Congressional calls to investigate Google for antitrust violations are heating up. The Senate Antitrust Subcommittee plans to look at the company's likely antitrust violations, with Chairman Herb Kohl, D-WI, saying in a release:
In recent years, the dominance over Internet search of the world's largest search engine, Google, has increased and Google has increasingly sought to acquire e-commerce sites in myriad businesses. In this regard, we will closely examine allegations raised by e-commerce websites that compete with Google that they are being treated unfairly in search ranking, and in their ability to purchase search advertising. We also will continue to closely examine the impact of further acquisitions in this sector.
Ranking Member Michael S. Lee, R-UT, also supported hearings on Google because, "the powerful position Google occupies in the general search arena creates myriad opportunities for anticompetitive behavior." Senator Lee also argued that Google's dominant position feeds the company's refusal, as in the wi-spy scandal, to take consumer privacy seriously:
Google's powerful position as an Internet gatekeeper reduces the company's incentive to compete with other search engines by providing enhanced privacy protection for consumers. The combination of behavioral and personal information enables Google to generate consumer data that is unprecedented in scale and scope. These activities raise serious privacy concerns and may be indicative of an important market that is largely unconstrained by competition.
The Congressional investigations are just paralleling rising scrutiny of Google by antitrust authorities in both the US and in Europe. J. Thomas Rosch, one of two Republicans on the five-member Federal Trade Commission, said he favors a review of the search industry. The European Commission in November started investigating whether Google is illegally directing users of its search engine to websites it owns or is affiliated with and whether Google is stopping websites from accepting competitors' ads. The U.S. Justice Department is reviewing Google's acquisition of travel data firm ITA Software on antitrust grounds. And Texas Attorney General Greg Abbott is conducting his own investigation and wants Google's formula for setting advertising rates.
Personally, I have some sense of déjà vu from my own experience ten years ago at NetAction where I led an effort examining Microsoft's dominance of the industry and why antitrust investigations were needed. A lot of people -- then with Microsoft as now with Google -- said the dominant company in question was just delivering a popular product with consumers and those looking to use the antitrust law just hated the companies. A decade ago, some of those going after Microsoft were Mac users who hated PCs, but I was a PC/Windows user (and still am) just as I'm a heavy user of Google products -- but it's actually the convenience of using the dominant product that highlights why antitrust concern is warranted.
Monopolies Don't Start out Inefficient: One intellectual mistake in understanding antitrust law is believing that monopolies always hurt consumers initially. In fact, many monopolies arise precisely because they are more efficient initially than a bunch of competing companies. J.D. Rockefeller's Standard Oil gained monopoly power by being more efficient than its competitors and integrating all aspects of the oil production process. Other rising monopolies of the past got there by outmaneuvering the competition with better products.
The problem comes with what a company does with a monopolistic position once attained. It can use that position not only to gain economies of scale but to reinforce that dominance with constraints imposed on contractors, customers and others that make it impossible for smaller competitors to achieve similar efficiencies. Customers look around and wonder why the "best" company is being politically attacked, when that company is using its position to prevent the competition from delivering a similar level of service.
And once a company is dominant in a core industry position, it doesn't have to worry as much about consumers defecting based on other concerns -- i.e. consumers will ignore privacy concerns of using Google because they think it's delivering their top priority of strong search results. The quote from Senator Lee above captures the idea that Google's seeming unconcern about violating privacy is driven by its complacency in dominating an uncompetitive search marketplace.
What are the Antitrust Concerns About Google: One of the reasons antitrust scrutiny of Google is rising both in the United States and globally is that the number and range of antitrust complaints and concerns has been multiplying so rapidly. Here are just a few:
And while Google's obviously not dominant in the browser or operating system fields, there is concern that Google's Android mobile operating system and Chrome browser qua operating system could be used to further entrench Google's search dominance.
Unfair Competition, Not a Bad Product: You don't have to think Google is producing a bad product to be concerned about how lack of competition may erode pressure on Google and others to innovate in the search and related markets. We don't want to live in a "winner take all" economy where a strong product allows a company to pull up the ladder behind it and destroy its competitors.
The real question is not why to investigate Google, since the problems listed above are obvious. The question is why not force Google to act more competitively? Antitrust restrictions will likely make Google products better and allow new competing products a better chance to reach consumers (and in turn force Google to innovate in response). For example, if Google's other products don't get special treatment in its search results, won't that force Google to improve those product to win fair-and-square by Google's own algorithm rules? If data in Adsense is portable to other advertising venues, won't that encourage Google to improve its services to advertisers to keep their business? And if Google knows its privacy violations can't be used for anti-competitive purposes, maybe the company will become a better guardian for consumer privacy.
Crossposted from Tech-Progress.org
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Look, antitrust law does not automatically break up companies once they hit 90% market dominance. Its not against the law to have a product or products that are so relatively good, they squash their competition. Its against the law to USE their market position to make it functionally "impossible" for competitors to make a profit.
Microsoft in the 1990's was a monopoly. When I, the consumer, have no choice but pay the "Microsoft" tax when I bought a new computer, that's monopolistic. When Microsoft steals the disk compression technology from another company and can count on bankrupting that company before suffering a loss, that's monopolistic. When Microsoft deems a web browser company a threat, and decides to offer a similar product for free, that's monopolistic. The instant Bing or Yahoo makes me 33% happier with my search results, I'm not using Google anymore. And I'm not even paying anything to use Google's offerings.
