Three dozen U.S. states are about to settle Android app store antitrust case with Google, leaving Epic Games and Match Group as two remaining plaintiffs: San Francisco trial starts in November

At 6 PM Pacific Time on Tuesday, Google, approximately three dozen state attorneys-general, and consumer class-action lawyers filed a "stipulation and [proposed] order re deadlines in consumers' and states' actions in light of tentative settlement" in connection with the Google Play (Android app store) antitrust litigation in the Northern District of California that resulted from the procedural consolidation of multiple parallel actions. The settlement was reached the same day and is subject to certain approvals (by the state attorneys-general, which should be a formality unless there was more political resistance than I can imagine, and Google parent Alphabet's board of directors, which should be even more of a formality), after which it needs to be blessed by the court, which is also unlikely to pose a major hurdle. The plan is for a long-form settlement agreement to be submitted to Judge James Donato in about a month.

The terms have not been announced yet, not even in broad lines.

The United States District Court for the Northern District of California will hold a trial starting November 6. With the states and the consumer plaintiffs out (and developer class actions--which achieved nothing of major value to the developer community at large--having settled long before), this means that there will be only two plaintiffs: Epic Games, which brought the complaint in August 2020 after Google ejected Fortnite from the Google Play Store, and Match Group (Tinder).

First, the notice of a tentative settlement (this post continues below the document):

In Re Google Play Store Antitrust Litigation: Stipulation and [Proposed] Order re Deadlines in Consumers' and States' Actions in Light of Tentative Settlement

It is not surprising that the class-action lawyers would settle with Google: in the end they just want to get paid. The far bigger win for Google here is that the three dozen U.S. states are also prepared to drop the case. Governmental support would have been very useful for Epic and Match at the trial. A settlement with only the class-action lawyers would have been of little value to Google if the state AGs had continued to sue on behalf of their citizens. The consumer class might not even have been certified in the end.

Given the fundamental problems surrounding app distribution on Android, it is hard to imagine that the settlement will solve the most pressing problems. But we will know for sure only when the exact terms have been announced. It's unlikely but not impossible that the state AGs negotiated something of value.

The only advantage this development has for Epic and Match is that the trial will be streamlined. The trial structure was threatening to become very complex, and now the focus at the pretrial conference on Tuesday will be on how to proceed with an Epic & Match v. Google trial. I don't think a trial that will be interrupted by the Thanksgiving holiday is a good idea, but it probably won't be postponed in light of the impending settlement.

Epic and Match may still government support: the DOJ, which supported and may continue to support (at the certiorari stage) Epic's appeal of the decision in the parallel Apple case, could file amicus briefs later on.

On Tuesday morning by Pacific Time, all the parties filed a joint pretrial statement highlighting the differences between their positions. There was no mention of a settlement in that filing: it was totally adversarial. But a settlement was mentioned as a hypothetical possibility in footnote 4:

"Further, while all Plaintiff groups expect to be at trial with the experts they disclosed to Google, there are circumstances that, at least theoretically, could change these plans (e.g., a settlement, a pending Daubert motion, etc.).

Here's that document:

In Re Google Play Store Antitrust Litigation: Joint Statement Regarding September 7, 2023 Pretrial Conference

Share|

Discovery closes today in two antitrust matters involving Activision Blizzard (FTC merger case and In Re Google Play Antitrust Litigation) while UK CMA is preparing remedies working paper

Coincidentally, today is the cutoff date for fact discovery in two disparate antitrust actions involving Activision Blizzard King (ABK):

• the FTC's adjudicative proceeding (in-house lawsuit) over ABK's acquisition by Microsoft, and

• the In Re Google Play Store Antitrust Litigation in the Northern District of California, where Epic Games and Match Group are pursuing a per se violation claim against Google based on its "Project Hug" agreements with game makers. ABK received $360 million, which ensured its loyalty to the Google Play Store for several years. In this particular case, ABK is a third party, but an important one. Because of this new theory, fact discovery in that litigation was reopened.

The purpose of this post is to discuss the next steps in those cases, also in United States et al. v. Google--a case pending in a court on the other coast (D.C.) but with factual overlaps--and the Microsoft-ActivisionBlizzard merger review in the UK, where some filings were released yesterday and an important new document is expected to be sent to Microsoft and ABK next week. Let's start with the merger-related parts.

1. FTC adjudicative proceeding enters expert phase

2. CMA remedies working paper expected while Sony is panicking

3. Curative sanctions--and trial date and format--to be determined in Google Play case in N.D. Cal.

4. Implications for sanctions motion in United States et al. v. Google (D.C.)

FTC adjudicative proceeding enters expert phase

After today's fact discovery cutoff, the focus in the FTC's Microsoft-ActivisionBlizzard process shifts to the experts:

• The FTC is to provide its expert witness reports within four weeks (May 5).

• A week later (May 12), the FTC has to provide to Microsoft's and ABK's lawyers its final proposed witness and exhibit lists with a view to the August trial.

• Another two weekslater (May 26), Microsoft and ABK have to provide their expert witness reports.

• By May 30, the deal parties have to provide their final proposed witness and exhibit lists.

• June 9 is the deadline for the FTC's rebuttal expert reports that respond to Microsoft's and ABK's expert witness reports.

• The deadline for expert depositions is two weeks later (June 23).

The most important question, however, is how much taxpayers' money the FTC really intends to waste on this. It's not even going to achieve its objective of moving the legal goal posts.

I've previously argued (mostly on Twitter) that the close of fact discovery is a point at which the FTC could--and in my personal opinion should--think hard about at least that PlayStation theory of harm. It would not be a sign of weakness, but of rationality, to recognize that Sony's theory is unsupported by any facts. There is no shred of evidence, and the numbers just don't work out.

The theory has been rejected or abandoned by a U.S. court and at least seven other regulators so far (Japan's JFTC having been the latest) as I discussed in a recent post. That's 8-0 against the theory. A recent report on the Phase III investigation in China suggests that it's also just about cloud gaming, in which case the score would already be 9-0. It's furthermore highly likely that Australia's ACCC and New Zealand's ComCom will agree with the UK CMA rather than the U.S. FTC. And decisions in some other jurisdictions could also come down anytime.

There could soon be a point at which a dozen or more regulators will have rejected the theory, and the FTC would come across as the "Flat Earth Society" in this regard. That would be bad, especially because America's consumers need a strong FTC to tackle the real issues facing them.

Why produce expert reports when a theory of harm is so clearly untenable? It doesn't even give the FTC any meaningful leverage in remedies discussions because it's just so very weak. Of course, it would be even better if the FTC could settle the entire case. In that case, the expert reports would not just be more focused but they wouldn't be needed anymore at all. If that is not possible in the very short term, I think a voluntary dismissal of Sony's theory--assuming that after today's fact discovery cutoff there simply won't be any evidence to build a foreclosure case--would be a logical thing to do.

Structurally, those FTC adjudicative proceedings are not entirely dissimilar to ITC Section 337 investigations, which I follow all the time. It is common and expected that parties narrow their ITC cases through voluntary dismissals. It's simply necessary to keep those ambitious schedules, and the ITC's ALJs even want to see periodical reports on efforts to streamline a given case. Could there be a clearer case for streamlining an FTC in-house lawsuit than this present situation?

CMA remedies working paper expected while Sony is panicking

The UK Competition & Markets Authority (CMA) amended its provisional findings on March 24 based on a consideration of all of the evidence and arguments before it, and consigned the PlayStation theory of harm to the dustbin of merger review history.

There was a deadline on March 31 for responses to that update, and it appears that Microsoft obtained an extension by a few days. Yesterday the CMA published the public redacted versions of the feedback it received from Microsoft (PDF), Sony (PDF), and UCL researcher Joost Rietveld (PDF).

