Well it's official. The Federal Trade Commission has served Google with subpoenas. Some of Google's critics -- including Gary Reback, who some credit with "goading" the Department of Justice to launching its investigation into Microsoft two decades ago -- analogize Google's conduct today to that of Microsoft's during the 1990s. That sounds appealing but it could not be more wrong.
Let's remember the past. (I should, I was an FTC staff attorney who worked on the FTC Microsoft investigation in the early 1990s). In the 1990s Microsoft clearly dominated the operating system market. The DOJ had challenged a set of practices in 1994 and brought a significant monopolization case. Antitrust authorities throughout the world including the EU had sued Microsoft. In its 1998 case the DOJ condemned a wide variety of exclusionary conduct, carried out (in Microsoft's words) to "cut off the air supply" of its rivals. In particular Microsoft tied its browser to its operating system to safeguard its operating system monopoly and extend it to the web. Microsoft compelled customers to purchase products they did not want and created obstacles for rival browsers to work effectively.
After years of litigation in a landmark decision, the D.C. Circuit upheld the lower court's conclusion that Microsoft's dealings with personal computer manufacturers violated Section 2 of the Sherman Act (they monopolized the market!), specifically, contractual provisions that prevented many manufacturers from pre-installing a web browser other than Microsoft's Internet Explorer and other remedies to protect incipient competition.
So to the Google critics this is a simple story -- like Microsoft, Google is big. Like Microsoft, Google has hampered the opportunities of rivals. And like Microsoft, Google has abused its purported dominant position in online search by prominently displaying its own products in search results and excluding competitors.
It may be simple; but it just is not true. There are four reasons why the analogy just does not hold water.
First, what's the harm to consumers? First, the hallmark of exclusionary conduct is that the alleged conduct must harm the competitive process (i.e. consumers); harm to competitors alone is insufficient to constitute a Section 2 violation. Even if we take the allegations as true... where is the harm to consumers? Let's take a look.
For consumers Google's services are almost completely free. Indeed, it is the fact that the services are free that Google search has transformed the nature of retail competition. Contrast this to the Microsoft case where the cost of Windows 95 was $200 retail and $100 for an upgrade. Consumers' pocketbooks do not see Google as any type of monopolist.
Second, is this really a monopoly? A prerequisite to any Section 2 claim is possession of monopoly power. Unlike Microsoft's 95% market share in the PC operating system market, which served as a substantial barrier to entry, Google neither dominates search to the same degree nor does the nature of search lead to a substantial consumer base that could constitute a barrier to entry. Allegations of Google's monopoly power in search are overblown, especially since Google only had 65% of the U.S. core search market in May 2011 according to comScore.com.
Additionally, unlike Microsoft's operating system product, whatever power this 65% share confers to Google is moot because search consumers face zero switching costs! You can't have monopoly power if it is costless to switch to an alternative. As explained by renowned antitrust scholar Herbert Hovenkamp, "There's no lock-in with a Google search engine. If you want to have six different search engines all on your desktop, you can do that. It's all free." Consumers have choices that are mere keystrokes away. Bing, Yahoo!, Ask.com all have measurable share of the core search market and there are also a number of niche search sites such as WebMD, Kayak, and Wikipedia. Unlike the cost of buying and installing a new operating system, users need only type "bing.com" into their browser's address bar to use a different search engine.
Moreover, the fluidity of web-based products is a constant check on any threatened monopolization. For instance, as observed by law Professors Manne & Wright, social media sites like Twitter and Facebook are occupying an ever increasing amount of consumers' "eyeball" time online. Google may have a significant share of search today, but as we have seen many times, search engines enter and exit the market with great frequency, and there is nothing to prevent other technology companies, such as Facebook, from making inroads to the search market.
Third, who is being handicapped, if anyone? There is a fundamental difference between the evidence of anticompetitive harm in Microsoft and Google's alleged exclusionary conduct. In Microsoft, there was a mountain of evidence that Microsoft's conduct led to significant rivals being severely handicapped and excluded. In Google's case, there are merely anecdotal and speculative claims of exclusion and harm, mostly offered by those with an affiliation to Google's competitors.
