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Stephen D. Houck

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Why Google Is Not Microsoft

Posted: 09/20/11 02:00 PM ET

Stephen D. Houck served as lead trial counsel for the 20 state plaintiffs in the government's lawsuit against Microsoft while he was chief of the Antitrust Bureau for the New York State Attorney General's Office from 1995 to 1999. He is an advisor to Google.

Thirteen years ago, in August 1998, I sat across a boardroom table from Microsoft co-founder Bill Gates for a deposition as part of the antitrust case brought against the company by the U.S. Department of Justice and 20 states. When the courts found that Microsoft had violated the law, the case showed the crucial difference between legitimate business competition, which the antitrust laws are intended to encourage, and illegal, strong-armed monopolistic practices which thwart competition and deter innovation.

This week, Eric Schmidt, Chairman of Google will be questioned by the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights about practices currently being reviewed by the Federal Trade Commission. Google's competitors and some observers have sought to identify similarities between Google and Microsoft as a result, but the companies, and the facts about their respective behavior then and now, could not be more different.

Simply put, Google is not Microsoft.

Antitrust law is about behavior. It's not about whether a company is big and successful -- it's about whether it is big and bad. Microsoft was both. With 95 percent share in the market for PC operating systems, Microsoft had unprecedented power over PC manufacturers who needed Windows to sell PCs, and it used that power to squelch competition. At trial Microsoft was found to have wielded its Windows monopoly to punish PC manufacturers who wanted to use products made by Microsoft's competitors -- most prominently a small startup company, Netscape. This had the effect of protecting the Windows monopoly, punishing those who pushed back on Microsoft's licensing terms, and raising prices for consumers.

In addition, Microsoft threatened to withhold technical information from software developers who wanted to write programs for Windows that might have eroded its monopoly. Microsoft also made it impossible to fully use other company's products on Windows and difficult even to install some rival programs. The purpose of Microsoft's conduct? To protect the huge profits it made from the high prices it charged consumers for Windows. Not surprisingly, the courts found that Microsoft had used its monopoly power illegally to stifle innovation, limit consumer choice and harm competition.

Flash forward 15 years and it's hard to understand exactly what the antitrust concerns are when it comes to Google. Yes, Google is big, but its share of search queries hardly seems 'durable.' Once as high as 75 percent a few years ago, it has fallen steadily since, losing a point of market share last month to drop to 64 percent, Microsoft's Bing search engine has climbed every month since launching just over two-and-a-half years ago. By taking over search engine responsibilities for Yahoo! and powering the search features of Facebook, the most popular site on the Internet, Microsoft now has nearly one-third of the market to two-thirds for Google. In stark contrast, Microsoft's share of the PC operating system market has stayed above 90 percent for decades.

No company is perfect and Google has undoubtedly made it share of mistakes. But it's difficult to understand how Google could fairly be compared to Microsoft. Google's consumer services are provided free to consumers, not at monopoly prices. Consumers who want to use Yahoo! or Bing instead of Google for internet searches can do so quickly and easily. They pay no price and suffer no loss for doing so. Indeed, consumers use more specialized search engines than Google for specific purposes every day (WebMD for health, Opentable for restaurants, Amazon for books) and Google does not try to stop them, penalize them, or make it more costly to do so. While Microsoft's monopoly was protected from competition by users' dependence on Windows programs, Google actually makes it easy for users to switch. User data is portable, so if consumers want to switch from Gmail to Hotmail or change her document service to Microsoft's Live 365, they are not locked into Google's products. They can easily pull data from Google's servers and take it anywhere they want.

While Microsoft's actions perpetuated its Windows monopoly and kept prices high, Google's innovative free services have benefited consumers and stimulated competition across the Internet. That makes all the difference under the antitrust laws. It is critical that today's antitrust enforcers recognize that difference.