Microsoft’s Satya Nadella testifies on ‘power of defaults’ in Google antitrust case

Google’s search engine is dominant because of the deals locking it in as the default in phones and computers, Microsoft chief executive Satya Nadella testified in an antitrust case in the US. 

Taking the stand in the Justice Department’s case against Google, Nadella said, “Defaults is the only thing that matters in changing search behavior.”

“The entire notion that users have choice, and they go from one website to another website is completely bogus,” he added. “My only argument against that is that users don’t switch.” 

Nadella faced questioning from Department of Justice lawyers and a coalition of state attorneys general who are pursuing legal action against Google. The government claims antitrust violations by Google owing to its alleged monopoly over distribution channels for general search engines, achieved through exclusive agreements with browser and smartphone manufacturers to establish Google as the default search engine on various devices.

Google is estimated to pay Apple between $18 billion and $19 billion annually for default status on iPhones and other Apple devices. Nadella disclosed that Microsoft was willing to spend over $10 billion annually to persuade companies to prioritize its Bing search engine, but Apple remained committed to its long-standing contract with Google.

Before becoming Microsoft’s CEO in 2014, Nadella had led efforts to develop a rival search engine to Google’s, resulting in the launch of Bing in 2009.

Earlier this year, Nadella declared a new competition against Google after Microsoft introduced an updated version of Bing powered by ChatGPT’s AI capabilities. However, Bing has only managed to attract a limited number of users away from Google so far.

“You get up in the morning, you brush your teeth, and you search on Google. With that level of habit forming, the only way to change is by changing defaults,” Nadella said.

Nadella claimed that Google’s existing 90% market share in the search engine market lets it improve its results even more. “it’s a vicious cycle.”

Nadella said on the stand that Google has “carrots and massive sticks” to ensure smartphone makers stay in default contracts with its search engine. “Without Google Play, an Android phone is a brick. That’s the kind of stuff that’s impossible to overcome.”

The power of defaults is one of the key questions of the antitrust case against Google and will continue to come up during the trial. 

While Nadella’s testimony argued that Microsoft’s search engine, Bing, is at a disadvantage because of default settings on devices that make Google the primary search option, Google says that building the best product is the only thing that truly matters and that Bing has never come close to doing that. 

During cross-examination, Google attorney John Schmidtlein suggested that Google had invested significantly more in its search engine as compared to Microsoft’s investments in Bing.

The trial began with the Justice Department presenting its witnesses, including Nadella, and making its case. Google will have the opportunity to present its defense and call its own witnesses starting in late October.

If Google faces penalties in this trial, Microsoft could benefit significantly. Microsoft’s Bing search engine has always lagged behind Google, which holds a 90% market share in general search queries. The Justice Department asserts that Google engaged in anti-competitive practices that hindered rival search engines such as Bing