Google's antitrust defense sounds like Microsoft's
I was a late-comer to covering Microsoft's antitrust troubles in the United States. I missed the first case, which the software giant and Justice Department settled in 1995, a short time before Windows 95 shipped. But I was on the case(s) from 1997, logged many courtroom hours and can say without boasting that my reporting on the three antitrust trials -- 1997 extension of the first, the big one filed in May 1998 and remedy hearing in Spring 2002 -- was among the best in techdom. I've reported on the European case, as well. It's from that vantage point, I look at Google's response to its US antitrust investigation.
Yesterday, in a blog post, Amit Singhal, Google Fellow, confirmed that the US Federal Trade Commission had opened an investigation into Google's business practices. The FTC has broad authority, meaning it can and likely will look at more than just antitrust issues (I'll expand on that topic in a few paragraphs). Google also has put up a "Facts About Competition" website. Microsoft used similar informational tactics during its US antitrust investigation and trial -- and strangely, or not, Google's defense is eerily the same: That the company's products and services enable consumer choice and businesses to grow.
The choice defense is quite deliberate. In the United States, monopolies aren't illegal, but the abuse of a dominant position is -- Google's search share was 65.5 percent in May, according to ComScore. Fundamental to any antitrust investigation is one question: Is the monopoly causing consumer harm by limiting choice? So it's not surprising the Google blog post is titled: "Supporting choice, ensuring economic opportunity".
Gatekeeper to the Internet?
Google's US antitrust problems are a strange juxtaposition to Microsoft's. The Justice Department and 20 states (some dropped out later) filed the 1998 case largely for fear Microsoft would become gatekeeper to the Internet. The motivation, other than those political, isn't more complicated than that. How strange then that because of its huge search success, Google is more Internet gatekeeper today than Microsoft ever was.
More practically, it's about the character of business and monopolies. Companies reflect the nature of people who run them, expressing the desire to dominate and be successful. Microsoft dominated and grew successful in part by integrating new features into its Windows platform. Google does that today by wrapping products and services around its search platform.
In antitrust parlance, the practice is called tying -- and it violats US antitrust law and precedents. Microsoft lost the tying claim -- that it illegally integrated Internet Explorer into Windows -- at trial. But the Justice Department later dropped the claim before settling the case in November 2001. In Europe, Microsoft wasn't so lucky. In two separate cases, the European Union Competition Commission found against Microsoft, and required the unbundling of Internet Explorer and Windows Media Player from Windows.
But the Google antitrust investigation has important nuances that are sure to put the gatekeeper problem more at the forefront. While the Justice Department investigated and prosecuted Microsoft, as previously stated the FTC is investigating Google's business practices. The FTC will likely look at privacy and other issues of direct consumer harm, rather than just that caused by Google's dominance thwarting competition and thus limiting choice.
There is another area of potential consumer harm that I wonder if the FTC will closely investigate -- and its fundamental to Google's whole business model: Free.
The Google-free economy is one of the most disruptive forces impacting business and commerce to come around in generations -- and its core to Google's success: The company gives away for free products and services that other companies charge for -- and it enables Google partners to do likewise. Google profits from search, keywords and advertisements associated with these free products or services. Some smart government lawyer(s) could argue that Google's business of giving away stuff for free tied to other stuff given away for free from a postion of market dominance is predatory and anticompetitive -- and that would fall much more under the FTC's jurisdiction than the Justice Department's.
Underlying the Google-free economy and services associated with it is information -- and the company's control or conduit of it. That comes back to the whole gatekeeper thing.
Something else: The Justice Department also prosecuted Microsoft for leveraging its Windows monopoly into the adjacent browser market, which at the time was dominated by Netscape. Conceptually, smart government lawyer(s) could argue that Google is trying to do something similar by tying search features with Android, Chrome, Chrome OS and other products or services.
The European Commission also is investigating Google business practices. In March, Microsoft filed a claim against Google. Microsoft General Counsel Brad Smith claimed that, with regard to YouTube, Google had placed "a growing number of technical measures to restrict competing search engines from properly accessing it for their search results." The claim relates both to tying and direct anticompetitive behavior from a monopoly position.
We've Heard it all Before
Google's antitrust situation cuts two ways. For one, its not the least surprising that a company would leverage its assets to make other products or services more successful. US capitalism is very much about companies having the choice to compete and to provide customers with products to choose from. Microsoft integrated new features into Windows, often offering for free technologies that competitors charged for, to make the platform more attractive and to give customers more choice. Google's situation is similar with regards to search and how it integrates the functionality.
For another, there is a problem: The 1890 Sherman Antitrust Act and court precedents that followed apply different rules to dominant companies than smaller ones, particularly when a market category is largely influenced by a single player.
Like Microsoft, Google built its monopoly organically. I doubt the FTC will find that Google's monopoly was illegally obtained -- well, unless, free is deemed somehow to be anticompetitive. There already is lots of speculation about what the FTC is after (Just, ah, Google it). I have a pretty good idea, as presented above, and so does Google.
"It's still unclear exactly what the FTC's concerns are, but we're clear about where we stand", Singhal writes in yesterday's blog post. But where Google stands reveals exactly what the company believes the FTC is after. That's made clear by what he writes, because we've heard it all before -- from Microsoft and other monopolists.
Singhal touts the benefits of Google products and services:
"Using Google is a choice -- and there are lots of other choices available to you for getting information". Microsoft also thumped about choice over and over. The Windows platform provided more products to choose from, PC OEMs and developers could choose other platforms, consumers could choose to download Netscape, etc.
"Powerful tools -- all for free". As I stated earlier, free as predatory pricing is a likely area for FTC investigation. The Justice Department's case against Microsoft also looked at free -- Internet Explorer given away for free when market leader Netscape had to charge for its browser. We know what happened to Netscape.
"Not every website can come out at the top of the page, or even appear on the first page of our search results", touting a customer-first philosophy when making "changes to our algorithms". The FTC is also likely to look at search favoritism or competitive collateral damage. Microsoft defended against similar charges with respect to developers, applications and its Windows monopoly.
"When you type 'weather in Chicago' or 'how many feet in a mile' into our search box, you get the answers directly, often before you hit "enter". Earlier this month Google announced "Instant Pages" a new search feature tied directly to Chrome and coming to v13. As previously mentioned, of course Google should want to improve its products, but the FTC could view such capabilities as anticompetitive or attempting to leverage monopoly from one market into another.
"Google always distinguishes advertisements from our organic search results". Consumer confusion on this point is sure to interest the FTC. It's less an antitrust consideration.
"We share more information about how our rankings work than any other search engine". This goes back to Microsoft's allegations about YouTube search and Google giving preferential treatment to its own products. Microsoft was accused of doing something like this with Windows, where, say, Office developers had inside information that made the product work better than competitive suites.
"We firmly believe you control your data". This relates to the previously stated Internet gatekeeper topic, and it's an area of likely broad concern to the FTC, because of privacy considerations.
"Loyalty, not lock-in". Microsoft's case was very much about lock-in, for customers, developers and partners, and it relates back to how much choice consumers have. Lock-in accusations have dogged Google for years and can only increase as more products are tied to search.
Now I pose the question to you: Is Google a dangerous monopoly, or is it a company competing fairly and offering valuable products and services to consumers? Please answer in comments.