Don't get me wrong. Google is a Big Brother nightmare. But you can't destroy a company based on its "potential" for economic threat. You can only apply antitrust law on cases where a company has ACTUALLY used its market position to strangle competitors.
There's a huge difference between Microsoft's behavior (which involved forcing PC makers to pay for copies of Windows that they didn't use on Linux PCs, for example) and Google's approach to search. What's more, anyone can click away to another search engine in an instant, which is far different from changing operating systems.
It seems to me that, if the government wants to encourage competition, it should break up the search deal between Microsoft and Yahoo, which has created a duopoly in search (with Microsoft, which already has the dominant PC operating system and browser, now controlling nearly all Web search that isn't being done on Google).
Apple is actually a good case. Their behavior was ignored for a long time because they were "too small". But now they have suddenly grown, and this behavior is becoming problematic? Would they be better citizens if they had been asked when they were smaller to play nicely?
In order to switch away from a Microsoft product, such as Windows or Office, you need to go to extra-ordinary lengths to ensure that your replacement is completely compatible with what your business needs and partners demand. You must ensure that all required software is present on the new platform, and that all file formats are compatible for everyone you deal with. This process is extremely difficult, and in many cases not possible (You will never see a mechanical engineer on Linux, for instance. No CAD software whatsoever). This is the defining point of Microsoft's monopoly position.
Google, conversely, has exceptionally low switching cost for all of their products. The cost of making a new email account is a few moments of sign-up, and sending a mass email to all your contacts. Even changing online advertising accounts is the work of a few hours at most. And the cost of switching to a new search engine are seconds, as you tell your browser to make a different engine the default. These reduced switching costs put whatever market share any Internet search provider gains in constant peril. Thus, Google will always have competition, and is not an unfair monopoly.
You make some good points about monopolies. I would argue that our government is the worst when it comes to mopolistic practices.
'The problem comes with what a company does with a monopolistic position once attained. It can use that position not only to gain economies of scale but to reinforce that dominance with constraints imposed on contractors, customers and others that make it impossible for smaller competitors to achieve similar efficiencies.'
Sounds like our public unions...
'The question is why not force Google to act more competitively? Antitrust restrictions will likely make Google products better and allow new competing products a better chance to reach consumers (and in turn force Google to innovate in response).'
Again, why can't we get the same accountability from our public unions?
Kai
As for accountability of unions, they are covered by a myriad of laws requiring financial and political accountability. Yet a lot of anti-union folks don't want "accountability"; they want to destroy those unions entirely.
I on the other hand, want Google to thrive and continue to innovate. I believe antitrust accountability won't hurt the quality of its products in any way; it will just enforce some accountability on the company for some of its less savory (and least innovative) practices.
‘In what ways do [public] unions have any monopoly?’
They control the supply of labor from which the states MUST employ and MUST pay regardless of performance, price, efficiency. A case in point is the recent decision by a mayor in California to get rid of the position of his secretary since he did not need one and he wanted to save his town the money. He was sued by the unions to keep that position despite the fact that it was unnecessary and cost way too much. In this case the unions control the supply of labor, as well as FORCE the demand for labor, all at the expense of the taxpayer.
They do not have accountability and that is why it is nearly impossible to fore teachers, police, etc, that have substandard performance. Please do not make me list examples, there are just too many to list.
Great, if it is good enough for Google, then it should be good enough for the teachers unions, yet they fight charter schools, teacher reform, voucher programs, performance-based pay, the removal of tenure. How are any of these things bad for the community. It isn’t but it is for self-seeking unions.
In Chicago, a billionaire wanted to donate a good part of his fortune to start a charter school system some time ago. The city refused the money since it would create serious competition for the public school system and the unions did not like that.
Kai
Sorry for my poor writing
Here's an alternative. Break up the "too big to fail" banks and insurance groups. Give us some legitimate financial regulation.
When Google looks like it's going to nuke the economy, then we can start worrying about non-competitive practices in their sector of the economy.
Fortunately, Americans and the world have gotten a handle on what's really going on. I don't even need to look up the background of the author to know that there's a lawyer getting ready to "make some money"...
I hope you progressives can see that what we need are more Google's, more innovation, particularly around search.
If you attorneys want to improve things, you ought to be campaigning for tort reform. Our legal system today (including tax code) is such a stress for business, for workers, for families, for children, for serenity of life - that it likely causes more deaths, more suicides, more divorces, more children living with one parent than one can imagine.
I think deep down that what I say is rings of truth to you. I challenge you to apply the same innovative spirit that Google has applied to connecting people and ideas to tort reform.
It's time for this to happen soon - because if you don't, I guarantee you that the American voter will and I would not want to see you experience the same listless life that our exploding bureaucracy has wrought to so many.
And it's just an odd random axe-grinding to switch over to tort reform, since trying to use government to suppress independent jury decisions doesn't seem to have much with antitrust law.
As for a specific example; let's go to the most famous - the McDonald's coffee incident. McDonald's coffee had actually been in a habit previously of burning it's customers and the particular lady who brought suit actually required skin grafts - not to mention she didn't spill the coffee, the coffee was so hot that it MELTED the styrofoam cup. The damages she was awarded were punitive and the amounted to McDonald's one day revenue from coffee sales; does this seem particularly unfair?
But, libs dont do history I guess, not even recent lib history.
the question is why are libs now protecting google? for the answer just follow the campaign cash into obama's coffers.
It will be fascinating to see what happens, as this goes forward (if it does, that is).