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Google Antitrust Fight Thrusts Low-Key C.E.O. Into the Line of Fire

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OAKLAND, Calif. — When Sundar Pichai succeeded Larry Page as the head of Google’s parent company in December, he was handed a bag of problems: Shareholders had sued the company, Alphabet, over big financial packages handed to executives accused of misconduct. An admired office culture was fraying. Most of all, antitrust regulators were circling.

On Tuesday, the Justice Department accused Google of being “a monopoly gatekeeper of the internet,” one that uses anticompetitive tactics to protect and strengthen its dominant hold over web search and search advertising.

Google, which has generated vast profits through a recession, a pandemic and earlier investigations by government regulators on five continents, now faces the first truly existential crisis in its 22-year history.

The company’s founders, Mr. Page and Sergey Brin, have left the defense to the soft-spoken Mr. Pichai, who has worked his way up the ranks over 16 years with a reputation for being a conscientious caretaker rather than an impassioned entrepreneur.

Mr. Pichai, a former product manager, may seem an unlikely candidate to lead his company’s fight with the federal government. But if the tech industry’s bumptious history with antitrust enforcement is any lesson, a caretaker who has reluctantly stepped into the spotlight might be preferable to a charismatic leader born to it.

Mr. Pichai, 48, is expected to make the case — as he has for some time — that the company is not a monopoly even though it has a 92 percent global market share of internet searches. Google is good for the country, so goes the corporate message, and has been a humble economic engine — not a predatory job killer.

“He has to come off as an individual who is trying to do the right thing not only for his company but broader society,” said Paul Vaaler, a business and law professor at the University of Minnesota. “If he comes off as evasive, petulant and a smart aleck, this is going to be a killer in front of the court and the court of public opinion.”

Google declined to make Mr. Pichai available for an interview. In an email to employees on Tuesday, he urged Google employees to stay focused on their work so that users will continue to use its products not because they have to but because they want to.

“Scrutiny is nothing new for Google, and we look forward to presenting our case,” Mr. Pichai wrote. “I’ve had Googlers ask me how they can help, and my answer is simple: Keep doing what you’re doing.”

Few executives have faced a challenge like this, and the most iconic figures in the technology industry have wilted under the glare of antitrust scrutiny.

ImageBill Gates testifying before the Senate Judiciary Committee in 1998, shortly before the government filed an antitrust lawsuit against Microsoft.
Credit…Stephen Crowley/The New York Times

Bill Gates, who was chief executive of Microsoft in the last big technology antitrust case brought by the Justice Department two decades ago, came across as combative and evasive in depositions, reinforcing the view that the company was a win-at-all-costs bully. Mr. Gates said last year that the lawsuit had been such a “distraction” that he “screwed up” the transition to mobile phone software and ceded the market to Google.

Mr. Page dealt with impending antitrust scrutiny with detachment, spending his time on futuristic technology projects instead of huddling with lawyers. Even as the European Union handed down three fines against Google for anticompetitive practices, Mr. Page barely addressed the matter publicly.

On a conference call with reporters on Tuesday, officials at the Justice Department declined to reveal whether they had spoken to Mr. Page during its investigation.

In its complaint, the Justice Department, along with 11 states, said Google had foreclosed competition in the search market by striking deals with handset manufacturers, including Apple, and mobile carriers to block rivals from competing effectively.

“For the sake of American consumers, advertisers and all companies now reliant on the internet economy, the time has come to stop Google’s anticompetitive conduct and restore competition,” the complaint said.

Google said that the case was “deeply flawed” and that the Justice Department was relying on “dubious antitrust arguments.”

Google is also the target of an antitrust inquiry by state attorneys general looking into its advertising technology and web search. And Europe continues to investigate the company over its data collection even after the three fines since 2017, totaling nearly $10 billion.

