In D.C. antitrust circles, how Google became the hunted
Google CEO Eric Schmidt speaking at the Democratic National Convention in Denver two weeks ago.
(Credit: Declan McCullagh/CNET News)About this time a decade ago, Google CEO Eric Schmidt was praying that the U.S. Justice Department would file an antitrust lawsuit against Microsoft.
"I've competed against Microsoft for years, but I never quite appreciated how big Microsoft has become, not just as a company, but as a brand and as part of the national consciousness," Schmidt said in 1998, four months before the suit was filed. "It's the products, the Microsoft marketing juggernaut, Bill Gates's wealth, all those magazine cover stories. It's everything."
That was when Schmidt was the chief executive of Novell, a Microsoft archrival that alleged anticompetitive activities and eventually filed its own private antitrust lawsuit.
Now the situation is reversed. Instead of competitors urging the Justice Department to pounce on Microsoft, the onetime monopolist (and its allies) are wielding the political process to hamstring Google. And Microsoft's position in the 1990s as the innovative West Coast company that captured the public's imagination -- with a wealth of new products, sappy magazine cover stories, and newly minted riches -- has been largely usurped by Google.
There are differences, of course: Google is only 10 years old today, while Microsoft was 23 years old when federal authorities decided to mount what ultimately proved to be an unsuccessful effort to carve it up into more manageable pieces. In addition, the Web makes switching away from a search engine or an advertising platform much easier than ditching Windows for a Mac or Linux; any network effects are far weaker than they are in the software world.
And Google says, as you might expect, that there's no reason for the feds to investigate its Yahoo advertising deal on antitrust grounds. The company provided CNET News with a statement on Tuesday saying: "While there has been a lot of speculation about this agreement's potential impact on advertisers or ad prices, we think it would be premature for regulators to halt the agreement before we implement it and everyone can judge the actual impact. We are confident that the arrangement is beneficial to competition, but we are not going to discuss the details of the regulatory process."
Yet the similarities are nevertheless striking.
File photo: Microsoft's adversaries speak to reporters in front of the federal courthouse during antitrust trial. Will Google be next?
(Credit: Declan McCullagh/mccullagh.org)In 1998, the Justice Department hired David Boies, a high-profile litigator who had founded his own law firm a year before, to be its lead trial counsel. In 2008, the government has hired Sandy Litvack, a high-profile litigator who recently left a law firm, according to a report in Tuesday's Wall Street Journal.
Microsoft's enemies used shady tactics, including hiring investigators to dig through the trash of pro-Microsoft groups in Washington, D.C. Today Google's enemies are using shady tactics, including hiring D.C. groups to plant articles and engage in a so-called astroturf campaign against the search company.
A decade ago, Microsoft had spread little money around Washington political circles: its political action committee handed out only $212,000 to politicians in the 1998 election cycle, a sum that leaped to $1.2 million by the time the antitrust trial was over. Similarly, Google's PAC spent only $156,936 in political favor-buying this election cycle, compared with, say, $3.8 million by AT&T.
To be sure, Google denies any allegation that its pending advertising deal (or any other activities) will impinge on competition. David Drummond, the company's top lawyer, told a Senate committee in July that the Yahoo advertising deal "will maintain and expand that competition," and co-founder Larry Page told a Washington audience that Google is in favor of openness and competition.
They may honestly believe that a lawsuit is unlikely. And it's true that no lawsuit may ever be filed. But many executives at Microsoft and a long list of antitrust defendants -- including American Airlines, Archer Daniels Midland, Bayer, Kimberly-Clark, Texas Instruments, Sony, and Visa -- probably felt the same way right up until they were served with a copy of the federal complaint.
The way the political establishment of the East Coast treats the technology firms of the West Coast in some ways resembles a shakedown racket: Tech firms and their CEOs are viewed as rich sources of untapped revenue for politicians. (It would be a shame if something happened to that nice, shiny search engine you've got there, wouldn't it?)