I commented quickly in the form of a four-part Twitter thread and provided further observations in subsequent tweets.

Microsoft argues that even the updated provisional findings still overstate the incentive for foreclosure (though the result is now that foreclosure is unprofitable), and that the "residual" concerns over cloud gaming are based on a foreclosure theory that isn't any "stronger" only because it has not undergone a similar revision. In any event, Microsoft points to its access deals with Nvidia, Boosteroid, and Ubitus. So even though Microsoft continues to argue for unconditional clearance, remedies are on the table.

Professor Rietveld lays out a "typology" of cloud gaming services, and disputes that such services even constitute an antitrust market. In the following tweet he explained his decision to chime in (and thankfully shared the first tweet of my thread on those submissions):

The @CMAgovUK's investigation into the #MSFT-#ABK acquisition is nearly done. After narrowing the scope of the investigation to cloud gaming, I felt inclined to chime in. My submission is now published. My argument? Cloud gaming is not a "distinct market". https://t.co/L8LcUTwhUz https://t.co/uzmsNObPmi

— Joost Rietveld (@gjrietveld) April 6, 2023

Sony's submission is the clearest sign yet of the PlayStation maker staring into the jaws of defeat without any realistic chances of snatching victory from them. By calling the evolution of the CMA's take on the console market theory of harm (which was a rational decision in recognition of hard facts) "irrational", Sony invokes the standard for appellate review (by the UK Competition Appeal Tribunal).

While some Microsoft submissions throughout the process have also reminded the CMA of the applicable appellate case law, there's a difference between saying at an early stage that a certain potential theory of harm would not be appeal-proof and doing what Sony did on March 31, which is to call an actual procedural step--the fact that the CMA amended its provisional findings-"irrational".

Sony can't prevent the merger from closing through an appeal. It won't achieve a subsequent divestiture either.

I couldn't resist but to do a "how it started / how it's going" tweet (a popular format on social media) to juxtapose Sony's earlier take on the CMA's work and its new aggressive stance. Let me show you the two annotated screenshots here (click on an image to enlarge):

There are five months and three days between those documents. But even at the beginning of March, Sony's position was still that it "welcome[d] the CMAs comprehensive review of the evidence in reaching this conclusion" and "agree[d] with the CMA's findings."

Now Sony slams the methodology and the conclusions, though the CMA had already previously--and rightly--rejected some of Sony's "evidence" for obvious deficiencies.

Sony's "Hail Mary" involves hyperbole so outlandish that parts of the internet are already ridiculing it:

"Any degradation in the price, performance, or quality of play on PlayStation or any delays on release would quickly harm SIE’s reputation and cause a loss of engagement and of players. As SIE’s CEO, Jim Ryan, explained to the CMA at the Remedies Hearing, if PlayStation received a degraded version of Call of Duty, it would 'seriously damage our reputation. Our gamers would desert our platform in droves and network effects would exacerbate the problem. Our business would never recover.'"

How can Mr. Ryan say that with a straight face? He should recognize his error and preserve his reputation. Right now he appears to be doing neither.

It's obviously clear that there would be no irreparable harm. Microsoft's Xbox has a much smaller market share than the PlayStation, and CoD has given Sony's customers some exclusive benefits for a while, yet there are no signs of irreparable harm to the Xbox, as the CMA also indicated in its findings.

Seeking Alpha has picked up a Deal Reporter story according to which the CMA is expected to issue its remedies working paper (the article mistakenly uses the singular form, "remedy") next week. This is what the CMA's guidelines (PDF) say about that document:

4.64 A remedies working paper, containing a detailed assessment of the different remedies options and setting out the CMA’s provisional decision on remedies, will be sent to the merger parties for comment following the response hearings. This paper will also set out the CMA’s views on whether the merger gives rise to RCBs, and if so, whether the proposed remedy should be modified in order to preserve those benefits. The merger parties will typically have at least five working days to respond to the remedies working paper. Third parties may also be consulted about the proposed scope of remedies and their views on any RCBs, and the remedies working paper may in some cases be published on the CMA website, but only if the CMA deems wider consultation to be necessary. In most cases, the remedies working paper is not published.

4.65 Following consultation on the remedies working paper and any further discussions and meetings with parties that the CMA considers necessary, the CMA will take its final decision on both the competition issues and any remedies.

Will this be one of the minority of cases in which the CMA does publish the remedies working paper and allows non-parties to comment?

There would obviously be a lot of curiosity due to the high profile of the case. But there has been so much discussion about remedies already, and why should the CMA invite Sony--especially after its unreasonable and unrealistic March 31 response to the updated provisional findings--to waste more time and insult human intelligence? Given that its console market theory of harm is dead, Sony is no longer important to the remedies process.

So while I would love to see that remedies working paper, I couldn't blame the CMA for concluding that it's now just for the CMA to hammer out the details with the deal parties. Sony may try to appeal clearance decisions in whatever jurisdictions if it wants to waste time, money, and energy, and be ridiculed. I think Sony won't want to do any of that.

Curative sanctions--and trial date and format--to be determined in Google Play case in N.D. Cal.

What makes the fact discovery cutoff in the Google Play Store (Epic Games et al. v. Google) case particularly important is the fact that Judge James Donato of the United States District Court for the Northern District of California has already determined that there will be non-monetary sanctions on Google for its automatic deletion of sensitive chats (on top of some reimbursement of fees, which won't move the needle). So Google's wrongdoing will have consequences for the adjudication of the case. There will have to be some jury instructions that up the ante for Google. But Judge Donato wanted discovery to be completed first so that there would be the most solid factual basis for determining the extent of the prejudice that the plaintiffs have suffered.

We can expect a huge fight over the non-monetary sanctions, and it will be one of the most difficult decisions a federal judge could have to make in commercial litigation. The wrongdoing is massive, but the case should still be decided correctly.

A case management decision will also have to be made in that litigation, and while it's just about the trial format, it involves a complex set of overlaps and interdependencies.

The procedural background is that the Ninth Circuit granted Google's petition for an interlocutory appeal of the certification of a consumer class seeking $4.7 billion in damages over the Google Play app tax, and on that basis, Google argues that the trial (scheduled to begin in early November) should be postponed because the consumer damages theory might not survive, at least not in its current form. As I mentioned in a tweet, which I also incorporated into a blog post, Google's position is not unreasonable.

Meanwhile, there has been further briefing. Epic Games and Match Group (Tinder) oppose Google's motion because the trial has already been pushed back four times (not once because of those plaintiffs) and they argue that in Epic Games v. Apple the consumer claims were also put on a different schedule and will be tried separately:

In Re Google Play Store Antitrust Litigation (case no. 3:21-md-2981-JD, N.D. Cal.): Epic and Match's Joint Opposition to Google's Motion for a Stay

Epic and Match's desire to go to trial as soon as possible is understandable. While Epic's case was never consolidated into the Pepper consumer class action the way those Google Play Store cases were combined (because it was only about injunctive relief; by contrast, those Google cases are all going to a jury trial), it is true that Apple will now have to deal with some overlaps between those cases.

But there are potential issues because of the relationship between the different claims in the Google cases:

• The plaintiff states' theory is also about consumer harm. According to Google, the theory is structurally similar to what the Ninth Circuit may overturn now.

• While Epic's focus is (like in the Apple case) on injunctive relief, Match additionally seeks a damages award. Google is right that Match and consumers (by extension, also the plaintiff states) represent two sides of a two-sided market, and that's why it makes sense to address those claims together so as to avoid inconsistencies. For every cent that was paid, the question is whether it belongs to Google, developers, or consumers.

