Either side of this fight would be fun for Google's Dana Wagner.
After nearly a decade of slumber, the U.S. government went into 2009 turning over rocks for potential antitrust violations inside the technology industry. Perhaps no company has been affected by this move toward legal activism more than Google, and perhaps no one within Google has the unique perspective on antitrust law and corporate rights of Wagner, senior competition counsel at Google.
Dana Wagner, senior competition counsel at Google
(Credit: Google)A former prosecutor in the U.S. Department of Justice's antitrust division and the U.S. Attorney's Office for San Francisco, Wagner's first job in the private sector arrived almost three years ago as he sought new challenges following a stint with a Justice Department that had grown boring: regulators like to regulate and litigate, and when that's not happening, the job is less fun.
While at the U.S. Attorney's Office for San Francisco in 2007, Wagner was approached about becoming Google's first full-time competition counsel, part of the company's decision to aggressively hire attorneys and lobbyists as it anticipated the pending clash with federal regulators. It sounded more interesting than other private sector gigs he had contemplated, and the money certainly didn't hurt: although Wagner pointed out you can make a boatload more with a private law firm if you're willing to sacrifice a bit of your mental health.
Since then, however, life for both antitrust regulators and lawyers at the world's most important Internet company has accelerated amid the intense scrutiny paid to Google's intentions during the last year. He's certainly not bored anymore.
"It's fun," Wagner said, speaking of his "intellectually challenging" role at Google over the last three years. Since arriving in Mountain View, Calif., Wagner has sought to improve Google's image among antitrust regulators and opinion makers by what he describes as directly engaging opponents, seeking out debate, and "trying to get ahead of the curve."
That involved reaching out to his former colleagues in government for a quick lesson on how AdWords works. It included lining up allies friendly to the cause, such as when Google assembled a roster of disability advocates to stump for approval of its Google Books settlement with authors and publishers. And it required a deft hand with the media, hoping to paint a picture of Google as a company that comes in peace, rather than one bent on destruction.
Google needed to do a better job explaining itself to those in government in particular, Wagner said. "Particularly as a west coast engineering company that still very much views itself as a start-up in a lot of ways, striking out against some Goliaths."
Google has long been a trendsetter in the Bay Area, but it found itself a little off guard in the nation's capital, probably because of how quickly the company rose to prominence. In 2006, the year before Wagner was hired, Google spent just $750,000 on political lobbying in Washington. Its current foes on the antitrust front--AT&T and Microsoft--spent a combined $35 million that year in political contributions.
That has changed. However, Google has certainly had its setbacks with the government: its proposal to strike a search deal with Yahoo was clearly not going to fly, CEO Eric Schmidt had to step down from Apple's board due in part to scrutiny regarding his overlapping roles, and Google was forced to amend its book search settlement at the last second after the Justice Department raised an eyebrow at several provisions. That included agreeing to limit the scope of the agreement and backing off some business models for book search.
Yet Google continues to introduce new products such as Chrome OS and expand existing ones like Android while keeping its gravy train--search advertising--intact from regulators. For now, at least: Google's increasing power over the Internet is troubling in many corners of the country, and although the company has not been accused of any wrongdoings it's safe to say that as the decade closes, a lot of people are starting to get freaked out by Google.
Despite that external perception, many people inside Google still think of the company as a unique force for good in the world. Wagner is a card-carrying member of the Google creed, with perhaps a lawyer's intuition of what "don't be evil" means.
"It's really important to people here; I can say something is perfectly legal but it's not good for users, and that would be taken seriously," he said. Earlier in the year, during a meeting with the tech press in San Francisco, Wagner blurted out "there's a lot of companies for which I wouldn't do this job. I would not be doing this at Halliburton."
Wagner, 34, has spent his whole adult life in government service before taking his current gig at Google, coming out of the University of California at Berkeley and Yale Law School. "As soon as he arrived here, you could tell he was destined for big things," Mark Siegel, Wagner's former supervisor at the Justice Department, said in an interview with Law.com earlier this year. "He was always the youngest guy in the room."
While those in the top jobs at government organizations change offices with the political winds, the people inside those organizations doing the brunt of the work--former colleagues now on the opposite side of the conference room table from Wagner--are for the most part career professionals.
"There is more consistency than people think. Ninety-five percent of the organization is the same people with the same values," he said, referring to the fact that despite the clear increase in antitrust activity inside the Obama administration--which Wagner concedes--the lawyers that are actually doing the work are the same people they were five years ago when the pace of antitrust scrutiny slowed during the Bush administration.
So will Wagner end up inside a courtroom in Washington, D.C. sometime in the next several years, defending Google's business practices against some of the same antitrust lawyers he once called friends?