At Mr. Pichai’s side are senior executives who are also inclined to strike an accommodating tone. He has surrounded himself with other serious, buttoned-up career Google managers who bring a lot of boring to the table.

The point person for handling the case is Kent Walker, Google’s chief legal officer and head of global affairs. Though Mr. Walker, who worked at the Justice Department as an assistant U.S. attorney and joined Google in 2006, oversees many of the company’s messiest issues, he rarely makes headlines — a testament, current and former colleagues said, to his lawyerly pragmatism.

Credit…Jim Wilson/The New York Times

Google has appointed Halimah DeLaine Prado as its new general counsel. A 14-year veteran of the company’s legal department, Ms. Prado was most recently a vice president overseeing the global team that advised Google on products including advertising, cloud computing, search, YouTube and hardware. While Ms. Prado doesn’t have a background in antitrust, she has been at Google since 2006 and is, by now, well versed in competition law.

The company is expected to rely heavily on its high-priced law firms to help manage the battle, including Wilson Sonsini Goodrich & Rosati, a top Silicon Valley firm, and Williams & Connolly, which has defended Google in other competition law cases.

Wilson Sonsini has represented Google from the company’s inception and helped it defend itself in a Federal Trade Commission investigation into its search business. In 2013, the agency chose not to bring charges.

Regardless of the legal argument for prosecuting Google as a monopoly, the case may shape the public perception of the company long after it has been resolved.

Until now, Google’s public posture has been a shrug. Mr. Pichai has said that the antitrust scrutiny is nothing new and that, if anything, the company welcomes the look into its business practices. Google has argued that it competes in rapidly changing markets, and that its dominance can evaporate quickly with the emergence of new rivals.

“Google operates in highly competitive and dynamic global markets, in which prices are free or falling and products are constantly improving,” Mr. Pichai said in his opening remarks to a House antitrust panel in July. “Google’s continued success is not guaranteed.”

Credit…Pool photo by Graeme Jennings

Mr. Pichai is familiar with the machinations of antitrust proceedings. In 2009, when he was a vice president of product management, he lobbied the European competition authorities to take action on Microsoft’s Internet Explorer web browser.

“We are confident that more competition in this space will mean greater innovation on the web and a better user experience for people everywhere,” Mr. Pichai wrote in a blog post at the time, sentiments that search rivals say about Google today.

But shortly after he became Google’s chief executive in 2015, Mr. Pichai displayed his tendency for pragmatism when he buried the hatchet with Microsoft. The two companies agreed to stop complaining to regulators about each other.

Early in his tenure running Google, Mr. Pichai was reluctant to press its case in Washington — a job that one of his predecessors, Eric Schmidt, had reveled in. Mr. Schmidt, a big donor in Democratic politics, was a frequent visitor to the White House during the Obama presidency and served on the President’s Council of Advisors on Science and Technology.

In 2018, Google declined to send Mr. Pichai to testify at a Senate Intelligence Committee hearing on Russian interference in the 2016 presidential election. Annoyed senators left an empty seat for the company’s representative next to executives from Facebook and Twitter. (Mr. Page was also invited to testify, but there was never any expectation from people within the company that he would.)

Since then, Mr. Pichai has made frequent trips to Washington, testified at other congressional hearings and held meetings with President Trump.

Credit…Tom Brenner for The New York Times

Microsoft’s long battle with the government has also influenced how Google plans to wage its antitrust fight. Many Google executives believe Microsoft was too combative with the Justice Department, bringing the company to a standstill.

For most of the last decade, even as Google has dealt with antitrust investigations in the United States and Europe, the company has continued expanding into new businesses and acquire companies, such as the fitness tracker maker Fitbit last year.

Now the bill for that growth may have come due. And like it or not, it has been left to Mr. Pichai. Mr. Page, who is a year younger than Mr. Pichai and who Forbes says is worth $65 billion, is pursuing other interests.

