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6/10/2009
06:34 PM
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Google Defends Itself Against Antitrust Regulation

In the face of growing scrutiny of corporate behavior, Google is hoping to dissuade the Department of Justice from bringing an antitrust case.

Wharton business school professor Eric Clemons characterizes Google's outreach campaign as a battle for public opinion. "I consider antitrust action likely at this point," he said in an e-mail. "More to the point, so does Google. They have, not surprisingly, figured out the points that will be key and are already starting to address them."

Many of the points Google is making, however, aren't germane to antitrust issues. Google engineer Brian Fitzpatrick, for example, walked the assembled journalists through Google's open source efforts and its commitment to data portability.

"We think that open source is a way of enhancing competition and letting more people compete on a level playing field," he said.

And without a doubt, Google is generous in many respects, in terms of the code it makes available, the free services it provides to consumers, and its commitment to responsible environmental business practices.

Such overall benevolence reflects Google's awareness that user trust is critical, but it has little to do with whether or not the company dominates online search advertising.

The key issue for Google and the Justice Department is defining the relevant market. Google claims that it's a minor player in the overall advertising ecosystem, with only 3% of general advertising revenue and 30% of online advertising revenue. The Justice Department, if it does bring an antitrust case, is likely to argue that the relevant market is the subset of online advertising known as online search advertising.

"If the DOJ is trying to make an affirmative case, they're going to try to make a narrow market definition," Wagner acknowledged.

"Google has gone right to the heart of the matter, which is if the relevant market is all of advertising, their position is inconsequential," Clemons said in a phone interview. "If the relevant market is Internet search, then there is a very real possibility in their minds that they can lose an antitrust lawsuit. So they're doing a massive disinformation campaign."

Clemons dismissed Google's contention that the relevant market is all advertising. "Have you ever tried clicking on a TV ad to get to a hotel reservation Web site?" he asked. His contention is that search advertising is not interchangeable with other forms of advertising.

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