Google and Antitrust

The August Wired has a nice article about the increased antitrust scrutiny that Google is facing. (Updated July 28, 2009 I would usually insert a link to the article, but I couldn’t find one online; sorry, but I am working from the dead-tree-and-ink version that the postman dropped off.)

Early on, the article notes some ironies of the current situation:

More than 15 years ago, federal regulators began making Microsoft the symbol of anticompetitive behavior in the tech industry. Now, a newly activist DOJ may try to do the same thing to Google.

It is an ironic position for the search giant to find itself in. [CEO Eric] Schmidt not only campaigned enthusiastically for the very Obama administration that appointed [DOJ antitrust chief Christine] Varney, but also was one of the most devoted opponents of Microsoft in the mid-’90s, eagerly helping the government build its case against the software firm.

A few weeks ago, I described some of the arguments that Google might use to defend itself. The Wired article elaborates on one of these: it’s fine for a company to be a monopoly if, as John Houseman used to say, they earn it. It then points to the other issues that may raise concerns:

In and of itself, Google’s size is not a legal problem. Varney herself has pointed out that, while Google may enjoy a monopoly in the search-ad business, the company acquired it legally by building better search products that competitors were simply unable to match. Lawyers and economists say that things get complicated, though, when Google moves beyond search and into Web services like online spreadsheets and video sites. Because its search and advertising algorithms are secret, there is no way for competitors or partners to know whether Google tweaks results to direct traffic to its own properties over theirs. Enter a street address into Google’s search engine, for instance, and Google Maps tops the results. Type “Britney Spears” and Google News comes up before People magazine or TMZ.com. … If Google is using its search position to promote its other businesses, that could leave it open to charges of illegal bundling and leveraging–the same changes that Microsoft faced for packaging its browser onto the Windows desktop.

The article does have one major lapse, offering up one of the dumber antitrust arguments:

Google can use the surplus cash from its search business to subsidize the development of new, free products and services. That’s a frightening prospect for would-be competitors without such a robust revenue stream–potentially scary enough to discourage them from entering the market. The possible result: less innovation overall.

By that logic, Google could only avoid antitrust scrutiny by either (a) not making profits or (b) not innovating. That’s absurd.

As someone who has given brief thought to competing with Google, I can tell you that the company is daunting. But not because it’s so profitable (otherwise Apple, George Soros, and Alex Rodriguez would be just as concerning). No, the reasons Google frightens competitors are its servers, software, know-how, user base, brand, etc. Any rational person would think twice before trying to compete with a company that’s become a verb.

6 thoughts on “Google and Antitrust”

  1. Donald,

    Another great post — you’re making my leisurely blogging schedule look lethargic.

    Here’s an idea: To compete with Google (or more likely, help it improve its services), let’s solve the economic data problem and improve competition at the same time. The House Oversight and Government Reform Committee approved legislation last month that would apply the industry standard computer language used for U.S. GAAP; Japan GAAP; International Financial Reporting Standards; mutual fund and credit rating agency reporting; standardized business reporting in Australia, the Netherlands, and elsewhere; to information collected by the U.S. government. More information, including the CBO cost estimate published last week, is at paulwilkinson.com. I talked with Doug Holtz-Eakin about this project way back when I was just getting into it, and he had some very good ideas about how XBRL could help CBO do its job. On the competition side, it’s fascinating to contemplate what impact a standard business reporting language might have. We saw how html, xml, and mp3 made the travel, realty, on-line brokerage, music, and other industries more competitive. Expanding Internet standards to other industries for which dead tree problems haven’t been solved would be interesting, to say the least.

    Cheers,

    Paul

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  3. Very interesting information!Perfect just what I was searching for!
    “The right to be heard does not autmatically include the right to be taken seriously.” by Hubert Humphrey.

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