealing, expelling the noncompliant app or site from access to Uber’s API as a penalty for including competitors.

More generally, Uber’s conduct falls within the general sphere of exclusionary conduct which has been amply explored through decades of caselaw and commentary. The Department of Justice’s 2009 guidance on Single-Firm Conduct Under Section 2 of the Sherman Act is broadly on point and usefully surveys relevant doctrines. As the DOJ points out, the essential question for exclusionary conduct cases is whether a given tactic is appropriate, aggressive competition (which competition policy sensibly allows) versus a practice intended to exclude competition (more likely to be prohibited under competition law). After considering several alternatives, the DOJ favorably evaluates a "no-economic-sense test" that asks whether the challenged conduct contributes profits to the firm apart from its exclusionary effects. In Uber’s case, no such profits are apparent. Indeed, the API restrictions require Uber to turn down referrals from apps that violate the API restrictions—foregoing short-term profits in service of the long-term exclusionary purpose.

The DOJ ultimately offers its greatest praise for an "equally efficient competitor test," asking whether the challenged conduct is likely in the circumstances to exclude a competitor that is equally efficient or more efficient. Uber’s restrictions fare poorly under this test. Consider a more efficient competitor—one with, perhaps, lower general and administrative costs that allow it to charge a lower fee on top of payments to drivers. Uber’s restrictions prevent such a competitor from effectively reaching the consumers who would be most receptive to its offer.

Separately, the DOJ notes the promise of conduct-specific tests that disallow specific practices. While the caselaw on APIs, data access, and price comparison is not yet well-developed, one might readily imagine a conduct-specific test in this area. In particular, if a company offers a standardized and low-burden mechanism for consumers, intermediaries, and others to check its prices and availability, the company arguably ought not be able to withhold access to that information for the improper purpose of blocking competition.

Relatedly, the DOJ points out the value of considering the scope of harm from the challenged conduct, impact of false positives and false negatives, and ease of enforcement. Uber’s restrictions fare poorly on these fronts too. Uber would face little burden in being required to provide data about its prices and availability to comparison services; Uber has already built the software interface to provide this data, and the servers are by all indications capacious and reliable. Enforcement would be easy: Require Uber to strike the offending provisions from its API Terms and Conditions. Uber need not create any new software interfaces or APIs in order to comply; only Uber’s lawyers, but not Uber’s developers, would need take action.

Uber might argue that it is one of many transportation services and that the Sherman Act should not apply given Uber’s small position in a large transport market. Indeed, Sherman Act obligations are predicated on market power, but Uber’s size and positioning leave little doubt about the company’s power. As the leading app-based vehicle dispatch service, Uber would certainly be found a dominant firm in such a market. In a broader market for hired transport services, including taxis and sedans, Uber surely still has market power. For example, analysis of expense reports indicates that business travelers use Uber more than taxis.

Experience of transport comparison services and the case of UrbanHail

As early as August 2014, analysts had flagged Uber’s restriction on developers promoting competing apps. Indeed, the subsequent two years have brought few apps or sites that help consumers choose between transportation platforms—some with static data or general guidance, but no widely-used service with up-to-the-minute location-specific data about surges and vehicle availability. Uber’s API restrictions seem to be working in exactly the way the company hoped.

An intriguing counterexample comes from UrbanHail, an app which promises to present "all of your ridesharing and taxi options in one click to help you save time and money [and] frustration." (UrbanHail was created by five Harvard Business School MBA students as their semester project for the required FIELD 3 course. As part of my academic duties as a HBS faculty member, I happen to teach FIELD 3, though I was not assigned these students. I advised them informally and have no official academic, supervisory, or other affiliation with the students or UrbanHail.)

UrbanHail prompted a response from Uber the same day it launched. In a first email, Uber’s Chris Messina (Developer Experience Lead) wrote:

Hey guys, my name is Chris Messina and I run Developer Experience for Uber. Chris Saad [CC’ed] is the PM of the API.