So there are four types of claim sets: Epic (developer harm, but no damages for now), Match (developer damages), consumer class actions (consumer damages), and plaintiff states (consumer harm). The potential legal ramifications involve that in one or more of the proposed formats, the consumer class may get its day in court without all of them actually having suffered injury (an Article III standing issue), and that there could be Seventh Amendment (right to jury trial in civil litigation) issues because of factually related issues being addressed by different juries in different trials.

For Match this is all about money, while Epic has a more strategic and principled perspective. Let's put it this way: Match is not the perfect match for Epic. But it's the only other major developer at this stage to be prepared to join Epic in suing a gatekeeper.

Google raises potential issues about the proposed formats that can't just be ignored. In my opinion, the only alternative to a complete postponement would be to try Epic's case separately from all others (plaintiff states, Match, consumer class)--and that could actually be done in a bench trial ("injunction prohibiting Google’s anti-competitive and unfair conduct and mandating that Google take all necessary steps to cease such conduct and to restore competition"; "declaration that the contractual restraints complained of herein are unlawful and unenforceable").

I wonder whether Google will also seek appellate review of a sanctions order, and what would happen if such a petition succeeded to the extent that the appeals court would wnt to take a look, but it's too early to tell.

Here's Google's reply in support of its motion to postpone the trial, which will be heard on April 20:

In Re Google Play Store Antitrust Litigation (case no. 3:21-md-2981-JD, N.D. Cal.): Defendants' Reply in Supprot of Motion to Defer or Stay Trial

Implications for sanctions motion in United States et al. v. Google (D.C.)

This here is just a minor update. The motion for sanctions over Google's spoliation of evidence in the search engine case in the District of Columbia was inspired by the sanctions motion in California, and the United States' reply brief very heavily relies on evidence from the California case.

Judge Amit P. Mehta in D.C. will have to make some procedural decisions now, such as whether (or, more likely, when) to conduct an evidentiary hearing.

Any upcoming filings in California concerning the extent of the prejudice could also be used in the D.C. case. Prejudice is issue-specific, but the search engine case also has an Android component, which is why "Project Hug" was discovered there first (while the California case is ahead with respect to spoliation sanctions).

The final document to show in this post is the plaintiff states' reply in support of their motion for sanctions, which is structurally similar to the DOJ's argument but tackles the issue from partly different angles:

State of Colorado, et al., v. Google LLC (case no. 1:20-cv-3715-APM, D.D.C.): Plaintiff States' reply in Support of Their Motion for Sanctions Against Google, LLC and an Evidentiary Hearing to Determine Appropriate Relief

Share|

U.S. Department of Justice reinforces motion for spoliation sanctions against Google, heavily relies on evidence from Epic Games case and points to Google's untruthfulness

On February 23, the Department of Justice (DOJ) on behalf of the United States brought a motion for spoliation sanctions against Google in the United States District Court for the District of Columbia. That motion referred to parallel proceedings over the same issue--the automatic deletion of "history off" Google chats after 24 hours and Google's employees' systematic use of "history off" chats for discussions involving allegedly anticompetitive behavior--as a motion by Epic Games and its co-plaintiffs (including three dozen state AGs) in the Northern District of California. In fact, the D.C. motion would likely never have been brought if not for Epic's persistent and investigative efforts.

On March 17, Google filed its opposition brief (which I've uploaded to DocumentCloud). Google argued that the plaintiffs in the D.C. search engine case were not prejudiced and, above all, that the motion was brought way too late.

Only 11 days later, Judge James Donato in San Francisco determined that Google had to be held responsible for spoliation of evidence. The first sanction he imposed is not important per se: just a reimbursement of fees. The big one--which will be non-monetary, but not "terminating"--is to be determined after the close of the (additional) fact discovery (April 7). What was remarkable about that order is that Judge Donato essentially accused Google's lawyers of having lied.

The DOJ reacted swiftly. It notified the California sanctions order to Judge Amit P. Mehta in D.C. on the same day it issued (Tuesday, March 28).

Yesterday (Friday, March 31) the DOJ filed its reply brief in support of its motion for sanctions:

United States of America, et al., v. Google (case no. 1:20-cv-3010-APM, D.D.C.): The United States' Reply in Support of Its Motion for Sanctions Against Google, LLC And an Evidentiary Hearing to Determine the Appropriate Relief

That file has more than 100 pages because I've also uploaded all publicly accessible exhibits. One can see that the evidentiary body here basically comes from the Epic litigation in California. Also, there's an excerpt from a San Francisco hearing transcript.

That reply brief is very well-crafted. I can't imagine that Judge Mehta would throw out the motion, at least not without the evidentiary hearing that the DOJ reasonably requests.

Frankly, the evidence is overwhelming that Google employees--all the way up to CEO Sundar Pichai--purposely used "history off" chats for sensitive discussions. There is even evidence of employees who wanted to act lawfully and have those chats recorded drawing internal pushback.

The evidentiary body for prejudice may become more robust. As I noted in my post on the California order, Google's Revenue Share Agreements (RSAs) with Android device makers are indeed at issue in the D.C. litigation and were mentioned in some of the Epic documents. The DOJ is currently reviewing 20,000 chats that it received after it brought its motion. And "recently produced chats show that Google discusses substantive business over chats with third parties—also instructing those third parties to communicate with care." So there already is quite some evidence, and this here is particularly damning:

"[...] Google’s Finance Director (and a deponent in this case) noted that 'the DOJ case is making the content very sensitive to share via email these days.'"

Like Epic, the DOJ notes that even Google's CEO "regularly turned 'history off so that we can speak (more) freely.'"

The DOJ seeks to dismantle Google's untimeliness argument using two attack vectors. One is that the DOJ argues that spoliation motions are not time-barred. In this context, the DOJ notes that the alternative would mean "flood[ing] courts with sanctions motions over what are often routine discovery conflicts" by filng motions "at the first hint of any potential issue." While it's just an out-of-circuit district court decision, the United States District Court for the District of Alaska stated it quite well when it wrote in a 2016 ruling that "a party need not file a motion at the first inkling of spoliation but is entitled to gather evidence . . . before filing a motion."

There may nevertheless be an untimeliness argument in some cases. But here there's an important factor:

"Google did not fully disclose its chat retention policy until January 2023. Following that disclosure, the United States timely moved for relief. The Federal Rules do not absolve Google’s spoliation because it previously provided partial information about its chat preservation policies.

"Google averred that it 'put a legal hold in place' which 'suspends auto-deletion' in November 2019. [...] The United States relied on that assertion."

Therefore, "it was only after the Epic sanctions motion was filed in October 2022 that the United States began to learn the full scope of Google’s chat preservation policies and its employees’ chat practices."

Google seeks to benefit from misrepresentations and stonewalling. I can't imagine that such a strategy will work. In the end, Judge Mehta will face the same dilemma as Judge Donato: to determine the proper sanctions, taking into account Google's misconduct on the one hand and the enormous implications of those huge antitrust cases--which no one would be comfortable deciding based on spoliation alone--on the other hand.