Mr. Pichai “hasn’t had to deal with anything of this magnitude,” said Michael Cusumano, a professor and deputy dean at the Massachusetts Institute of Technology’s Sloan School of Management. “He has to face the government. He has no choice.”

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The Trump campaign celebrated a growth record that Democrats downplayed.

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The White House celebrated economic growth numbers for the third quarter released on Thursday, even as Joseph R. Biden Jr.’s presidential campaign sought to throw cold water on the report — the last major data release leading up to the Nov. 3 election — and warned that the economic recovery was losing steam.

The economy grew at a record pace last quarter, but the upswing was a partial bounce-back after an enormous decline and left the economy smaller than it was before the pandemic. The White House took no notice of those glum caveats.

“This record economic growth is absolute validation of President Trump’s policies, which create jobs and opportunities for Americans in every corner of the country,” Mr. Trump’s re-election campaign said in a statement, highlighting a rebound of 33.1 percent at an annualized rate. Mr. Trump heralded the data on Twitter, posting that he was “so glad” that the number had come out before Election Day.

The annualized rate that the White House emphasized extrapolates growth numbers as if the current pace held up for a year, and risks overstating big swings. Because the economy’s growth has been so volatile amid the pandemic, economists have urged focusing on quarterly numbers.

Those showed a 7.4 percent gain in the third quarter. That rebound, by far the biggest since reliable statistics began after World War II, still leaves the economy short of its pre-pandemic levels. The pace of recovery has also slowed, and now coronavirus cases are rising again across much of the United States, raising the prospect of further pullback.

“The recovery is stalling out, thanks to Trump’s refusal to have a serious plan to deal with Covid or to pass a new economic relief plan for workers, small businesses and communities,” Mr. Biden’s campaign said in a release ahead of Thursday’s report. The rebound was widely expected, and the campaign characterized it as “a partial return from a catastrophic hit.”

Economists have warned that the recovery could face serious roadblocks ahead. Temporary measures meant to shore up households and businesses — including unemployment insurance supplements and forgivable loans — have run dry. Swaths of the service sector remain shut down as the virus continues to spread, and job losses that were temporary are increasingly turning permanent.

“With coronavirus infections hitting a record high in recent days and any additional fiscal stimulus unlikely to arrive until, at the earliest, the start of next year, further progress will be much slower,” Paul Ashworth, chief United States economist at Capital Economics, wrote in a note following the report.

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Black and Hispanic workers, especially women, lag in the U.S. economic recovery.

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The surge in economic output in the third quarter set a record, but the recovery isn’t reaching everyone.

Economists have long warned that aggregate statistics like gross domestic product can obscure important differences beneath the surface. In the aftermath of the last recession, for example, G.D.P. returned to its previous level in early 2011, even as poverty rates remained high and the unemployment rate for Black Americans was above 15 percent.

Aggregate statistics could be even more misleading during the current crisis. The job losses in the initial months of the pandemic disproportionately struck low-wage service workers, many of them Black and Hispanic women. Service-sector jobs have been slow to return, while school closings are keeping many parents, especially mothers, from returning to work. Nearly half a million Hispanic women have left the labor force over the last three months.

“If we’re thinking that the economy is recovering completely and uniformly, that is simply not the case,” said Michelle Holder, an economist at John Jay College in New York. “This rebound is unevenly distributed along racial and gender lines.”

The G.D.P. report released Thursday doesn’t break down the data by race, sex or income. But other sources make the disparities clear. A pair of studies by researchers at the Urban Institute released this week found that Black and Hispanic adults were more likely to have lost jobs or income since March, and were twice as likely as white adults to experience food insecurity in September.

The financial impact of the pandemic hit many of the families that were least able to afford it, even as white-collar workers were largely spared, said Michael Karpman, an Urban Institute researcher and one of the studies’ authors.

“A lot of people who were already in a precarious position before the pandemic are now in worse shape, whereas people who were better off have generally been faring better financially,” he said.

