FTC Watch.org

There’s a lot we don’t know about the FTC’s antitrust investigation into Google. But no matter how it plays out, one of the fundamental principles of the Internet as we know it is on trial.

Let’s back up. We know that Google is under scrutiny for allegedly stifling competition by favoring its own sites in search rankings, among other things. And we also know that Google chairman Eric Schmidt is going to be testifying in front of the US Senate on September 21st at a hearing billed as “The Power of Google: Serving Consumers or Threatening Competition?”

That’s all eclipsed by the things we don’t know. What will Schmidt say on the stand?  What questions do legislators have for Schmidt? Will the FTC actually lodge a formal complaint? In short, and for lack of a better way to phrase it, is Google guilty of antitrust law violations?

To get some perspective on how all those questions might be answered, I spoke to New York-based intellectual property lawyer Rob Kunstadt, who’s been keeping a close eye on Google and was even quoted in a recent decision by Judge Denny Chin regarding the ongoing drama around the Google Books settlement with authors.

The main point that Kunstadt wanted to make in our conversation was that the sudden influx of lawsuits, legal attention, and, yes, antitrust complaints could simply be a sign that Google’s decade-long winning streak as the poster child of the Internet era is drawing to a close.

After all, Kunstadt says, Intel and Microsoft may still be titans of the tech industry, but both ran into antitrust trouble that didn’t destroy their businesses, but did demolish their positions as innovation leaders. And now it just might be Google’s turn to face the music.

Moreover, Kunstadt explains that the FTC investigation is just that – an investigation. Regulators could find nothing at all. They could find a major infraction that requires Google to restructure its entire company. Or the FTC could fine Google for a few thousands of dollars and walk away satisfied.

There’s simply no way of knowing what the FTC has in store for Google, and without hard data, there’s a hypothetical case to be made for any contingency.

Kundstadt supposes that Schmidt’s testimony will likely revolve around pushing the idea idea that as a business, and one of the very first major players in the search market besides, Google has the right to promote its own services ahead of competitors. That defense goes double when there are other search engines like Microsoft Bing ready and able to accept your search queries.

The extent of Google’s market power an open question, and one worth exploring (the US Senate apparently agrees). But this all leads back to my original point.

What’s really at stake in the Google antitrust case? The very notion of the web startup.

No matter whether or not the FTC brings a formal complaint to bear against Google, Schmidt’s testimony is going to set the tone for the future of Internet business development. Is it worth even trying to innovate if Google is going to demote you in search results? The discussion of how much power Google wields is almost irrelevant in the face of public perception.

Look at the EU, where no less than nine antitrust suits have been filed against the search giant, accusing Google of essentially strangling their business with these supposed demotion practices. And investors are already skittish about making an enemy of the Googleplex. And that goes for the entire range of markets where Google is competing, from local deals to social networking.

I don’t mean to be alarmist, and I highly doubt that letting Google continue as it allegedly has been would kill the very notion of innovation amongst web companies.

But barring a rhetorical miracle on the part of Schmidt when he takes the Senate floor, the spectre of doubt is going to be cast over Google for a long time to come no matter how the legal drama plays out. And that may turn out to be toxic for the technology market as a whole.