While there's a part of Wagner that would likely relish the challenge, he has too keen a sense of antitrust history as it pertains to the tech sector to hope the situation gets that far.
"We don't want to repeat the mistakes of past companies," Wagner said. "Even when you are doing good things, you can end up suffering."
Google News has come under fire in Italy.
(Credit: Screenshot by Tom Krazit/CNET)Updated 10:40 a.m. PDT with Google's response.
Competition regulators in Italy have opened an inquiry into Google News at the behest of publishers who allege they were banned from search results unless they agreed to be part of Google News.
According to reports, Google's offices in Italy were searched Thursday by regulators seeking evidence that Google forced Italian news sites to make their copy available through Google News unless they were willing to be excluded from search result pages. A complaint was filed by an Italian newspaper organization, FIEG, which also decried the lack of information made available to publishers as to how Google News organizes links to stories.
Google Italy representatives were quoted in several places as saying "The Competition Authority has notified us of a claim against Google Italy. We're finding out more details today, although we do know that it's in relation to Google News, which drives significant traffic and new readers to newspaper Web sites."
Later in the day, Google posted a blog item on the inquiry, acknowledging the existence of the claim but spending most of the post explaining how publishers can remove themselves from Google News, but not search results, at their request.
Google News is definitely a sore spot for many publishing companies, who feel Google's news aggregation site siphons readers from their own Web sites. Marissa Mayer, Google's vice president of search products and user experience, appeared before Congress in May to defend Google against such charges, saying that Google directs an awful lot of traffic--which can be turned into ad revenue--to newspaper Web sites for free.
But allegations that Google is messing with search results pages in retaliation for a business decision are very serious. Google's search results are supposed to be completely automated--driven by algorithms and keywords--and a large part of the company's growth has been driven by the public belief that its search results are gospel.
The New York Times reported that Google had denied the charges regarding the search results. Google's blog post Thursday did not specifically address that allegation but said there is a mechanism for removing one's content from Google News yet leaving it among search results.
The inquiry also comes at a point in Google's history where just about everything it does gets examined through an antitrust lens, with a new administration in the U.S. taking a closer look at several parts of its business.
Google, the company best equipped and most motivated to digitize the world's books, wants to offer the world an online Library of Alexandria. The decisions of the Justice Department, authors, book publishers, a federal judge, and Google itself likely will determine whether the company actually does.
Nobody in recent years has accused Google of lacking ambition, but its Google Book Search project is certainly among the company's top projects when it comes to chutzpah. That's not just because of the technical and financial hurdles of scanning, indexing, and displaying online millions of books, it's also because of the tangled intellectual property and legal concerns involved in the controversial project.
After revealing the book-search project in 2003, Google drew copyright infringement lawsuits from the Authors Guild and the Association of American Publishers in 2005, but an October 2008 proposed settlement, now under review by Judge Denny Chin of the U.S. District Court for the Southern District of New York, has converted those groups from adversaries to allies.
The settlement, if approved, could neatly cut a Gordian knot of copyright entanglements though setting Google back $125 million. That's because it would enable Google not only to display books that are out of copyright and those that are in print by cooperating publishers, as it does today, but also those from the vast collection of in-copyright brooks that are out of print--even when those holding rights to those books didn't specifically agree to Google's plan.
The complicated proposed settlement invoked the wrath of some authors concerned it would grant Google monopolistic power over online publishing, and the court extended the deadline for authors to choose whether to opt out of the settlement from May to September. Then the other shoe dropped this month: the Justice Department signaled serious antitrust scrutiny by issuing subpoena-like civil investigative demands, or CIDs, to check into the matter.
AIG and General Motors apparently are too big to fail. But the way the opposition to Google Book Search is shaping up, it looks like some believe Google is too big to succeed.
... Read moreMicrosoft confirmed on Tuesday that it is looking into an issue in which users of Internet Explorer 6 are forced into having Bing as their default search engine.
"We are aware of the issue with Bing on machines running IE6 and are investigating a solution," Microsoft said in a statement. "This issue is not impacting IE7 and IE8 users."
Although it is only affecting its older browser, many people still use IE6 and Microsoft has faced a lot of over how default search preferences are set and changed within Internet Explorer.
The issue crops up just as Microsoft plans to formally launch Bing. Among its planned promotions is a huge ad campaign as well as an event Tuesday night at Seattle's Space Needle.
The IE6 issue was noted earlier on Tuesday by Search Engine Land.
Google has pulled the plug on a search-ad partnership with Yahoo that would have given Yahoo major new revenue but that raised antitrust concerns.