Federal relief programs, such as expanded unemployment benefits, helped offset the damage for many families in the first months of the pandemic. But those programs have mostly ended, and talks to revive them have stalled in Washington. With virus cases surging in much of the country, Mr. Karpman warned, the economic toll could increase.

“There could be a lot more hardship coming up this winter if there’s not more relief from Congress, with the impact falling disproportionately on Black and Hispanic workers and their families,” he said.

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Ant Challenged Beijing and Prospered. Now It Toes the Line.

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As Jack Ma of Alibaba helped turn China into the world’s biggest e-commerce market over the past two decades, he was also vowing to pull off a more audacious transformation.

“If the banks don’t change, we’ll change the banks,” he said in 2008, decrying how hard it was for small businesses in China to borrow from government-run lenders.

“The financial industry needs disrupters,” he told People’s Daily, the official Communist Party newspaper, a few years later. His goal, he said, was to make banks and other state-owned enterprises “feel unwell.”

The scope of Mr. Ma’s success is becoming clearer. The vehicle for his financial-technology ambitions, an Alibaba spinoff called Ant Group, is preparing for the largest initial public offering on record. Ant is set to raise $34 billion by selling its shares to the public in Hong Kong and Shanghai, according to stock exchange documents released on Monday. After the listing, Ant would be worth around $310 billion, much more than many global banks.

The company is going public not as a scrappy upstart, but as a leviathan deeply dependent on the good will of the government Mr. Ma once relished prodding.

More than 730 million people use Ant’s Alipay app every month to pay for lunch, invest their savings and shop on credit. Yet Alipay’s size and importance have made it an inevitable target for China’s regulators, which have already brought its business to heel in certain areas.

These days, Ant talks mostly about creating partnerships with big banks, not disrupting or supplanting them. Several government-owned funds and institutions are Ant shareholders and stand to profit handsomely from the public offering.

The question now is how much higher Ant can fly without provoking the Chinese authorities into clipping its wings further.

Excitable investors see Ant as a buzzy internet innovator. The risk is that it becomes more like a heavily regulated “financial digital utility,” said Fraser Howie, the co-author of “Red Capitalism: The Fragile Financial Foundation of China’s Extraordinary Rise.”

“Utility stocks, as far as I remember, were not the ones to be seen as the most exciting,” Mr. Howie said.

Ant declined to comment, citing the quiet period demanded by regulators before its share sale.

The company has played give-and-take with Beijing for years. As smartphone payments became ubiquitous in China, Ant found itself managing huge piles of money in Alipay users’ virtual wallets. The central bank made it park those funds in special accounts where they would earn minimal interest.

After people piled into an easy-to-use investment fund inside Alipay, the government forced the fund to shed risk and lower returns. Regulators curbed a plan to use Alipay data as the basis for a credit-scoring system akin to Americans’ FICO scores.

China’s Supreme Court this summer capped interest rates for consumer loans, though it was unclear how the ceiling would apply to Ant. The central bank is preparing a new virtual currency that could compete against Alipay and another digital wallet, the messaging app WeChat, as an everyday payment tool.

Ant has learned ways of keeping the authorities on its side. Mr. Ma once boasted at the World Economic Forum in Davos, Switzerland, about never taking money from the Chinese government. Today, funds associated with China’s social security system, its sovereign wealth fund, a state-owned life insurance company and the national postal carrier hold stakes in Ant. The I.P.O. is likely to increase the value of their holdings considerably.

“That’s how the state gets its payoff,” Mr. Howie said. With Ant, he said, “the line between state-owned enterprise and private enterprise is highly, highly blurred.”

China, in less than two generations, went from having a state-planned financial system to being at the global vanguard of internet finance, with trillions of dollars in transactions being made on mobile devices each year. Alipay had a lot to do with it.

