Microsoft Corp. Chief Executive Satya Nadella today testified in an antitrust lawsuit that the Justice Department is pursuing against Google LLC.

The case is currently in the third week of what is expected to be an up to 10-week trial. U.S. District Judge Amit Mehta, who is presiding over the case, reportedly has the power to break up Google or order the company to change its business practices.

The Justice Department launched the suit in 2020 over the way Google runs its core search engine business. According to the department, the Alphabet Inc. unit has been using anticompetitive practices to maintain a monopoly in the search and search advertising segments. 

At the heart of the case is an agreement under which Google pays Apple Inc. an estimated $4 billion to $7 billion per year. In return, the iPhone maker keeps Google as its Safari browser’s default search engine. The Justice Department’s lawsuit also encompasses a number of similar agreements that the Alphabet unit has inked with other companies.

Because Microsoft’s Bing is one of the most popular alternatives to Google, the Justice Department called Nadella as a witness in the case. The executive didn’t mince any words during his testimony today. Asked about Google’s agreement with Apple, Nadella described it as a “simple oligopolistic arrangement.”

Nadella said that the agreement harmed Bing’s ability to compete in several ways.

On the witness stand, the executive stated that iOS users have become accustomed to making searches in Google. That force of habit, he continued, is a competitive advantage for the Alphabet unit. “You get up in the morning, you brush your teeth, and you search on Google,” Nadella said. “With that level of habit forming, the only way to change is by changing defaults.”

Nadella also stated that Google has trapped Bing in a “vicious cycle.”

Google commands a more than 90% share of the search market, which means it processes considerably more search queries than Bing. The company uses those queries to improve its search engine. Nadella said the improvements made by Google draw more users who run additional queries, which facilitates further improvements to create a feedback loop.

Ahead of Nadella’s testimony today, Bloomberg reported that Microsoft had considered selling Bing to Apple in 2020. The same report revealed Microsoft has also floated the possibility of investing billions of dollars in a partnership with the iPhone maker. Both of those initiatives, Bloomberg’s sources said, were designed to replace Google with Bing as the default search engine in Safari.

Nadella provided additional details about those initiatives during his testimony. He revealed that Microsoft sought a deal with Apple in a bid to gain access to new search query data, which it could have used to improve Bing.

Making Bing the default search engine in Safari, Nadella explained, would have drawn more users to the platform and thus increased query volumes. Using those additional queries, Microsoft could have improved its search engine, drawn more users and thus created a feedback loop similar to the one Google maintains. 

Nadella divulged that Microsoft was prepared to pay Apple up to $15 billion per year to become its default search engine provider. Furthermore, the company would have been willing to hide the Bing icon in Safari. Nadella believes Apple used Microsoft’s offer to “bid up the price” it received from Google to keep the latter company’s search engine as the default option.

The Justice Department revealed earlier in the trial that Google pays the iPhone maker up to $7 billion per year as part of their agreement. But that revenue isn’t the only reason Apple hasn’t switched to Bing, Nadella argued during his testimony.

According to Nadella, Apple is concerned that Google could create more competition for its Safari browser. The executive explained that the search giant could in theory start more actively promoting Chrome via the interfaces of services such as YouTube and Google Maps. Such an advertising campaign may draw users away from Safari.

At one point during his testimony, Nadella also discussed the potential impact of artificial intelligence on the search market.

In February, Microsoft debuted a new version of Bing with a built-in AI chatbot. At the time, Nadella expressed optimism about the update’s potential to create more competition for Google. But during his testimony today, he noted that advanced AI models such as those that power Bing’s chatbot could have the opposite effect and cement Google’s market position.

“I worry a lot that — even in spite of my enthusiasm that there is a new angle with AI — this vicious cycle that I’m trapped in could even become even more vicious because the defaults get reinforced,” Nadella said.

Bing had a 3% share of the search market when the chatbot launched, Nadella disclosed today. He added that the search engine is profitable. 

Photo: Microsoft