(This article is both an examination of the intended role of American Antitrust law and the case study of Google as possibly in violation of such law. Part I will focus on Google, Part II will look at the progression of Anti-Trust Law in the U.S.)
Part I: More About Google
In September of 1998, Google Inc. was created.
At its beginning, Google was nothing more than a quaint search alternative to the likes of Yahoo as well as many other search engines now long forgotten. Today, barely more than a decade later, Google has become a giant, employing over 20,000 personnel and generating more than $20 billion annually in advertising revenue. But don’t let the title of this article mislead you, by no means does Google possess a classic monopoly in the online advertising market. Google currently competes primarily with Yahoo, Microsoft and AOL in the e-advertising industry, but as long as Google Search continues to host the majority of internet search queries worldwide Google stands to remain as the dominant party in the growing online advertising game - a fact not remiss with the U.S. Department of Justice (DOJ).
A large component of Google’s success has been tied to the company’s investment in developing its brand, now appraised by many as the most powerful in the world1. A Key component of Google’s branding has been to create the public perception that Google operates as a sort of public trust, one that considers the benefit of the consumer and society before all else, including the company’s own bottom line. Before Google, I suspect many would have thought such a degree of altruism would not be possible, or at least not effective, in a capitalist corporate world, but to Google’s credit they have continued to find ways to both make money and provide much free benefit for us all. In addition to providing the internet’s most effective navigation tool (Google Search) Google has continued to release and develop free web-based software such as Gmail, Google Docs, Google Analytics, etc, even though some of these products lack foreseeable avenues of significant monetization. On top of this, Google’s environmental reputation is nothing short of sterling, and it is consistently rated as one of the best companies to work for. As a consumer, there is simply a lot to like and respect about Google.
Still, the true genius behind the Google business model lies in the company’s ability to generate its profits through the innovation and expansion of the entire online advertising market and the internet at large for that matter. For example, Google Ads allows advertisers to control whether or not their ads will display based on the appearance or exclusion of certain keywords in a search query and/or webpage content. Suppose a certain TV retailer wanted an ad to display on Google Search only after a user searches ‘buy tv’. However, this particular store doesn’t sell Samsung televisions so they do not want the ad to display if the term ‘Samsung’ was searched. Using minor customization of Google Ads, a search of ‘buy samsung tv’ would not display the advertisement, allowing the TV retailer to more efficiently advertise by avoiding unlikely buyers. In this way, Google not only streamlines online advertising for existing advertisers, but also makes it a more viable option for companies targeting highly specific consumers - often small businesses.
Indeed, there are many examples showing Google to be a creator of industry, from their charting tools like Google Earth and Google Maps to their web-monetization tools like Google Analytics and Adsense to their creation of the web 2.0 AJAX technique, one thing is clear - Google’s products have provided a lot of free assistance. But despite Google’s knack for online services the company has been perhaps zealous in its ongoing expansion, which has included aggressive acquisitions into many pockets of online industry. Google’s most high profile were the purchases of Youtube and advertising giant DoubleClick. Although Google drew a good deal of legal attention at the times of these purchases they believed they were operating with competitive ethics in mind and likewise Google convinced the DOJ as much. Then, in 2008, a proposed advertising deal with fellow e-mogul, Yahoo, was rejected by the Department of Justice. The rejection was not because there was anything anti-competitive intrinsically with the proposed deal - in fact, Google has many similar deals in place - but rather because it would have further enabled Google to participate in future anti-competitive behavior.
Such a sudden reversal of treatment from the DOJ was likely a shock for a company who’s informal motto is “don’t be evil,” but the timing appeared fortunate because Google had been a very early backer of Presidential Candidate Barack Obama, then well on his way to ascending to the white house. In fact, Google CEO Eric Schmidt was even a member of Obama’s transition team and he currently sits on Obama’s technology advisory council. Knowing all of this, it is easy to see why many including myself were led to speculate that Google would be allowed to operate with the utmost political trust. Since then, however, new events have transpired that lead me to believe my prior assumption could not have been more wrong.
While no formal antitrust case has been raised against Google, the antitrust division of the DOJ has been fairly blatant in its foreshadowing of an impending suit. On Jan 22nd, Obama appointed Christine Varney to the head of the antitrust division of the DOJ. Only months before this, Varney, who had been one of the top attorneys representing Netscape in their antitrust suit against Microsoft in the 1990’s, spoke out vociferously against Google, comparing them to Microsoft insofar as being a behemoth with the power to crush its competitors. Varney suggested that the government had been too slow in building a case against Microsoft, and even went as far as saying, “I think we are going to see a repeat of Microsoft.”2 Since her appointment, Varney has not mentioned Google by name, but has added that she plans to take an aggressive approach to enforcing our nation’s antitrust laws, a daunting prospect for Google’s continuing prosperity.2
So, with the DOJ now breathing down Google’s back, the question becomes not if there will be an antitrust suit, but on what legal grounds? To answer we must not only look at the body of laws, but also at the history of the court’s interpretation of the law. At the outset, however, it is hard to imagine how a company that seems to go out of its way to improve industry could be in violation of laws designed with a very similar intent - to protect and promote industry.
Stay tuned for Part II…
1) Wired Magazine: The Plot to Kill Google
2) Wired Magazine: Why is Obama’s Top Antitrust Cop Gunning for Google?
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Tags: Antitrust, Christine Varney, Department of Justice, Eric Schmidt, Google, Google Antitrust, microsoft, Obama, Yahoo