Share|

Epic v. Google judge chides Google for unrepentance and lying about chat deletion, non-monetary sanctions TBD after April 7 discovery cutoff: implications for United States et al. v. Google

Two months after I wrote that "sanctions loom large" over Google's systematic deletion of chats about legally sensitive topics, that prediction and the fact that this blog has written about the topic more often than any other (non-paywalled) website--see the link list in this recent post--have been vindicated. Yesterday, Judge James Donato of the United States District Court for the Northern District of California, who is presiding over multiple consolidated Google Play Store antitrust cases (brought by Epic Games, three dozen state AGs, Match Group, and class-action plaintiffs), entered his findings of fact and conclusions of law, ordering monetary sanctions first (recovery of attorneys' fees) and announcing that non-monetary sanctions will be determined a little later:

In Re Google Play Store Antitrust Litigation (case no. 21-md-2981-JD, N.D. Cal.): Findings of Fact and Conclusions of Law re Chat Preservation

If this was about the actual merits of the case, that order would amount to

• an entry of liability (Judge Donato finds that Google is guilty of spoliation of evidence),

• a decision on a first minor remedy (recovery of fees, with the exact amount to be determined now), and

• a holding that a remedy of a certain category (at an abstract level, comparable to injunctive relief) is warranted, though more information is needed to make that determination.

• Furthermore, Judge Donato reiterated that a "terminating sanction" won't issue. So what the plaintiffs and Google know now is that there will be a non-monetary sanction that will have an impact on the adjudication of the case (unlike a fee award, which doesn't really matter between those parties), but it won't be fatal to Google's defenses. Comparing this again to a merits decision, it's like a judge saying that an injunction will issue, but it will have to be reasonably narrowly tailored.

Judge Donato notes that "[p]roportionality is the governing concept here." In order to have as solid a factual basis as possible for determining what remedy "fit[s] the wrong," he "would like to see the state of play of the evidence at the end of fact discovery." Fact discovery in this litigation was reopened after Epic and Match were allowed (in mid November 2022) to amend their complaints. As per a stipulation granted by Judge Donato, the cutoff date for that supplemental discovery is April 7 (next week's Friday). Thereafter, "plaintiffs will be better positioned to tell the Court what might have been lost in the Chat communications."

Proportionality must go both ways. Judge Donato "fully appreciates plaintiffs’ dilemma of trying to prove the contents of what Google has deleted." So the really tricky part is still ahead of the court and the parties. The remedy--some jury instruction--must not be disproportionate in terms of penalizing Google to an undeserved extent. At the same time, it would also be unfair if the absence of certain evidence that is totally due to Google's misconduct resulted in inconsequential sanctions.

I believe the minimum hurdle for Epic and its co-plaintiffs will be to show that Google employees likely discussed topics relevant to this particular antitrust litigation--such as "Project Hug" (see the previous link)--by chat. The hurdle for that should not be insurmountable.

The order rebukes the way in which Google has been dealing with this issue:

"Google clearly had different intentions with respect to Chat, but it did not reveal those intentions with candor or directness to the Court or counsel for plaintiffs. Instead, Google falsely assured the Court in a case management statement in October 2020 that it had 'taken appropriate steps to preserve all evidence relevant to the issues reasonably evident in this action,' without saying a word about Chats or its decision not to pause the 24-hour default deletion. [...] The Court has since had to spend a substantial amount of resources to get to the truth of the matter, including several hearings, a two-day evidentiary proceeding, and countless hours reviewing voluminous briefs. All the while, Google has tried to downplay the problem and displayed a dismissive attitude ill tuned to the gravity of its conduct. Its initial defense was that it had no 'ability to change default settings for individual custodians with respect to the chat history setting,' [...] but evidence at the hearing plainly established that this representation was not truthful."

In other words, Google's lawyers are liars according to the order. That's harsh, but it doesn't look like this is formally going to have an impact on the severity of the non-monetary sanctions to be ordered in the coming months. It is, however, the kind of stuff that will hurt Google when it appeals the decision, which I'm sure it will. Google even likes to appeal decisions prior to final judgment, and in another context but related to this litigation it succeeded to the extent that the United States Court of Appeals for the Ninth Circuit accepted to review a consumer class certification now. On that basis, Google has asked the court to postpone the trial in this litigation (PDF), and in a Twitter thread I agreed that Google had a point:

Google is not saying that the litigation as a whole should be put on hold; it's just about the trial. I consider the motion self-serving BUT reasonable.

Google is under pressure here because of the Google Chats issue involving even its CEO, see https://t.co/ceMJDvbLxG

🧵5/5

— Florian Mueller (@FOSSpatents) March 17, 2023

I want Epic and the other plaintiffs to prevail, and Google is not really concerned about litigation economics, but the fact that the Ninth Circuit is reviewing the class certification decision at this stage does warrant a postponement of the trial in my opinion.

Let's briefly also talk about what this means for the other Google antitrust litigation in which the same spoliation-of-evidence issue is now on the agenda: the first United States et al. v. Google case (in the District of Columbia). A little over a month ago, I commented on the DOJ's motion for sanctions. Meanwhile, Google has filed its opposition brief, which just like in the Northern District of California is the epitome of denial:

United States of America, et al., v. Google (case no. 1:20-cv-3010-APM, D.D.C.): Memorandum in Opposition to Plaintiffs' Motions for Sanctions

Meanwhile the DOJ and the plaintiff states have replied in support of their motion, but those documents are sealed for the time being. Anyway, I doubt that Google will be able to persuade Judge Amit P. Mehta to deny that motion in D.C. without an evidentiary hearing. The San Francisco decision isn't binding on him, but strongly suggests that there is an issue to be addressed.

Interestingly, some of the evidence of Google's systematic deletion of chats that the plaintiffs in the Northern District of California present is actually related to topics at issue in the D.C. litigation over Google's search engine monopoly, such as its revenue sharing agreements (RSAs). The last document I'll show you here was just filed a couple of days ago, and it's an unredacted version of a brief by Epic and its co-plaintiffs. I already published the redacted version in my most recent post on that California litigation, U.S. states, Epic Games, others accuse Google CEO Sundar Pichai of 'routinely opt[ing] to move ... to history-off [c]hats to hold sensitive conversations' in violation of retention obligations. The unredacted document makes it a little clearer what happened there, and the fact that Google's CEO himself sought to delete a message is quite interesting. Also, the unredacted material shows that Google employees were quite aware of what they were doing and why, and in at least one case someone even used a smiley, which is totally inappropriate when enaging in spoliation of evidence. Judge Donato apparently wanted that material to be made public first before issuing his order, given that his order makes even more sense against that backdrop. Here's the unredacted document with lots of exhibits:

In Re Google Play Store Antitrust Litigation (case no. 3:21-md-2981-JD): Unredacted Version of PLaintiffs' Supplemental Brief on Google's Chat Production

Share|

Focus of Activision Blizzard merger debate shifts from concerns to constructive solutions and procompetitive effects: Epic Games welcomes Microsoft's mobile app store plans

If not for my new editorial policy that respects the patent-focused part of my readership, I'd have had a handful of reasons to blog about the Microsoft-ActivisionBlizzard merger review processes since my post on Wednesday, Activision Blizzard acquisition won't close before May 22, Microsoft is prepared to stipulate in San Francisco court. I have, however, commented in real time via Twitter, where many of my recent tweets have received hundreds (often between 500 and 900) likes. This is now a roundup of recent developments.

Momentum for clearance is growing. There are unmistakable signs for that. The tone of the conversation has changed. This is now the solution-finding stage. It's the time for deal makers rather than detractors and obstructors. It is not a solution to urge competition regulators to try to block a deal when they could never defend such decisions in the courts of law--and when there are relevant customer benefits on the table. One of those "RCBs" is directly related to the primary competition concern that the European Commission and the Competition & Markets Authority are trying to address on the basis of new legislation: opening up mobile app markets.

The Financial Times reported yesterday on Microsoft's plans to create--enabled by the acquisition of Activision Blizzard King as well as legislation that demonopolizes the mobile app ecosystems--a mobile app store. That is not entirely new. Microsoft started talking about it shortly after the merger agreement was announced, and specifically described plans to "shift consumers away from the Google Play Store and [Apple] App Store" in a filing with the CMA. This blog was first to highlight that passage in October (followed by The Verge and others).