AT&T (itself once broken up by a federal antitrust action) has a larger market capitalization than Google, with the lion's share of U.S. DSL customers, and grew by gluing together former Ma Bell assets including Southwestern Bell and BellSouth. But thanks to its generous political giving (or, more charitably, a genuine confluence of ideologies), AT&T's mergers have won the applause of Republicans including Rep. Joe Barton of Texas, who personally lobbied the Federal Communications Commission to "act expeditiously on the AT&T-BellSouth application so that consumers will have an opportunity to reap the benefits."
When it comes to Google, though, Barton is an antitrust enthusiast. He repeatedly assailed the DoubleClick merger. He publicly complained that his aide had received a "chilly response" when trying to arrange a visit to the company's Mountain View, Calif. headquarters. One reason for this animus, perhaps, is that Barton opposed extensive Net neutrality regulations and has received millions from like-minded telecommunications companies; Google was on the other side.
This not only provides political cover to the Bush administration; it's also an indirect threat as well. Research has shown that one additional congressional hearing raises the probability of a Federal Trade Commission merger challenge, for instance, by approximately 4.2 percentage points. What's more, the political influence tends to happen at the higher levels of the agency. It turns out that Washington bureaucrats are political creatures after all.
All this should give Google's employees, who have opened their wallets to fund Barack Obama's presidential campaign (making them the sixth-largest donor, behind Harvard University), something to think about.
When Obama showed up for a campaign stop at Google, he promised more aggressive antitrust enforcement. His technology campaign platform pledges to "reinvigorate antitrust enforcement" and "step up review of merger activity." He complained to the American Antitrust Institute that "the current administration has what may be the weakest record of antitrust enforcement of any administration in the last half century."
If the Bush administration's current antitrust probe of Google, coupled with this week's apparent threat of a federal lawsuit, amounts to a "weak" record, imagine what antitrust true believers in an Obama administration might do. (A three-way split of Google into search, applications, and display ads, anyone?)
That threat may be enough to convince the legions of vaguely progressive computer geeks who inhabit the recycling-focused, solar-powered Googleplex to rethink their enthusiasm for Obama. After Microsoft was targeted on antitrust grounds, employees there halved the percentage of contributions flowing to Democrats. It may even -- who knows? -- be enough to prompt Eric Schmidt, a longtime Democratic donor, to vote Libertarian.
Disclaimer: Declan McCullagh is married to a Google employee
Declan McCullagh, CNET News' chief political correspondent, chronicles the intersection of politics and technology. He has covered politics, technology, and Washington, D.C., for more than a decade, which has turned him into an iconoclast and a skeptic of anyone who says, "We oughta have a new federal law against this." E-mail Declan.
@ Dan: the profanity filter needs tweaking - saying " t i t " in this context isn't profane... heh.
Meanwhile, The EU concerns were legit. MSFT's concerns are not in the context of partnerships between Google and Yahoo for a small slice of a niche market. Otherwise I (sadly) agree with you that this is the norm.
Perhaps MS can complain to the Gov't as well that they themselves have an unfair monopoly on the OS market, since they actually hold more OS market share than Google does and have been proven to use it to leverage other markets in the past. Then I would respect their motives as pure.
Don't get me wrong, I don't like any type of monopoly, including search. No matter how "innocent" and "pure" ones motives are, you know what happens when you begin to get absolute powers, even to the best of us. But I find it hypocritical that MS is so quick to beat the antitrust drums against google. It's not the pot calling the kettle black, it's the witches' cauldron in macbeth calling the kettle black.
The deal is lawful and has merit in the scope of collaborating business. togenerate profit.
We all remember Google going whinning to the DOJ and EU even BEFORE IE 7 was released, whinning about how if Microsoft put Live Search as default in IE 7, it would be unfair to Google, even while at the same time, Google themselves were making Google search the default in all Firefox browsers. Talk of hypocracy.
Its a matter if great joy to me that super evil Google is now getting a taste a of their own bitter medicine. Hope they choke on it.
Google is now getting attacked by the same monster they helped create. Isn't life just great?
Oh rubbish!
Why is it ok for Google to spend the last 5 years constantly demanding that the EU and DOJ to take down Microsoft on trumped up charges, but not ok for Microsoft to hit right back at Google?