"After four months of review, including discussions of various possible changes to the agreement, it's clear that government regulators and some advertisers continue to have concerns about the agreement," said David Drummond, Google's chief legal officer in a blog post Wednesday. "Pressing ahead risked not only a protracted legal battle but also damage to relationships with valued partners. That wouldn't have been in the long-term interests of Google or our users, so we have decided to end the agreement."
Updated at 7:35 a.m. PST: Yahoo isn't happy with the outcome.
"Yahoo continues to believe in the benefits of the agreement and is disappointed that Google has elected to withdraw from the agreement rather than defend it in court," the company said in a statement. "Google notified Yahoo of its refusal to move forward with implementation of the agreement following indication from the Department of Justice that it would seek to block it, despite Yahoo's proposed revisions to address the DOJ's concerns."
The deal's demise is a new blow to the struggling Internet pioneer, whose stock has plunged since Microsoft offered as much as $33 per share just months ago in an unfriendly acquisition attempt. Yahoo shares closed at $13.35 Tuesday, but rose 57 cents, or 4 percent, to $13.92 in trading Wednesday morning.
When Yahoo and Google announced the search-ad deal in June, Yahoo said it would generate $800 million and $250 million to $450 million in incremental operating cash flow in the first 12 months of operation.
Under the deal, Yahoo would have placed Google ads on some Yahoo search results, and the companies would have shared resulting revenue. The deal would have let Yahoo show ads on pages where its own technology, called Panama, wasn't able to provide results, the company said.
Updated at 7:51 a.m. PST: But the deal ran into objections, and the biggest was from the Justice Department's antitrust regulators. Today, those authorities expressed satisfaction with the demise of the deal.
"The companies' decision to abandon their agreement eliminates the competitive concerns identified during our investigation and eliminates the need to file an enforcement action," said Assistant Attorney General Thomas Barnett, who leads the Justice Department's antitrust division, in a statement. "The arrangement likely would have denied consumers the benefits of competition--lower prices, better service and greater innovation."
Other objections came from Microsoft, which runs in third place in search queries and search advertising after Google and Yahoo, and, perhaps more notably, from the Association of National Advertisers.
It's not surprising that Google and Yahoo didn't see eye to eye about how hard to fight for the deal. Google voiced its willingness to help out its chief business rival during a time when Microsoft was trying to acquire Yahoo and later, its search assets. Now, even though Yahoo's new board member Carl Icahn still is interested in a Microsoft transaction and many observers believe it possible, the Microsoft threat to Google is much diminished.
Also, from a raw financial perspective, Google would have benefited directly much less than Yahoo from the search-ad deal. Chief Executive Eric Schmidt said in October that Google typically gives the bulk of revenue to advertising partners that carry its ads.
Updated at 8:30 a.m. PST: Also, it's easy to see why Google might not want to fight this particular fight. No doubt Google, which already had a hard time pushing through its acquisition of display-ad powerhouse DoubleClick, doesn't want any more regulatory ill will than necessary.
And given Google's trajectory, more government scrutiny seems inevitable. Google's dominance over the Internet continues to grow in its first two priorities, search and advertising, and it clearly has high hopes for its third ambition, Web-based applications.
Updated at 9:17 a.m. PST: Yahoo and Google had lobbied hard to bring their partnership to fruition, trying to explain the deal to Congress, the public, and regulators. Schmidt professed confidence in the deal, saying the companies had structured it to satisfy antitrust concerns.
But the companies weren't even close, as it turned out. The Justice Department remained unmoved, saying it would file an antitrust lawsuit to block the agreement, even after a recent proposed revision that would have limited the deal's scope.
Here's how the regulators saw the deal, according to the Justice Department's statement:
"The agreement would have enabled Yahoo to replace a significant portion of its own Internet search results advertisements with search results advertisements sold by Google.
After an extensive investigation that was facilitated by the companies' cooperation and agreement to provide the department time to investigate prior to implementation, the department concluded that Google and Yahoo would have become collaborators rather than competitors for a significant portion of their search advertising businesses, materially reducing important competitive rivalry between the two companies.
Although the companies proposed various modifications to their original agreement in an effort to address the Department's antitrust concerns, the Department determined that such modifications would not eliminate the competition concerns raised by the agreement.
The Center for Digital Democracy applauded the outcome. "Today's announcement in its own way underscores what we have been telling officials: that a very tiny handful of global digital giants--particularly Google--is increasingly dominating the most prevalent way online publishing is financially supported," said Executive Director Jeff Chester. "The future diversity of online content--including news--is ultimately connected to the key question of whether one or two companies globally control the flow of most ad dollars tied to our use of broadband to PCs, mobile devices, and perhaps even digital TVs."
Yahoo, which doesn't have to pay any termination penalty, now says it's moving on.