In the fall Epic Games' founder and CEO Tim Sweeney said he'd be happy to compete with a Microsoft Store on mobile platforms, and he's spoken out even more clearly now:

Microsoft launching mobile app stores to compete with the iOS App Store and Google Play Store is huge news, and highlights that today’s PC stores from Microsoft, Valve, and Epic are tomorrow’s leading contenders to expand to mobile. https://t.co/6yVcxQdaON

— Tim Sweeney (@TimSweeneyEpic) March 20, 2023

He added:

"Microsoft’s core market is way over a billion active users and they want many billions. I love this ambition."

As my readers know, I agree with Epic on a number of app store questions and I'm grateful for their efforts on all developers' behalf. We disagree only rarely, and just at the periphery of those issues.

I believe Epic would speak out even more strongly and clearly in favor of Microsoft's acquisition of ABK if Sony wasn't a shareholder (5% or so) and the PlayStation a key distribution channel. When it comes to opening up mobile app markets, Epic has actually much more in common with Microsoft than with that walled-garden dinosaur.

The FT article confirms what MLex and Reuters have also reported: the commitments (potential merger remedies) Microsoft offered to the EU last week are all about cloud gaming and don't mention any foreclosure concerns related to Sony's PlayStation or Google's Chrome OS, which shows that the European Commission has narrowed its case to gaming services. On Twitter I commented as follows:

After MLex and the FT, Reuters now also confirms Microsoft's remedy offer to the EC doesn't mention Sony.

In other Activision Blizzard news, Epic's Tim Sweeney welcomes Microsoft's mobile app store plans.

Sony has lost control over the narrative. The conversation has moved on!

— Florian Mueller (@FOSSpatents) March 20, 2023

Last week, Microsoft announced two 10-year agreements with cloud gaming companies. After the deal with Boosteroid, which I blogged about, Microsoft announced another agreement with Ubitus, a cloud gaming provider that powers other services:

Microsoft and Ubitus @ubituskk, a leading cloud gaming provider, have signed a 10-year partnership to stream Xbox PC Games as well as Activision Blizzard titles after the acquisition closes. Our commitment is to give more players, more choice.

— Phil Spencer (@XboxP3) March 15, 2023

Between Nvidia, Boosteroid, and Ubitus, there are now already three such deals in place. Arguably four, given that Valve (Steam) said they could trust Microsoft and saw no need to contractualize anything.

Those positive dynamics have made Sony lose control over the narrative. In the beginning, the name of the game for them was negativity. It was all about fear, uncertainty, and doubt. That's what got in-depth investigations started in some jurisdictions, though I still believe that the ones who cleared the deal on the fast track (especially Brazil and Chile) got things right by traditional merger review standards. By now, Sony is an entrenched, increasingly isolated, and almost sidelined complainant. It missed more than one opportunity to play a more constructive role. I don't understand that degree of inflexibility.

In order to have enough time for a proper market test of Microsoft's proposed commitments, the European Commission has extended its deadline to May 22--the date that Microsoft previously mentioned as the earliest possible closing date in a filing with the United States District Court for the Northern District of California.

For the class-action lawyers in San Francisco (who've lost a long list of merger cases), it's now back to the drawing board. Judge Jacqueline Scott Corley granted Microsoft's motion to dismiss because "[t]he Complaint does not plausibly allege the merger creates a reasonable probability of anticompetitive effects in any relevant market." Judge Corley rightly asked: "Why would Microsoft make Call of Duty exclusive to its platforms thus resulting in fewer games sold? What is it about the console market or PC games market and Microsoft’s position in those markets that makes it plausible there is a reasonable probability Microsoft would take such steps." Here's the order (my commentary continues below the document, where I'll also provide an updated timeline chart):

DeMartini et al. v. Microsoft Corp. (case no. 22-cv-8991-JSC, N.D. Cal.): Order Granting Motion to Dismiss

The class-action lawyers now have 20 days to file an amended complaint. I guess they'll try, and Judge Corley appears to expect the same, which is why she still has a case management conference on her calendar for April 12. But will their amended complaint fare better? Will they ever meet the "Twiqbal" plausibility requirement? I doubt it.

Given that the private lawsuit in California was largely just copied from the FTC's complaint, what does that decision mean for the FTC? I want to be fair. The FTC obviously knows a lot more about the case than those class-action lawyers do, and chances are that the FTC has better lawyers. While I disagree with the FTC on this merger topic, I know that sooner or later I'll find myself in a U.S. courtroom again watching them defend competition. It's fair to say that the dismissal of the "FTC copycat" lawsuit in San Francisco also indicates that the FTC won't easily persuade a federal judge of its theories, but it's equally correct to say that the FTC would probably have done a better job, so the outcome could have differed gradually.

What should give the FTC pause is the combination of Judge Corley's order and the more solution-oriented position taken by the EU Commission. And there's this backdrop of growing criticism of Lina Khan's leadership of the FTC.

All things considered, now might be a good time for the FTC to look at Microsoft's remedy proposals to the EC and think hard about whether that could be a starting point for discussions. At the first FTC v. Microsoft & Activision Blizzard hearing in early January, Microsoft's counsel said that they hoped to be able to work things out with the FTC after agreeing on solutions in the EU and/or UK. That is now the case, at least with a view to the EU, but arguably also in the UK, where Microsoft submitted a "self-executing" access remedies proposal.

Last week, the UK Competition & Markets Authority (CMA) published Microsoft's response to its provisional findings. Two parts of it were particularly noteworthy. A chart shows the extent to which most console game publishers are dependent on the PlayStation:

This chart from a #Microsoft filing released by the #CMA today shows how (most) publishers are dependent on the #PlayStation. pic.twitter.com/QEDVoC8nP6

— Florian Mueller (@FOSSpatents) March 16, 2023

But Microsoft also detected a clear error in the CMA's PlayStation-related foreclosure theory:

#Microsoft says the #CMA's determination of whether foreclosure is profitable is based on the FIVE-year profits from an additional #Xbox user while considering only ONE year of lost CoD revenues.

Quite an asymmetry.

Once normalized, the result is: foreclosure is UNprofitable.

— Florian Mueller (@FOSSpatents) March 16, 2023

The numbers presented by the CMA itself show that foreclosure would be vastly unprofitable as soon as an error (comparing a one-year term to a five-year term) is corrected. I wouldn't attribute this to malice, but the CMA can do better than that for sure.

Just like the EC stressed that it might reach different conclusions from regulators in other jurisdictions (probably alluding to the FTC more than to anyone else), the CMA has the same right. But if the numbers aren't there, why should the CMA not find a way to make it work? It would definitely be desirable to have a reasonable degree of consistency between the remedies agreed upon in the UK, U.S., and EU.

Sony is asking for too much if it wants the CMA to swim against the tide and take an unconstructive outlier position that it won't be able to defend in court. The EU won't block the deal. In the U.S., the FTC may or may not become constructive, but sooner or later it will lose in federal court.

Finally, here's my updated timeline chart, which reflects the postponement of the EU decision and the dismissal (without prejudice) of the private lawsuit in California (click on the image to enlarge):

Share|

U.S. states, Epic Games, others accuse Google CEO Sundar Pichai of 'routinely opt[ing] to move ... to history-off [c]hats to hold sensitive conversations' in violation of retention obligations

Since the "Google Chats" discovery dispute started with a motion by dozens of state AGs, Epic Games, Match Group, and other plaintiffs in October 2022, it has made Google's behavior look worse as more information came to the light of day. The issue has also widened because the DOJ and the same state AGs as in the litigation that was originally started by Epic brought a motion for sanctions in the United States et al. v. Google antitrust litigation in the District of Columbia. Both cases are scheduled to go to trial later this year, and the plaintiffs are seeking trial-related sanctions as opposed to a slap on the wrist.

