Google Gets Ready For Antitrust Grilling - InformationWeek

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9/19/2011
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Google Gets Ready For Antitrust Grilling

Does Google hinder competition? A Senate subcommittee hearing later this week puts Google on notice, one critic says.

Google executive chairman Eric Schmidt is due to testify at a Senate subcommittee hearing on Wednesday to address concerns that the company is threatening competition as its interests expand beyond the boundaries by which Google once defined itself: search, ads, and apps.

Regulators in the U.S. and abroad have been looking into various aspects of Google's business practices since the company's 2007 purchase of ad firm DoubleClick. And Googe's competitors have been encouraging antitrust investigations since then: Microsoft opposed the DoubleClick deal on antitrust grounds and its lobbying has gained support from travel search companies, which opposed Google's acquisition of ITA Software.

Microsoft itself faced antitrust litigation in 1998, which it settled in late 2001. The impact of that case, what it accomplished and what it failed to accomplish, is surely on the minds of Google's executives.

At the moment, European regulators are conducting an antitrust inquiry into Google's search business while the Federal Trade Commission is doing likewise. The Texas Attorney General has also opened an inquiry, and other state-level investigations remain a possibility.

For all the fretting about Google's online dominance, the company's ambitions have been relatively unhindered in terms of the deals it has tried to make. The two exceptions are Google's proposed ad deal with Yahoo in 2008, which was dropped for fear of an antitrust lawsuit from the Justice Department, and Google's attempt to reach a settlement with authors and publishers opposed to its book scanning efforts, which may finally happen if reports of progress prove true.

Google has been lobbying hard against regulatory restraint since 2009, when it actually mounted a roadshow for the media and regulators to argue that "Competition is only one click away."

[To find out more about Google's longstanding lobbying effort, see Google Defends Itself Against Antitrust Regulation.]

But lately Google's message has been drowned out by the growing chorus of companies that believe Google is behaving in an anti-competitive manner.

In addition to Schmidt, those scheduled to testify include Yelp co-founder and CEO Jeremy Stoppelman, who has objected to some of Google's practices, and Thomas O. Barnett, a partner at law firm Convington & Burling, counsel to Expedia (a company opposed to the ITA deal), and former Assistant Attorney General in charge of the Antitrust Division of the U.S. Justice Department.

Eric Clemons, a Wharton School professor and longtime critic of Google, writes that he hopes the hearings will show whether competition is really one click away, or whether Google has taken action to lock in customers.

Benjamin Edelman, an assistant professor at the Harvard Business School, who has objected to Google's AdWords API restrictions on automated access and other company practices, said in a phone interview that the hearing will give the Department of Justice and the Federal Trade Commission more latitude to act.

"It puts Google on notice," he said.

Asked whether antitrust law had failed to keep up with the nature of technological competition, where companies can easily enter other markets, Edelman said that we have seen huge conglomerates that have combined diverse businesses before. He said that antitrust law can still effectively address that kind of competition and that low-barriers to entry enhance competition. He suggested that attention should be paid to the defensive measures that companies devise to limit competition.

As example, he pointed to the secret cable configuration once used by IBM to connect mainframes to storage devices. The cables had pins, he said, that were designed as decoys, to make it harder to create an interoperable device.

Google did not immediately respond to a request for comment.

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