The hypocracy here comes from Google, who are using every illegal tactic known to man, to become a monopoly, even while hysterically screaming for the EU/DOJ to take down Microsoft on trumped up "monopoly' charges.
gabeheim: "For some reason, it is illegal for Google, a company that is only approaching monopoly status to dominate the search market, yet, it's perfectly legal for MS to hold 90% or more of the OS market"
You clearly have no ida what anti-trust laws are about.
Its perfectly fine to obtain even 95 % of any market, so far as you obtained that throgh legal means, did not not try and get that 95% throgh taking over your biggest competitor, and don't abuse that monopoly position. This is not about Google's market share that they obtaibned organically. Its about Google trying to totally control the search market, by taking over Yahoo, their only effective compoetition right now. It would screw consumers totally.
It would be totally irresponsible of the DOJ to let this outrageous Google/Yahoo pact go through.
Website URL's that a user clicks on is a choice. Where advertisers choose to spend their money is a choice. Unlike bundling IE or media software (to the point where the consumer cannot remove all of it even if he or she tried), this doesn't push MSFT out into the cold (in fact, MSFT is still perfectly free to do whatever they want on their website and to attract consumers to it cost-free).
/P
Nice try.
Microsoft's "pay per PC shipped" license agreements with OEM's has been abolished over 10 years ago. PC makers are free to gho to whoever they want for their OS. Consumers simply don't want Linux, and Apple is so scared of competition, they won't licsense their OS to anyone. They tried it b4, and lost market share big time to their own OEM's.
Anti-trust law is clear: You can't have a # 1 market share outfit, take over the # 2 market share outfit, if combining the 2 firms amounts to an over 90% market share, and effectively kills competition in that market.
It's irrelevant if Yahoo went to Google or Google went to Yahoo.
There is a reason why the DOJ is looking to stop this deal. It would be fun when the EU steps in as well and hammers Google. After all, Google has been caping at the EU for over 5 years, shrilling screaming that they go after Microsoft's blood. Let the EU do the same thing to Google , and lets see how they like it.
Calif. AG Reviewing Google/Yahoo Deal; Bernstein?s Lindsay Says Deal In Trouble, Cuts YHOO Price Target
http://blogs.barrons.com/techtraderdaily/2008/09/10/calif-ag-reviewing-googleyahoo-deal-bernsteins-lindsay-says-deal-in-trouble-cuts-yhoo-price-target/?mod=yahoobarrons
1) Google isn't "taking over the #2 market share outfit", and
2) The deal does not involve Yahoo's business in the EU
Rather, Google will simply be doing what it always does: serving up ads on Yahoo's NA and Canadian websites, much like it does for Ask.com, Aol.com, Comcast.net, etc. Were Google to deny Yahoo access to its ad serving platform, that would actually be considered anti-competitive. Why? Because it would put Yahoo at a competitive disadvantage to the other websites out there that are allowed access to Google's AdSense platform. Is Google paying Yahoo for this deal? No. Yahoo pays them for the service, just like any other customer, in the form TAC. Hence, Yahoo will always have the incentive to improve upon its own technology, in order to avoid paying TAC. The DOJ can review the deal all they want, but it won't be about Google. If the DOJ has a problem with it, they'll have to take YAHOO to court - and have a valid, constitutional reason why YAHOO cannot have access to Google's superior ad-serving technology, but everyone else can.......(that just sounds like reverse logic there).
That is just the point.
Google IS effectively taking over Yahoo search busines( without actually taking over Yahoo) and removing their # 1 competitor from effectively competing with them
There is simply no way Yahoo is going to go flat out to compete with Google search, when Yahoo is getting $400million to $800 million per year from Google, deriving from Google's search business.
Would you go flat out to take out an oufit that is making you to the tune of $800 million per year, at a time when your other businesses are floundering? Nope!
All this talk of "non-exclusive agreements" and whatnots ae merely a camouflage by Google to emasculate and neautralise Yahoo, effectively removing Yahoo as an effective competitor. Even the DOJ is seeing that. They are not as stupid as Google thinks they are.
:"The deal does not involve Yahoo's business in the EU "
That hasn't stopped the power grabbing EU before.