"While the implementation of the services agreement with Google would have enabled Yahoo to accelerate its investments in its top business priorities through an infusion of additional operating cash flow, this deal was incremental to Yahoo's product roadmap and does not change Yahoo's commitment to innovation and growth in search," the company said in its statement. "Going forward, Yahoo plans to continue to provide the cutting-edge advances in products, platforms and services that the industry needs and expects, and intends to be the destination of choice for advertisers and publishers who want to reach one of the largest and most engaged populations of consumers on the Web."
Updated at 10:43 a.m. PST: Microsoft, which fought its own war with antitrust regulators, expressed predictable pleasure about the news--and the regulatory conclusion in particular.
"The Department of Justice's finding is significant for advertisers, publishers, and consumers, who voiced overwhelming concern about this illegal deal to law enforcement and policymakers," Microosoft said in a statement.
And advertisers who opposed the deal applauded the decision by the companies to step away from the agreement.
"The proposed deal was anticompetitive and would have given Google too much power over online advertising," said Larry Kilman, a spokesman for the World Association of Newspapers, which in September announced its opposition. "It's clear from the announcement that government competition authorities were receptive to the concerns raised by the advertising and media industries. We're delighted that Google and Yahoo decided to drop it." The Association of National Advertisers, which raised its objections in September and updated its concerns this week with a letter to the Justice Department, breathed a sigh of relief. "We knew some decision was coming soon and are grateful that the parties agreed to discontinue their agreement. It's an important step for the industry to move forward...it will stimulate the level of innovation," ANA Chief Executive Bob Liodice said.And a proposed modification of the terms didn't satisfy him.
"When the fundamentals don't change--concerns of pricing and concentration of power--then the fact that it's a 2-year deal or a 10-year deal doesn't matter," Liodice said. "If a deal can't stand up on its own under the longer terms, then it shouldn't stand up at all under shorter terms."
Nu-uhhh.
That's a one word summary of Microsoft's statement Sunday rebutting Google's statement earlier in the day that said Microsoft's $44.6 billion bid for Yahoo could raise antitrust concerns.
"The combination of Microsoft and Yahoo will create a more competitive marketplace by establishing a compelling number two competitor for Internet search and online advertising," Microsoft lawyer Brad Smith said in a statement. "The alternative scenarios only lead to less competition on the Internet."
Smith argues that Google already has three-quarters of the paid search market and about two-thirds of U.S. search queries and 85 percent in Europe.
Meanwhile, Reuters is reporting that Yahoo is considering some type of tie-up with Google, potentially something smaller than an all-out acquisition. Google Chief Executive Eric Schmidt phoned Yahoo Chief Executive Jerry Yang on Friday to discuss how to avoid a Microsoft takeover, either by offering money or guaranteed revenue in exchange for Yahoo outsourcing its advertising to Google, according to a report in The Wall Street Journal. A Google spokesman said the company had no comment on the report, and Yahoo representatives could not be reached for comment.
Google's top lawyer has penned a letter outlining a number of concerns it sees if Microsoft's bid for Yahoo goes through.
In the letter, "Yahoo and the future of the Internet," Google chief legal officer David Drummond says that Microsoft's offer "raises troubling questions" given the company's monopolistic past.
"This is about more than simply a financial transaction, one company taking over another," Drummond said. "It's about preserving the underlying principles of the Internet: openness and innovation.
Drummond warns that Microsoft could attempt the same things it did in in the PC market, ultimately stifling new ideas. It also says a combined Microsoft-Yahoo would have an "overwhelming share" in instant messaging and Web mail.
"Policymakers around the world need to ask these questions--and consumers deserve satisfying answers," Drummond wrote.
Google and Microsoft frequently trade complaints on how the other is a monopoly and shouldn't be able to do whatever the other wants to do.
Perhaps, they just need a proper introduction to one another. Pot, meet kettle. Kettle, this is pot.
The European Union's Court of First Instance handed Microsoft a major defeat on Monday, slapping down the software maker's appeal in three significant areas of the historic antitrust case brought by the European Commission.
In the closely watched case, which has dragged on since March 2004, the Luxembourg-based court upheld the Commission's findings that Microsoft abused its dominant position in the market.
The highlights:
Interoperability. The court agreed with the Commission that Microsoft was stifling competition by withholding certain technical specifications, or protocols, from rivals. The court also agreed that the Commission wanted Microsoft to share only the system protocols, and not its source code. After all, not everyone wants to be "like" Microsoft.
"The court rejects Microsoft's claims that the degree of interoperability required by the Commission is intended in reality to enable competing work group server operating systems to function in every respect like a Windows system and, accordingly, to enable Microsoft's competitors to clone or reproduce its products," the Court of First Instance stated in its decision.
... Read more
- prev
- 1
- next
