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Amended Brief of Defendant and Counterclaim Plaintiff-Appellant My Triggers

Amended Brief of Defendant and Counterclaim Plaintiff-Appellant My Triggers

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Published by Eric Goldman

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Published by: Eric Goldman on Apr 03, 2012
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04/03/2012

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Google is the dominant search engine in the United States, with over an 80% market

share. Amended Answer and Counterclaim of Defendant myTriggers.com, Inc. at ,-r5 (May 19,

2010) ("CC"); Amended Answer and Counterclaim of Defendant myTriggers.com, Inc. at ,-r3

(Sept. 26, 21011) ("Am. CC"). Indeed, both federal antitrust enforcement agencies have

concluded that Google is dominant after investigating the issue:

• In rejecting Google's proposed deal with Yahoo! in :W08, the United States Department
of Justice stated "[tjhe Department's investigation revealed that Internet search
advertising and Internet search syndication are each relevant antitrust markets and that
Google is by far the largest provider of such services, with shares of more than 70 percent
in both markets."

• Similarly, in clearing a search deal between Microsoft and Yahoo!, the Department of
Justice stated "[t]he proposed transaction will combine the back-end search and paid
search advertising technology of both parties. . .. Google [is] the firm that now
dominates these markets."

• Again, in attacking the proposed (and now rejected) Google Books class action
settlement in 2010, the Department of Justice stated "[Google] holds a relatively
dominant market share" of Internet search advertising.

• The Federal Trade Commission has similarly concluded that "Google, through its
AdWords business, is the dominant provider of sponsored search advertising."

The United States District Court for the Southern District of New York has likewise

acknowledged Google's market power, stating that Google's ability to deny competitors access

to certain materials it owns "would further entrench Google's market power in the online search

market." Am. CC,-r 16.

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When a user enters a query into a search engine, the search engine returns two types of

results: natural results (sometimes referred to as "algorithmic" results) and search advertising

results (sometimes referred to as "sponsored" or "paid" results). CC,-r 2. Natural results are

often returned based on an algorithm and are typically displayed on the left and bottom of a

search results webpage. CC,-r 3. Paid search advertising results, on the other hand, are typically

displayed at the right side of a search results webpage and at the very top of the natural results.

Id. Due to Google's dominant position, many web-based businesses rely on Google tor their

livelihood through organic and paid search referrals. Am. CC,-r 9.

Google derives the substantial majority of its $29 billion annual revenue from its paid

search advertising platform known as AdWords. Search advertisements are displayed as a direct

response to a user's keyword search, which the search platform uses to understand what type of

advertisement the user might be interested in seeing. CC ~ 4. The paid search results are

generally displayed on the search results pages as a result of an auction based upon bids

submitted by advertisers for specific keywords or combinations of keywords. The prevailing bid

is typically determined by implementation of a variation of a "second price" auction, where the

winner of the auction pays the price of the next highest bid. !d. However, Google selects

winning bids through a process that is mostly unknown to the bidder. CC,-r 10. Google's CEO,

Eric Schmidt, has admitted that "people do not understand how the auctions really work." Id.

Many commentators have coined Google's advertising system a "Black Box" due to its lack of

transparency. Am. CC,-r 12.

In actuality, Google employs a variety of exclusionary acts that ensure that rivals cannot

divert tratlic to their own competing search websites, particularly if the effect of such diversion

is substantially to compete against Google's search platform, CC,-r 10. Among these acts is

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Google's use of its opaque "quality score" that enables Google to exclude rivals. Id. The

outcome of an AdWords auction therefore is not solely the result of the highest bid but rather is

heavily influenced by Google with limited information provided to the advertiser. Google's so-

called "quality" scoring establishes a minimum pricing threshold that differs across advertisers.

The criteria for determining quality score apparently includes "Landing Page Quality," which is

under Google's exclusive control. Google provides "Landing Page and Site Quality Guidelines"

to advertisers, but ultimately Google determines how many ads to place on its search-results

pages, which ads to place, and in which order to place them. As a result, the advertiser with the

highest bid does not always get the best slots on the page and in many cases that advertiser's ads

are not shown at all. CC ~ 11.

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