We wanted to congratulate on your recent press as we love seeing folks innovating in the transit space, but wanted to let you know that your use of our API is in violation of section II B of our terms of use.

We’re more than happy for you to continue developing your app, but ask that you remove any features that list Uber’s prices next to our competitors.

Please let us know if you have any questions. Thanks!

Three weeks later, he followed up:

Hey guys,

I haven’t heard back from you, so I wanted to follow up.

Unfortunately, UrbanHail is still violating the agreements you entered with Uber, including not only the API Terms of Use which I mentioned in my previous email, but also Uber’s rider terms (which prohibit scraping or making Uber’s services available for commercial use).

I’d like to highlight that not only are these conditions found in the legal text, but the spirit of our terms are summarized in plain english at the top of that document. Further, a specific warning to not create a price comparison app is provided in-line in the technical reference for the price estimates API.

Thousands of developers around the world use the Uber API to build new, interesting apps. To preserve the integrity of the Uber experience, we require these apps to stay within the guardrails we’ve created, and are set forth in our terms. Despite our efforts to make these terms and policies clear and transparent, you chose to act against them.

All that being said, we very much value the time and energy that developers like you invest in building with the Uber API, and we actively support and encourage them to be creative and innovate with us.

If you build something that complies with our Terms of Use, we would love to reward your effort in a number of ways. Here are just some of the things we can offer:

* A post on our blog featuring your app

* A listing in our showcase

* Affiliate revenue for referring new Uber riders to us

* Access to our "Insiders Program" which offers office hours with the Uber Developer Platform team and exclusive developer events

Please let me know when you’ve taken UrbanHail out of the App Store and removed any related marketing materials so we can start working on a new opportunity together.

Please note, however, if I don’t hear from you by May 31, I’ll be forced to revoke your client ID’s access the Uber API.

Chris

Today, May 31, is Chris’s deadline. I’ll update this post if Chris follows through on the threat to disable UrbanHail’s API access and prevent the app from including Uber in its price comparison.

Update (June 3): UrbanHail reports that Uber terminated its API access, preventing Uber from appearing within Urbanhail’s results page.

Special challenges for Uber in imposing these restrictions

Uber styles itself as a champion of competition. Consider, for example, CEO Travis Kalanick’s remarks to attendees at TechCrunch Disrupt in 2012. His bottom line: "Competition is good." Uber takes similar positions in its widespread disputes with regulators and incumbents transportation providers—styling its offering as important competition that benefits consumers. Against that backdrop, Uber struggles to restrict third-party services that promise to enhance competition.

Indeed, media coverage of Uber’s dispute with UrbanHail has flagged the irony of Uber criticizing competition from other services. The Boston Globe captioned its piece "New app gives Uber a little disruption of its own," opening with "Uber Technologies Inc. built a big business by pushing past regulations that limit competition with taxis. But the tech-industry darling isn’t always happy with smaller companies trying similar tactics." Boston.com was in accord: "Uber rankled by app that compares ride-hailing prices," as was BostInno: "Uber is trying to shut down this Boston price-comparison app."

Twitter users agreed: Henry George: "@Uber Do you find it the least bit ironic that you’re complaining about ride competition with @urbanhail? Don’t try legal BS, innovate!" Michael Nicholas: "The irony of @Uber complaining @urbanhail is ‘breaking the rules’ of api usage is breathtaking." Gustavo Fontana: "@Uber should leave them alone. It’s fair game."

Uber may dispute whether it has the market power necessary to trigger antitrust law and Sherman Act duties. But Uber’s general position on competition is clear. Uber struggles to chart a path that lets it compete with taxis without the permits and inspections required in many jurisdictions—but doesn’t let comparison shopping services compare Uber’s prices with taxis, Lyft, and other alternatives.

Moreover, Uber’s professed allies are equally difficult to reconcile with the company’s API restrictions. For example, Uber this month announced an advisory board including distinguished ex-competition regulators. Consider Neelie Kroes, formerly the European Commission’s Commissioner for Competition who, in that capacity, oversaw the EC’s €497 million sanctions against Microsoft. Having overseen European competition policy and subsequently digital policy for fully a decade, Kroes is unlikely to look favorably on Uber’s efforts to foreclose entry and reduce competition.