The latest filing by the plaintiffs in the Northern District of California takes the topic to a new level: Google CEO Sundar Pichai himself is being accused of playing a key role in this. Despite heavy redactions, the following passage is revelatory:

"The newly produced Chats reveal a company-wide culture of concealment coming from the very top, including CEO Sundar Pichai, who is a custodian in this case. In one Chat, Mr. Pichai began discussing a substantive topic, and then immediately wrote: '[REDACTED]' Then, nine seconds later, Mr. Pichai [REDACTED]. [...] When asked under oath [REDACTED]' (Id. Ex. 2, Pichai Dep. Tr. 195:7-12.)

"Like Mr. Pichai, other key 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. Indeed, they did so 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." (emphasis in original)

It's a safe assumption that the above passage tells the story of Mr. Pichai himself having moved a conversation from a history-on to a history-off chat. The first redaction likely means that he realized that the topic should not be discussed with history on, and what he did "nine seconds later" will either have been that he turned history off or that he opened a new chat with history off from the beginning.

This is the filing by Epic and its co-plaintiffs that was made a few hours ago in response to a court order:

In Re Google Play Store Antitrust Litigation (case no. 3:21-md-02981-JD, N.D. Cal.): Plaintiffs' Supplemental Brief on Google's Chat Production

Google was also ordered to make a statement, and unsurprisingly Google continues to deny any wrongdoing or prejudice:

In Re Google Play Store Antitrust Litigation (case no. 3:21-md-02981-JD, N.D. Cal.): Google's Supplemental Breif in Response to the Court's February 27, 2023 Minute Order

From the outside it appears very, very difficult to imagine that Google will get away with what it's done. The courts in California and D.C. will most likely feel forced to impose sanctions. Let us not underestimate how unpleasant this situation is for the two district judges:

• Google's systematic avoidance of discovery obligations cannot be tolerated, or draw only symbolic sanctions, without calling the whole system of pretrial discovery and retention obligations into question.

• Both cases--the Android app store antitrust case in San Francisco and the search engine monopoly maintenance case in Washington--are among the most important U.S. antitrust cases in history. Adverse inferences could make a major impact.

  It would obviously have been preferable for Google not to delete those chats, and then the cases could be decided strictly on the actual evidence. Now it's too late.

Nothing has happened yet about the sanctions motion in the District of Columbia. In California, Judge James Donato has gone to extreme lengths to establish the facts. The discovery dispute there is now getting to the point where a decision will come down.

I also have a brief update on a third Google antitrust case: the ad tech case that was filed in the Eastern District of Virginia in January. Google has requested that the case be transferred to the Southern District of New York, where a multidistrict litigation panel decided to consolidate various other ad tech cases (compared to which Google claims the DOJ's case adds nothing new, though it comes years after some others). Google acknowledges, however, that the DOJ's cases are immune to consolidation. It's just that Google sees no particular reason why that case should be litigated in the Eastern District of Virginia, and it argues that the DOJ's convenience (owing to geographic proximity) is not a major factor. Google may indeed win that venue transfer, given that there is a district judge in New York who's already very familiar with the issues.

Share|

DOJ seeks sanctions over Google's systematic deletion of chats: more cross-pollination between United States et al. v. Google (D.C.) and In Re Google Play Antitrust Litigation (N.D. Cal.)

In the first of its two (possibly soon to be three) Google antitrust lawsuits, the Department of Justice filed a motion yesterday with the United States District Court for the District of Columbia, requesting that Judge Amit P. Mehta impose spoliation-of-evidence sanctions on Google over its systematic deletion of "history off" Google Chats after 24 hours. The motion proposes an evidentiary hearing over this issue.

This is only the latest example of United States et al. v. Google (in the District of Columbia) and In Re Google Play Antitrust Litigation (Northern District of California) being two highly interdependent cases--with some of the interdependencies being more than just procedural in nature. This blog has talked more about the Google chat preservation issue than any other (at least any other non-paywalled) website because the issue first arose in San Francisco (where the plaintiffs are three dozen state AGs, Epic Games (Fortnite), Match Group (Tinder), and some class-action lawyers). The DOJ motion explicitly refers in its D.C. motion to the California case, where an evidentiary hearing over this same issue was already held last month. The DOJ makes it clear that the developments in California inspired the motion in Washington. For example, two of the headlines speak for themselves:

"After The Epic Sanctions Motion, The United States Raised Concerns Regarding Spoliation In This Case"

"The Subsequent Epic Evidentiary Hearing Reveals Document Destruction"

Here are some previous FOSS Patents post on the Google Chats sanctions process in California (in reversely chronological order):

• 01/28/23: States, Epic Games, Match Group show smoking guns for Google's spoliation of evidence by moving sensitive talks to 'history off' chats: sanctions loom large

• 01/25/23: 36 states, Epic Games, Match Group allege Google had 'culpable state of mind' when auto-deleting relevant Google-internal chat messages: Google obviously denies

• 11/17/22: U.S. states, Epic Games, Match Group, consumers get evidentiary hearing over Google's systematic deletion of company-internal chats: Northern District of California, mid January

• 11/11/22: U.S. states, Epic Games, other plaintiffs reinforce motion for discovery sanctions against Google over systematic deletion of chats

• 10/14/22: 36 U.S. states, Epic Games, and consumer plaintiffs seek sanctions against Google for not preserving any relevant Google Chats: by default, all Google Chats are permanently deleted every 24 hours

There have previously been at least two other overlaps, connections, and interdependencies between those two Google antitrust cases:

• The scheduling of the San Francisco trial over Android app distribution was affected by the Washington D.C. trial, which will start on September 12. The witness lists overlap. In order to avoid scheduling conflicts, Judge James Donato scheduled his Google Play Store trial for November. The plaintiffs in that case remain concerned about the potential impact of the Thanksgiving holiday.

• The D.C. case is about Google's monopoly maintenance in the search engine market, and one aspect of it is that Google is the default search engine on Android devices. When state AGs involved with both of those Google antitrust litigations became aware of Google's dealings with other game makers by virtue of the D.C. case, that information was used in their 2021 California complaint, which then got consolidated with the Epic Games and class-action lawsuits that were already pending for about a year. That was the time when Google's "Project Hug" initiative to dissuade game makers from distributing their games outside the Google Play Store became an issue in the California litigation. By now that story has even given rise to a per se claim by Epic and Match, and we've learned that Google paid $360M to Activision Blizzard King alone (and other significant amounts to approximately 20 other publishers).

Back to the Google Chats discovery dispute: Let me first show you the DOJ's motion and then also the most recent minute order by Judge Donato in San Francisco, which shows that the noose may be tightening quickly around Google's neck now.

United States of America et al. v. Google (case no. 1:20-cv-3010-APM, D.D.C.): Memorandum in Support of the United States' Motion for Sanctions Against Google, LLC And an Evidentiary Hearing to Determine the Appropriate Relief

In my interpretation, the motion suggests that the DOJ has drawn a similar conclusion from watching the sanctions process in California as I did when I said (in one of the posts I linked to further above) that Epic and its co-plaintiffs had presented smoking guns. But the DOJ also had to act now with a view to the September trial date. The motion assures the court that the sanctions process does not require postponing the actual trial, and that makes sense--but they couldn't wait forever.