If you remember, when Boeing announced they were going to take over the Boeing-McDonnell Douglas back in 1996, the EU announced an agreesive antitrust inquiry Into the Boeing deal, even tho McDonnell Douglas wasn't even doing any business in the EWU at all, at the time. As far as the EU was concerned, so far as Being themselves were doing business in the EU, they had every right to butt in and regulate.
The 2 situations are nothing alike. Not only did Microsoft do underhand things in business making enemies of everyone (including Intel), but the went out of their way making it difficult for anyone to do anything they didn't want. Using their OS wasn't enough, you had to use their software because they'd make sure everyone elses didn't work right. It wasn't until the anti-trust suits that they backed down, trying not to provide more ammunition. And that short period of time was all anyone needed to get around them. And then there's the fact the EU has been more successful in not backing down to MS.
No one needs to use google for anything at all. There are lot's of options and nothing is tied to the OS (except maybe for MS again) so it's easy to switch back and forth, which many people do. I may use the yahoo search for this and the google search for that, etc. It really is a matter of people picking the best one for their needs, not being forced into using one or the other, and MS is loosing. What MS feared when it went out of it's way to destroy Netscape has come true, it doesn't matter what OS you are one because it's all about the Net and opensource. You can pick the OS and tools that suit you the best.
Oh yes they do. When you take Google and add its serach to yahoo search, it doesn't leave much out there in terms of market share. Over 90% of consumers would ave to go to one of those 2, like they do right now.
kxmmxk : "There are lot's of options"
There are plenty of desktop OS's out there too, including the Mac and Linux, which are every bit as capable as Windows is.
But that is not what anti-trust laws are about.
It's irrelevant if "no one needs to go Googe for anything ' or not.
If Coca Cola wanted to take over Pepsi for example, the Justice Department and the EU would step in at once, because of anti-trust issues.
You are not going to tell me that there are no other opitions for drinking soda apart from those 2 companies are you, but that would still not stop anti-trust investigations.
Same with Google and Yahoo, only much moew serious. Coca Cola and Pepsi don't control 90% of the soda market like Google/Yahoo control 90% of the search market.
Umm..no.
Microsoft still controlls over 90% of the world's desktops, currently controls oiver 60% of the server market(by units), has the highest market share in email servers, the highest share of browsers, controls the office productivity market share(MS Office) etc etc, and makes 5 times as much profits per quarter as Google does. And Google's stock price has been dropping like a stone recently, down over 40% from its 52 week high.
Google dominates search, but that's about it. even in web based email, Microsift's Hotmail totally trumps Google's mail in terms of users, and Microsoft's MSN instant messenger totally smokes Google Talk by signed up users.
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by carlpers
October 25, 2008 2:08 PM PDT
- I'm surprised that nobody has picked up on my lawsuit against Google for monopolization of the search advertising market with AdWords. Google acquired 65+ companies of which approximately 40 assisted in creating the monopoly. Under these circumstances, Google should not be allowed to use its monopoly to charge discriminatory prices to users such as myself. Ebay pays 1/2 cent per click for the same keywords for which I'm required to pay 50 cents a click (or 100 times as much), even when ebay and I are the only advertisers. Of course, 50 cents per click for me prices me out of the market, and the successful companies get more successful using Google, and the unsuccessful companies can never get started to compete with them. This is part of the Yahoo-Google problem. Allowing Yahoo to be licensed to use Google's adwords technology is merely giving Google a larger market share and greater market domination. We have seen in other areas of the economy that when companies are too large the country can suffer. Here the Justice Department is considering whether it should permit Google to get larger, with the obvious effect being to increase injury against the small adwords advertisers who can expect even higher, discriminatory prices to drive us further into unprofitability when using adwords. A word for AdWords. It is the greatest thing ever, if priced on a non-discriminatory basis. But the present pricing system is predatory, discriminatory, abuse and monpolistic, and only creates a larger Google and further domination in a host of other fields. What the country and world needs from Google is a declaration by the Government that Google through its monopollistic practices has become a regulated public utility, with the requirement of non-discriminatory pricing, and a government guarantee that its non-discriminatory pricing will enable Google to make a fair return on its invested capital.
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(23 Comments)Carl E. Person, antitrust lawyer and
plaintiff against Google. See lawmall.com/google.php