Finally, where are the bad acts? Finally, there are no "bad acts" to support a Section 2 claim against Google. The nature of the market and nonexistent switching costs derails any predatory pricing claim. Moreover, unlike the case in Microsoft where consumers were unable to override the default browser setting and prevented consumers from being able to remove Internet Explorer, none of Google's products frustrate a user's ability to use other search products. Lastly, any refusal to deal arguments are misguided, primarily because Google has no duty to deal, but also in light of Supreme Court precedent narrowly construing refusal to deal as a basis for antitrust violation.
Google is not like Microsoft. Google's conduct today is not like Microsoft's conduct during the 1990s. The markets in which Google competes are vibrant, competitive, and rapidly evolving. Any analogy between a potential antitrust case against Google and the antitrust case against Microsoft ignores the underlying facts and is a misguided over-simplification of the complicated nature of the on-line search market.
You have enemies? Good. That means you've stood up for something, sometime in your life.
Winston Churchill
I can only imagine that the Feds are interested in this because they have been so utterly inept at doing anything about our financial services industry; who have damaged America (almost) irreparably.
I also find your comments about drivers not being available on Windows an outright lie. It's also hilarious you mentioned it in relation to Linux, which is an absolute disaster when it comes to drivers and everthing else. Your entire post is a lie.
Now the real question to me is why we let the baboons out in the first place.
No, they didn't. They were sued because the busines player was unwilling to comply.
Every single point in your article is incorrect. For brevity I will completely destroy your first argument. Destroying the rest if left up to the reader.
Your Argument 1 - What's the harm to the consumers?
The reason you are completely and totally wrong:
Google's customers ARE NOT PEOPLE DOING SEARCHES. Google's customers are those who are PAYING GOOGLE TO DISPLAY ADS. THEY are the ones who pay more.
And guess what? When they pay more to advertise because Google absolutely dominates the online advertising market. Google receives over 80% of search spending in the US, and more in other parts of the world.
Thus, they are pretty much "the only game in town" for businesses who want to advertise. They must either pay Google's rates, or they simply don't get ad views on the net. This creates HUGE pressure to increase Google's rates.
And guess what? If companies pay more to advertise on the net, they pass those costs onto THEIR customers (i.e. the public).
So yeah..in just your first "point" you completely misidentified Google's paying customers, and you completely missed the fact that EVERYONE has to pay hidden costs due to an uncompetitive search market.
There is no talk about MONEY! If the author of this article had at least some business experience, he would have known about AdWords (are their AdSense/DoubleClick siblings). In capitalism, customers are people that bring money. Search services and Gmail are only the baits for eyeballs - that then get sold to advertisers.
The four points are totally bogus. I can hardly imagine an online ad campaign that excludes Google AdWords, AdSense and DoubleClick. Yes, you could throw others into the mix, but to totally avoid Google? I don't think so.
Have you ever tried to reach Google's help desk? It's impossible to even report a bug in their services for non-paying "customers" that Balto speaks of. But if you are an advertiser (a real PAYING customer), you can pretty easily get in touch with Google's support.
The bad acts: AdWords has really become much more expensive in the last five years. It used to be cents per click, now it is at least a quarter. Google doesn't even want to show your ad if it is lower than that - even if you are the only bidder...
Google's non-advertising revenue is otherwise peanuts. Search services and Gmail are the real thing, but they are only the baits for eyeballs - that then get sold to advertisers.
And yes, I was so disturbed by the article that I reset my forgotten password to write my second post on HP...
The only consolation is that MS is losing badly in the mobile market which is where a lot of consumer desktop computing is going to. There the Linux/ARM partnership and ease-of-use dominates (MS basically made you manage their products which is why the they don't have the history of designing easy-to-use products--imagining have to know the deep internals of the iPhone before you could adequately use it.)
Tell Steve I said hello.
The problem with any anti-trust is simply put:
1) If you "overprice"-----you're gouging the consumer
2) If you undercut your competitor, it's "predatory pricing"
3) If you price the same as your competitor it's "collusion"
You aren't even close to being right. Mac OS X has less than 6% market share. Linux has 1%