Last spring, Google came away unscathed in D.C. over another discovery issue: its "Communicate with Care" policy, which in the DOJ's opinion abused the attorney-client privilege. Some reference to "Communicate with Care" is also made in the latest motion, but the case for sanctions is now a lot stronger, and the key difference actually relates to what the consequences should be: if evidence has been destroyed, for which there is an extremely strong case here, the solution can't just be to go over a bunch of emails again and revisit privilege assertions like in the "Communicate with Care" context. There has to be an inference.

The DOJ says "Google’s daily destruction of written records prejudiced the United States by depriving it of a rich source of candid discussions between Google’s executives, including likely trial witnesses." Also: "Google destroyed written records covering nearly four years of employee communications, and those records likely would have been especially probative."

More specifically, the DOJ describes the potential impact of Google's systematic-automatic deletion of chats on the D.C. case by pointing to testimony according to which two Google executives chatted--with "history off"--about "Project Banyan, ... a potential collaboration with Samsung on app stores" that according to the DOJ was "worth hundreds of millions of dollars." That Project Banyan is at issue in both the California case over the Google Play Store and the D.C. case. A footnote of the DOJ's motion notes that "[Google executive] Mr. Rosenberg was shown Project Banyan documents during his deposition in [the D.C.] case."

The sanctions process in San Francisco is already at an advanced stage. It seems to me--and I say this with caution because I didn't attend any of the hearings (and the most interesting parts may have happened behind closed doors anyway)--that Judge Donato in California managed the sanctions process very well with his iterative approach. Step by step he obtained clarifications and asked the parties to make their arguments. Last week he entered the following minute order, which suggests that sanctions indeed loom large:

ORDER. For Google's production of additional chats, see MDL Dkt. Nos. 440, 451, Google must at minimum produce all chats that have been preserved for Custodians 1 through 383 (as identified in Dkt. No. 429-2) that are: (1) responsive to any search term the parties have agreed to in this litigation (as proposed by Google in Dkt. No. 451 at 6), OR (2) responsive to these additional terms: "sensitive," "history off," "history is not off," "history on," "history is on," "off the record," or "on the record."

To be clear, for the latter set of terms, Google may not limit its production to only those chats that discussed "turning history 'on' or 'off' in connection with the topics of this case or in connection with [a] legal hold, investigation, regulatory proceeding, or litigation." Dkt. No. 451 at 8. The responsive chats must be turned over without the additional limitation of being responsive to the search terms in this case or being connected to a legal hold, investigation, regulatory proceeding, or litigation.

Google must complete the production of these chats by February 24, 2023, at 5:00 p.m. California time at the latest. This deadline will not be extended. Google may conduct a responsiveness and/or privilege review only to the extent it can do that and still meet this deadline. To the extent Google decides against a privilege review, including for any subsets of custodians, plaintiffs will agree to a "broad non-waiver agreement allowing the clawback of any privileged material," as they have proposed. Dkt. No. 451 at 4.

Signed by Judge James Donato on 2/15/2023.

That's a rather strict tone. Google's lawyers have been trying for a while now to downplay the issue and to put up smokescreens, but Judge Donato wants the truth to come out--and as far as I can see, he's not asking for too much (such as a manual review of millions of documents).

Finally, a quick follow-up to the substantive issues in the D.C. case (United States et al. v. Google I):

Five days ago I wrote about the DOJ's and the state AGs' opposition briefs to Google's motion for summary judgment (U.S. states liken Google's various anticompetitive actions to octopus tentacles; DOJ says 'Google has bought, not earned, at least 33% of all U.S. searches'. Professor Herbert Hovenkamp commented on that, highlighting the key question, which is that defaults are not ties (defaults can be changed by customers, ties cannot):

The U.S. brief relies heavily on defaults, which are not ties. With a market share >90%, are multiple defaults (Android, Apple, several browsers) unlawful? Google notes defaults can be changed. Should their effect be treated as an empirical question? unlawful as a matter of law? https://t.co/FxzMD46mb8

— Herbert hovenkamp (@Sherman1890) February 19, 2023

Google's argument is that this is not really foreclosure, and if it is, then only to a negligible extent because most users would choose Google anyway. But there is evidence that Bing--Google's only competitor (and now even more so than ever)--gets far more usage where Google is not the default search engine. Shortly after the DOJ's and the state AG's opposition briefs, two amicus curiae briefs were filed. The American Antitrust Institute supports the plaintiffs, but what I find more interesting is the following amicus brief by three behaviorial economists (including one from Munich by the way) about the immense Power of Default:

United States of America et al. v. Google (case no. 1:20-cv-3010-APM, D.D.C.): Brief of Behavioral Economists George Loewenstein, Klaus M. Schmidt, and Paul Heidhues as Amici Curiae in Support of Plaintiffs

There'll be more discussion about the Power of Default--in both of the Google antitrust litigations discussed in this post.

Share|

States, Epic Games et al. v. Google jury trial over app store rules scheduled for November 6--another major Google antitrust trial (first DOJ case) starts on September 12

"Remember, remember, the 5th 6th of November" (and the 12th of September):

• Judge James Donato of the United States District has formally approved a case schedule negotiated between Google and the Google Play Store antitrust plaintiffs (three dozen U.S. states, Epic Games, Match Group, and a consumer class action) and set the In Re Google Play Store Antitrust Litigation (case no. 3:22-cv-2746-JD, N.D. Cal.) jury trial in San Francisco for November 6, 2023.

  This means the trial will be interrupted by the Thanksgiving holiday (November 23), though it is unclear whether the trial will be interrupted for a full week or just a very long weekend.

• As previously reported, Google already has a huge antitrust trial coming up in the last third of this year: on September 12, the United States et al. v. Google trial in the District of Columbia will go ahead.

  That case has already impacted the California app store case because of the information the three dozen state AGs obtained through discovery in the D.C. case.

  Google has moved for summary judgment against the DOJ and the state AGs, who have meanwhile filed their opposition briefs, which are sealed for the time being. When Google filed public redacted versions of its SJ motions, I provided an overview of its theories. I don't expect the whole case to go away, so the September trial is going to happen in one form or another.

  It will be a "trying" final third of the year for Google's legal department as the stakes are extremely high in either one of those antitrust cases. The DOJ and eight states recently filed another Google antitrust complaint (over adtech).

The hearing minutes in which Judge Donato stated his approval of the November 6 trial date are primarily about the continued fight over sanctions that may be imposed on Google for systematically moving sensitive discussions to chats that were then automatically deleted after 24 hours. The governmental and private plaintiffs were able to show some smoking guns. Judge Donato has ordered further productions and would like the parties to "meet and confer about which of the relevant custodians still have their history setting turned to 'off' for any of their chats, and whether Google should now change those default history settings to 'on' for the core set of relevant custodians as the parties agree." It looks like some spoliation-of-evidence sanctions are rather likely, and the question may just be how impactful they will be.

Share|

U.S. states, Epic Games, Match Group remain concerned about November trial in Google Play Store antitrust case being impacted by Thanksgiving holiday

Late on Monday, the plaintiffs (36 state AGs, Epic Games, Match Group, and consumer class-action plaintiffs) and Google submitted a joint proposed schedule that would allow their antitrust litigation in the Northern District of California to go to trial in the fourth quarter:

In Re Google Play Store Antitrust Litigation (case no. 3:21-md-02981-JD, N.D. cal.): Joint Statement Re: Proposed Case Schedule and Trial Structure

The two sides managed to work out an agreement on a variety of pretrial deadlines, such as an April 20 deadline for dispositive and Daubert motions, and they are all fine with holding a final pretrial conference on October 19. But there are two case management questions on which the court will have to decide because the parties have different positions and interests.