Alibaba created the service in the early 2000s to hold payments for online purchases in escrow. Its broader usefulness quickly became clear in a country that mostly missed out on the credit card era. Features were added and users piled in. It became impossible for regulators and banks not to see the app as a threat.

ImageAnt Group’s headquarters in Hangzhou, China.
Credit…Alex Plavevski/EPA, via Shutterstock

A big test came when Ant began making an offer to Alipay users: Park your money in a section of the app called Yu’ebao, which means “leftover treasure,” and we will pay you more than the low rates fixed by the government at banks.

People could invest as much or as little as they wanted, making them feel like they were putting their pocket change to use. Yu’ebao was a hit, becoming one of the world’s largest money market funds.

The banks were terrified. One commentator for a state broadcaster called the fund a “vampire” and a “parasite.”

Still, “all the main regulators remained unanimous in saying that this was a positive thing for the Chinese financial system,” said Martin Chorzempa, a research fellow at the Peterson Institute for International Economics in Washington.

“If you can’t actually reform the banks,” Mr. Chorzempa said, “you can inject more competition.”

But then came worries about shadowy, unregulated corners of finance and the dangers they posed to the wider economy. Today, Chinese regulators are tightening supervision of financial holding companies, Ant included. Beijing has kept close watch on the financial instruments that small lenders create out of their consumer loans and sell to investors. Such securities help Ant fund some of its lending. But they also amplify the blowup if too many of those loans aren’t repaid.

“Those kinds of derivative products are something the government is really concerned about,” said Tian X. Hou, founder of the research firm TH Data Capital. Given Ant’s size, she said, “the government should be concerned.”

The broader worry for China is about growing levels of household debt. Beijing wants to cultivate a consumer economy, but excessive borrowing could eventually weigh on people’s spending power. The names of two of Alipay’s popular credit functions, Huabei and Jiebei, are jaunty invitations to spend and borrow.

Huang Ling, 22, started using Huabei when she was in high school. At the time, she didn’t qualify for a credit card. With Huabei’s help, she bought a drone, a scooter, a laptop and more.

The credit line made her feel rich. It also made her realize that if she actually wanted to be rich, she had to get busy.

“Living beyond my means forced me to work harder,” Ms. Huang said.

First, she opened a clothing shop in her hometown, Nanchang, in southeastern China. Then she started an advertising company in the inland metropolis of Chongqing. When the business needed cash, she borrowed from Jiebei.

Online shopping became a way to soothe daily anxieties, and Ms. Huang sometimes racked up thousands of dollars in Huabei bills, which only made her even more anxious. When the pandemic slammed her business, she started falling behind on her payments. That cast her into a deep depression.

Finally, early this month, with her parents’ help, she paid off her debts and closed her Huabei and Jiebei accounts. She felt “elated,” she said.

China’s recent troubles with freewheeling online loan platforms have put the government under pressure to protect ordinary borrowers.

Ant is helped by the fact that its business lines up with many of the Chinese leadership’s priorities: encouraging entrepreneurship and financial inclusion, and expanding the middle class. This year, the company helped the eastern city of Hangzhou, where it is based, set up an early version of the government’s app-based system for dictating coronavirus quarantines.

Such coziness is bound to raise hackles overseas. In Washington, Chinese tech companies that are seen as close to the government are radioactive.

In January 2017, Eric Jing, then Ant’s chief executive, said the company aimed to be serving two billion users worldwide within a decade. Shortly after, Ant announced that it was acquiring the money transfer company MoneyGram to increase its U.S. footprint. By the following January, the deal was dead, thwarted by data security concerns.

More recently, top officials in the Trump administration have discussed whether to place Ant Group on the so-called entity list, which prohibits foreign companies from purchasing American products. Officials from the State Department have suggested that an interagency committee, which also includes officials from the departments of defense, commerce and energy, review Ant for the potential entity listing, according to three people familiar with the matter.

Ant does not talk much anymore about expanding in the United States.

Ana Swanson contributed reporting.

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