Special challenges for Uber’s developer team in imposing these restrictions

A further challenge for Uber is that its key managers—distinguished experts on software architecture—have previously taken positions that are difficult to reconcile with Uber’s efforts to restrict competition.

Best known for creating the hashtag, Chris Messina (Uber’s Developer Experience Lead) boasts a career espousing "openness." In his LinkedIn profile, he notes a prior position as an "Open Web Advocate" and a board member at the "Open Web Foundation." Describing his work at Citizen Agency, he says he "appl[ied] design and open source principles to consulting." Wikipedia disambiguates Messina from others with the same name by calling him an "open source advocate," a phrase repeated in the first sentence of Wikipedia’s article. Wikipedia also notes a 2008 article entitled "So Open It Hurts" about Messina and his then-girlfriend, describing their "public and open relationship." Google reports 1,440 different pages on Messina’s personal site, factoryjoe.com, mentioning the word "open." While the meaning of "open" varies depending on the context, the general premise is a skepticism towards restrictions and limitations—be they requirements to pay for software, limits on how software is used, or, here, restrictions on how data and APIs are used. It’s a world view not easily reconciled with Uber’s restriction on price comparisons.

Chris Saad (Uber’s API Product Manager) has been similarly skeptical of restrictions on data. His LinkedIn page notes that he co-founded the DataPortability Project which he says "coined and popularized the phrase "data portability"; and led "an explosion of conversation[s] about open standards and interoperability." That’s a distinguished background—but here, too, not easily reconciled with Uber’s API restrictions.

It’s no coincidence that Uber’s developer team favors openness. Openness is the natural approach as a company seeks to connect to external developers. But in limiting how other companies use data, Uber violates key tenets of openness, restricting the flow and use of data that partners and consumers reasonably expect to access.

Looking ahead

Uber faces a looming battle to retain its early lead in smartphone-based vehicle dispatch. But as the dominant firm in this sector—with the largest market share and, to be sure, a category-defining name and concept—Uber is rightly subject to restrictions on its methods of competition. Cloaking itself in the aura of competition as it seeks to avoid regulations that apply to other commercial vehicles, Uber is poorly positioned to simultaneously oppose competition from other app-based services.

Uber is not alone in limiting the ways users can access data. In 2008, I flagged Google’s AdWords API restrictions, which impeded advertisers’ efforts to use other ad platforms as well as Google. Google defended the restrictions, but competition regulators agreed with me: Even as the FTC declined to pursue other aspects of early competition claims against Google, FTC pressure compelled Google to withdraw the API restrictions in January 2013. In Europe, these same restrictions were among the EC’s initial objections to Google’s conduct. Google has yet to resolve this dispute in Europe, and may yet face a fine for this conduct (in addition to substantial fines for other challenged practices). Uber’s API restrictions risk similar sanctions—perhaps even more quickly given Uber’s many regulatory proceedings.

What comes next? If Uber follows through on its threat to UrbanHail, as Messina said it soon would, there will again be no app or site to compare prices and availability across Uber and competitors. Uber won’t need to go to court to block UrbanHail; it can simply withdraw the security credentials that let UrbanHail access the Uber API. From what I know of UrbanHail’s size and stature, it’s hard to imagine UrbanHail filing suit; that would probably require resources beyond UrbanHail’s current means.

Nonetheless, Uber is importantly vulnerable. For example, transport is highly regulated, and Uber needs regulatory approval in most jurisdictions where it operates. This approval presents a natural and easy way for policy makers to unlock Uber’s API restrictions: As a condition of participation in a city’s transit markets—using the public roads among other resources—Uber should be required to remove the offending API restrictions, letting aggregators use this information as they see fit. Once one city establishes this requirement, dozens more would likely follow, and Uber’s API restrictions could disappear as suddenly as they arrived.