The parties have sort of agreed that the jury trial will begin on November 6, 2023, but the plaintiffs "respectfully request the opportunity to discuss with the Court the impact of the Thanksgiving holiday on the trial and the possibility of an alteration of the trial date." Google opposes any trial date earlier than November 6 because of a potential conflict with the trial in the first United States et al. v. Google case in the District of Columbia (meanwhile the DOJ has brought a second federal complaint). But as Judge James Donato said at a December 16, 2021 hearing, he anticipates an approximately three-week trial. This means the trial--if it indeed starts on November 6--would be interrupted by Thanksgiving (November 23, 2023).

The plaintiffs were previously concerned about Thanksgiving potentially impacting jury deliberations. That concern was reasonable: while jury deliberations often conclude within a matter of days, it sometimes takes longer, especially in complex cases like this one. With the current schedule, the problem is not that the jury might rush to a verdict because of that holiday approaching, but the trial would have to be interrupted. Many Americans like to take the entire Thanksgiving week off. What will the district court do? If the trial starts on November 6, there are only two weeks before Thanksgiving week, meaning that everyone would have to return after Thanksgiving, listen to another week of testimony, and closing arguments, and then start deliberating.

The court will instruct jurors not to do their own research on the case, such as reading about it on the internet, and not to discuss the case with others. But if the trial is interrupted for a long weekend or a full week, and people spend a lot of time with their families, it's hard to imagine that there wouldn't be at least some violations of that rule. If any such violations become known, jurors have to be disqualified, and at some point there might not even be enough jury members left to render a verdict. It's a tricky situation.

If the trial started right after Thanksgiving, then there would be a conflict with Christmas in the event of protracted jury deliberations.

The trial would be shorter, however, if Google's breach-of-contract counterclaims against Match and Epic were severed from the antitrust case and tried separately. Google argues that "the resolution of the counterclaims will require the presentation of evidence, witnesses, and issues that duplicate the proof presented in the trial on Plaintiffs’ claims"--and that is a valid efficiency argument, though Google's motivation here is simply that it wants to portray Epic Games and Match Group as parties who breached a contract and thereby influence the jury's thinking on the antitrust issues. The plaintiffs have a point that "the claims are irrelevant and hence inadmissible as to States and Consumers and will consume precious time in the trial on core antitrust issues," which is why they will bring a motion to sever those counterclaims.

I regret to say that Google's efficiency-centric argument, while unrelated to Google's actual agenda, appears a lot stronger than the upcoming request for severing its counterclaims can possibly be.

It's unclear whether the trial can really be held before the end of the year. Unless the court simply sets a (much!) earlier trial date than November 6 and tells Google that any conflicts between the D.C. and California trials (such as overlapping witnesses) will be resolved as they arise, it may actually be better to hold a trial in January 2024 that won't be interrupted by a holiday around which people like to take an entire week off. I want the plaintiffs to prevail, and I want them to win as soon as possible in the interest of the app economy at large, but there are logistical issues.

Judge Donato will preside over the continuation of the Google Chat preservation hearing later today, and discuss case management with the parties on the same occasion. The plaintiffs have a strong case for discovery sanctions as I explained a few days ago.

Share|

States, Epic Games, Match Group show smoking guns for Google's spoliation of evidence by moving sensitive talks to 'history off' chats: sanctions loom large

The Tuesday (January 31) hearing related to Google's auto-deletion of chats (as part of the Google Play Store Antitrust Litigation in the Northern District of California) is hardly going to be pretty for Google. I've commented on that sanctions process a few times, most recently on Wednesday (in that post you also find links to my previous articles on that issue), and sometimes it feels like I'm the only one to follow the process in granular detail. But once the court slaps Google with sanctions--which is quite a possibility now--the topic may draw considerably more attention.

Shortly before midnight local time on Friday, the two sides filed their responsive post-evidentiary-hearing briefs. You can find them at the end of this post.

The plaintiffs are going for the jugular by asking for punitive sanctions. But that doesn't mean they're wrong: it's a problem of Google's own making. I must say that some of the evidence referenced in and attached to their latest filing strongly suggests both that Google had a culpable state of mind and that the plaintiffs were indeed prejudiced. Should the plaintiffs' position be overreaching, than only to a gradual extent as far as I can see based on the evidence that has been put out in the open.

Google's argument comes down to saying that there are millions of documents--enough to build a case on--and that even if anything relevant was said in those Google-internal chats, it wouldn't add anything new. Well, with a view to both the "culpable state of mind" and extent-of-prejudice questions, there's some pretty damning evidence of Google systematically discussing sensitive issues in non-saved chats. This is evidence that Judge James Donato may not take lightly. It shows that Google just gives lip service to the preservation of evidence by pointing to its encouragement of using chat history or of saving key messages on email: as the plaintiffs note, it's just not realistic that busy managers will be able to make a determination on whether a chat is or is not relevant to a huge and complex case. The only solution is to save everything and have discovery attorneys take a look. But that's what Google wanted to prevent from happening:

• In a 2018 document, Google discussed "smart replies", meaning that a chat system proposes likely answers; for instance, if someone proposes a meeting, the system may offer such choices as "works for me". In that context, the assumption is stated that if the preservation of a chat's history is turned off, the content may be sensitive (click on the image to enlarge):

  

  "The assumption is that users often turn History off to discuss sensitive topics." And it's anybody's reasonable assumption that a Googler wouldn't have written this is if it wasn't Google's own policy. Indeed, Google's "Communicate with Care" guidelines for employees say that having off-the-record charts is "[b]etter than sending the email [about the same thing], but not without risk."

• The plaintiffs point to a hearing exhibit according to which there were Google-internal instructions that "anything sensitive" should be "move[d] to Chat/video call."

• Then there's a document in the evidentiary record where an employee deleted a passage from a Google executive's talking points (concerning some other gaming platform) and wrote:

  "Since it’s a sensitive topic, I prefer to discuss offline or over hangout." (Hangout was one of Google's chat systems, though it could also be used for screen sharing, voice calls, and video conferences.)

• My favorite smoking gun here is that a Google executive (Larry Yang, who was in charge of Fitbit at some point) made the specific distinction between saved and unsaved chats in connection with legal matters (click on the image to enlarge):

  

• What's similar in nature and even specifically related to Epic's lawsuit is a warning by one Google exec to his colleagues that on-the-record chats "remain in perpetuity" (click on the image to enlarge; I added the arrow that points to the critical passage):

  

It seems that Googlers don't always communicate with care about their company's Communicate with Care program...

My primary concern is that Google's "Project Hug"--an effort that resulted in various anticompetitive agreements with the likes of Activision Blizzard and Riot Games, ensuring their loyalty to the Google Play Store--is portrayed by Google as just some kind of customer loyalty program involving other services such as the Google Cloud Platform and YouTube, but I have no doubt that the driving motivation was to ensure all major mobile games but Fortnite would remain on the Google Play Store, and some of the automatically deleted chats probably contained smoking guns to that effect. And that's a key issue: Epic and Match amended their complaint (for Epic, it was even the second amendment) to allege a per se violation of Sherman Act Section 1 through those contracts.

Based on what has been put forward--which is only a subset of what the plaintiffs were able to present to Judge Donato--it seems to me that Google is guilty as charged.

Finally, the briefs with all of the (public) attachments:

In Re Google Play Store Antitrust Litigation (case no. 3:21-md-2981-JD, N.D. Cal.): Plaintiffs' Response to Google's Brief in Response to the Court's Minute Order Questions Regarding Preservation of Chat Messages

In Re Google Play Store Antitrust Litigation (case no. 3:21-md-2981-JD, N.D. Cal.): Defendants' Reply to Plaintiffs' Responses to Minute Order Questions

Share|