A federal judge has pressed pause on a class action lawsuit accusing Google and Apple of clandestine cooperation ensuring Google would maintain its position as the dominant search engine.
U.S. District Judge Edward Davila issued an opinion Aug. 18, in San Jose federal court, granting a motion to dismiss the antitrust lawsuit from 27 individual plaintiffs who alleged Google and Apple have, since 2005, been operating under a contract in which Google paid Apple a share of its profits in exchange for Apple not creating a competing search engine.
The plaintiffs alleged the deal has been worth billions to Apple, which allegedly enhanced its take by agreeing to use Google as the default search engine for its products. They also, according to Davila, “allege that this agreement was formed and reaffirmed over the course of multiple secret clandestine meetings between the CEOs and Chairmen of Apple and Google —— originally Steve Jobs and Defendant Eric Schmidt in the early 2000s, but presently Defendants Tim Cook and Sundar Pichai.”
“You can actually merge without merging,” Schmidt allegedly said during an iPhone unveiling in 2007. “If we just sort of merged the two companies, we could just call them AppleGoo.”
Calling it a de facto merger, and using picture of a dinner meeting between Cook and Pichai as evidence, the plaintiffs further alleged Bruce Sewell, former Apple general counsel, described the relationship between the two companies as “co-opetition.”
Davila described the complaint’s allegations as largely conclusory, relying on thin evidence. Some of the statements alleged in the complaint lack context or fail to identify the speaker. Although circumstantial evidence could demonstrate an illegal agreement, he continued, the plaintiffs would need to also allege “parallel conduct with plus factors … defined as actions and outcomes inconsistent with economic self-interest but consistent with coordinated conduct.”
An allegation company executives met is insufficient, Davila said, because it “could just as easily suggest rational, legal business behaviors as it could suggest an illegal conspiracy.” The plaintiffs further alleged the agreement central to the first antitrust count also constitutes a conspiracy to monopolize, but Davila dismissed both parts of the complaint while granting the plaintiffs leave to amend their complaint.
Turning to the issue of standing, Davila said the complaint doesn’t adequately allege “an actionable antitrust injury.” The allegations of the legal damages the plaintiffs said they suffered are “vague and conclusory, Davila continued, including that “prices are higher, production is lower, innovation is suppressed, quality is less (in terms of privacy, data protection, and use of consumer data), user choice is reduced, and search results are distorted or steered.”
But search engines are free, Davila said, undercutting a pricing allegation, and the complaint likewise lacks allegations about how Apple offering to not create a search engine kept Google from cutting back on innovation or production or how Google handled user privacy or funneled search results to users. He also said the complaint didn’t adequately define the market that is allegedly monopolized, as the complaint reference both mobile and computer search endings or just the generic American search engine landscape.
“Arguably user choice is less because Apple is not an option, but even that claim is too speculative to establish standing at this stage,” Davila wrote. “Further, plaintiffs have failed to define the relevant market from which their injuries flow.”
Davila also said the plaintiffs are barred by statutory limitations from seeking relief tied to a legal injury before April 22, 2018, four years preceding their lawsuit. Because the complaint doesn’t establish an overt act, he said, it likewise fell short of alleging continuing violations that would reset a statutory clock. The complaint also said the companies fraudulently concealed their agreement, “but the fact that Google and Apple did not announce meetings to the world is not fraud,” he wrote.
Plaintiffs have been represented in the case by attorneys Joseph M. Alioto and Tatiana V. Wallace, of the Alioto Law Firn, of San Francisco.
Apple is represented by attorneys Steven C. Sunshine and Jack P. DiCanio, of Skadden Arps Slate Meagher & Flom, of Palo Alto.
Google is represented by attorneys John E. Schmidtlein and Carol J. Pruski, of Williams & Connolly, of Washington, D.C.