Sundar Pichai returns to court to defend Google for second time in two weeks

In his latest court appearance in San Francisco, Pichai spent more than two hours defending the business practices of the Google Play Store, which distributes apps for the company’s Android software that powers most of the world’s smartphones.

At times, the soft-spoken Pichai looked nonplussed and frustrated by the confrontational questioning he faced. Other times he came across as a professor explaining complex subjects to the trial’s 10-person jury located just a few feet from a podium Pichai was allowed to use because he has difficulty sitting for prolonged periods.

Epic Games, the maker of the popular video game Fortnite, is trying to convince the jury that a Google Play payment processing system that collects a 15% to 30% commission from in-app purchases is illegally hurting consumers and software developers. Google collects those commissions, according to Epic, by using its market muscle to thwart competing Android app stores – a strategy that drives up prices and discourages innovation.

It echoes a previous case that Epic brought against Apple, the iPhone maker that is alternately being depicted as Google foe and ally in this trial.

Pichai’s latest testimony came 15 days after he traveled to Washington, D.C., to take the stand in a separate antitrust trial revolving around the Justice Department’s allegations that Google has stifled competition and innovation by abusing the power of the dominant search engine that launched the company in 1998.

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Although the two trials are unfolding on opposite ends of the country and are delving into different parts of a company that investors value at $1.7 trillion, they are touching upon at least two common issues – Google’s immense power and its unusual relationship with Apple, an even bigger tech powerhouse. A key part of Google’s defense against that allegations that its Play Store is running an illegal monopoly on Android apps hinges on the assertion that the company faces major competition from Apple’s iPhone, mobile operating system and app store.

Meanwhile, the Justice Department’s case against Google in Washington is focused largely on deals that the company negotiated with Apple to ensure Google’s search engine automatically fields queries entered on iPhones and Apple’s Safari browser.

After Monday testimony from an expert witness in the Washington antitrust trial revealed Google shared 36% of its ad revenue from Safari search queries with Apple in 2021, Pichai was forced to confirm the figure Tuesday in San Francisco under often combative questioning by Epic lawyer Lauren Moskowitz.

Things got so tense that before recessing for a short break, U.S. District Judge James Donato described the back-and-forth between Epic’s lawyer and Pichai as a “rocking 75 minutes.”

Before the testimony began, Donato had granted Moskowitz’s request to disclose the precise amount of money that Google paid Apple in 2021 over objections from both Google and Apple lawyers, but she never got that specific.

Instead, Moskowitz got Pichai to acknowledge that Apple received the bulk of the $26.3 billion that Google paid for all of its 2021 deals that locked in its search engine as the automatic handler of queries on smartphones and web browsers. Analysts have estimated Apple’s annual take from Google to be in the range of $15 billion to $20 billion.

Moskowitz also pointed out that Apple’s 36% cut from Google’s search ad revenue in the Safari browser was more than twice the 16% rate paid to Samsung, the biggest seller of Android smartphones. That point seemed to be aimed at painting Apple as one of Google’s biggest business partners, rather than a major competitor.

Although he sometimes seemed to be caught off balance by Moskowitz’s aggressive questioning, Pichai never wavered from his insistence that Google and Android compete “fiercely” with Apple and the iPhone – a rivalry he asserted has given consumers more choices and driven down prices.

“We enable more affordable smartphones,” Pichai said of Android, which Google gives away to Samsung and other smartphone manufacturers for free in exchange for putting the company’s search engine and other services, such as its Play Store, on the devices. That, Pichai added, “is very different from what Apple does.”

Apple’s specter looms over the Play Store in other ways too, given Epic Games already has lost in a similar 2021 trial that targeted the payment system for the iPhone app store.

Although a federal judge sided with Apple on most fronts in that trial, the outcome opened one potential crack in the digital fortress that the company has built around the iPhone.

The judge and an appeals court both determined Apple should allow apps to provide links to other payment options, a change that could undermine the commissions that both Apple and Google collect on digital purchases made within a mobile app. Apple is appealing that part of the ruling to the U.S. Supreme Court.

Evidence submitted during Pichai’s Tuesday testimony showed just how lucrative the Play Store has been for Google. During the first half of 2020, for instance, the Play Store generated an operating profit of $4.4 billion.

Steered by questioning from a Google lawyer, Pichai pointed out that figure didn’t account for the billions of dollars that the company spends on the Android operating system that ensures people have other smartphone options than then iPhone. He also pointed out that 97% of software developers with apps in Google Play don’t pay any fees at all because they either don’t sell digital goods or don’t generate enough revenue to reach the threshold that triggers the commissions.

“The way we designed Google Play is we do well only when developers do well,” Pichai said.