THE BLOG
08/14/2013 06:20 pm ET Updated Oct 14, 2013

Is Google Complicit in J2 Global's Monopoly Over the Online Fax Industry?

J2 Global Communications, a company known for the internet fax services as well as other online services such as cloud storage and email marketing, has long been accused of pushing the boundaries of what can be deemed acceptable in the online market. Now their business practices have begun to gain notice, and have the potential threaten to drag down Google's name as well.

An Illusion of Choice

For those who have never used the services, online fax is, essentially, a service that uses the Internet in place of traditional phone lines for faxing documents. This helps to cut costs by assigning a telephone number that routs faxes scanned in from a fax machine directly to email, or from email to a recipient fax machine. Given the high costs of telephone-based fax services over long distances, which also lack the ability to send and receive numerous simultaneous faxes, the use of online fax services has become increasingly popular and may soon phase out traditional fax methods entirely.

Although the merits of this industry are obvious, the relative lack of notoriety in its use has allowed for ostensibly unethical business practices to go relatively unnoticed, particularly at the hands of industry leader J2 Global. Much like AT&T in the 1980's, J2 has used predatory tactics such as aggressive acquisition of competitors and persistent litigation to enforce a monopoly over their interests.

In order to create the illusion of choice for consumers, J2 Global operates numerous, nearly identical websites such as eFax.com, RapidFax.com, MyFax.com, MetroFax.com, SmartFax.com and Fax.com that all offer the same internet fax services. As a result, J2 effectively controls over 90% of the internet fax market. This allows for J2 to screen their actions as if they are separate entities in the eyes of the average consumer, and as a result, J2 is able to set prices to whatever level they see fit.

Driving Out the Competition

If the market was free, this would likely not be an issue. However, the methodology of litigation that J2 employs has allowed for them to sue any competitors for infringing on a patent held by J2 over all faxes using an email, regardless of whether they are using PHP, SMTP or .NET gateways in the emails. Many legal experts observing such lawsuits have deemed J2 to essentially be a practicing-entity "patent troll," in which aggressive legal action is used to enforce their control over the market with a vague or fraudulent patent, comparable to the numerous lawsuits recently seen in the realm of smartphones.

With J2's considerable resources and powerful legal assets, most of these cases never actually make it to court, and are instead settled before proceedings formally begin. In many ways, this works to J2's advantage; were these cases to climb the legal ladder, the probability of J2's patent remaining intact would be minimal. Also, by obtaining these settlements, J2 is then easily able to move into acquire the weakened company before shuttering it completely or simply adding their former competitors to their roster of companies. Companies currently hurting from this monopolization which have not (yet) been acquired by J2 include Ring Central, Fax87 and Nextiva.

In a rare case of a suit against J2 for their business practices, Integrated Global Concepts Inc., one of J2's largest competitors, filed a complaint against J2 in 2007 that accused J2 of "enforcing fraudulently obtained patents to unlawfully create and maintain a monopoly by intimidation against j2's competitors" and utilizing their wealth and legal acumen to "crush competition, raise their costs of operation, eliminate them as competitors in the relevant markets entirely, and substantially raise the cost of fax to e-mail services to customers."

While the case was eventually dismissed, the two companies have continuously engaged in legal proceedings since 2007, with J2 filing numerous unsuccessful suits of patent infringement against Integrated Global Concepts as recent as July, 2013.

Google's Role in the Problem

To compound the problem with J2's practices even further, the manner in which consumers shop for internet fax has also been gamed through the use of their numerous subsidiary companies in the form of Google. As the world's leading search engine, the bulk of internet traffic brought to J2's websites come from Google. But when someone searches on Google for the query "online faxing," the vast majority of the results they see are from J2 properties.

Such practices are technically prohibited by Google AdWords's "double serving policy," which stipulates that multiple ads solicited by accounts owned by the same corporate entity should not be allowed when triggered by the same keyword. A search of "online faxing" shows that this policy is clearly in violation several times over, as the vast majority of the websites that appear with search terms related to online faxing are all owned and operated by J2.

Most people may not initially see much of a problem with this, but given the fact that Google has built its reputation on reliable search results, this does not reflect well on Google. providing consumers with results that are tantamount to identical services operated by the same company with only slight variations in price casts aspersions on Google's ability to monitor incidents of search results being manipulated by a monopolistic corporation, or possibly are simply turning a blind eye to these practices entirely.

Additionally, non-ad results also make up the bulk of the top organic (non-paid) search results in a Google search. To understand this issue, one must first understand how Google tabulates its search results. Google orders search results based off of many factors, but one of the strongest known factors is the quantity and quality of inbound links to a page (and/or domain).

By owning and operating the majority of internet fax websites, J2 is able to easily place hidden and visible links to their own properties. These practices, which many consider to be "grey hat SEO," are also something that Google has repeatedly attempted to eliminate in order to maintain integrity of their search results. With this in mind, Google has a responsibility to assist in allowing for a fair, free market.

Conclusion

All in all, the practices of J2 in monopolizing this market are questionable. Whether Google is aware of the practices employed by J2, is unclear. But one thing is certainly clear: Complacency will only cause large corporations like J2 to continue to drive out competition at the average consumer's expense.