Editor’s Note: This article reinforces CRE’s position that old fashioned trust busting analyses are not applicable to the FTC investigation of Google.
July 13 (Bloomberg) — When Google Inc. went public in 2004, its founders declared that the search-engine leader wasn’t a conventional company and didn’t intend to become one. This maverick attitude has defined Google ever since, especially in its hot-and-cold relations with the world’s governments.
Regulators constantly find some aspect of Google’s business that demands attention. There are bogus advertisers to be shut down and offensive YouTube videos to be challenged. Authors fret about copyright issues involved in digitizing old books. Privacy-minded citizens worry about unwanted visibility from Google Maps and Google Earth. The controversies are endless. To date, regulators have acted as if Google is moving in the right direction but needs to be more careful about how it proceeds.
Now some of Google’s fundamental business practices are under fire. At issue is the company’s dominance in online search, with more than 60 percent of the U.S. market and an even larger share in Europe. The biggest critics, which tend to be other online businesses, argue that Google is skewing search results to favor its own services, that it is making it hard for other businesses to win top ad placements, or that the company using other sites’ content in unwelcome ways.
The Federal Trade Commission has embarked on a wide probe of Google, looking for antitrust violations. The agency is adopting the time-honored way of dealing with market dominators, going back to the meatpackers and steel companies of the 1920s.
The protracted rituals of antitrust, however, were built for a world in which monopolists stymied innovation, jacked up prices, stifled competition and arm-twisted customers into buying extra goods or services they didn’t need. It’s not that simple in high tech.
Refining Algorithms
Google hardly acts like a classic monopolist. It innovates furiously, having made 500 refinements to its search-engine algorithms last year alone. Google gives away most of its products. Google’s easy-to-use AdWords and AdSense products have helped thousands of businesses get started. And for all its supposed market clout, Google has launched its share of flops, such as Google Health.
The Mountain View, California-based company argues that rival search engines are just a click away. It also points out, rightly, that the marketplace would punish it if Google puffed up its own offerings in search results. Both Microsoft Corp. and AOL Inc. got carried away promoting their own content in the late 1990s; it didn’t work out well for either.
Jitters about Google’s ability to run its own ads next to search results seem overblown. Although such “house ads” could push up other advertisers’ costs, Google’s ads equate to less than 0.5 percent of all spending on the site. Besides, similar house ads have long been accepted in print and broadcast.
Antitrust Cudgel
Complaints about Google overstepping its right to treat others’ data as public-domain material may carry more weight. Here, though, the antitrust cudgel is an ill-suited fix. The decade-long pace of many antitrust cases makes it impossible to cure problems as they unfold. What’s more, the classic trust- busters’ remedies — forcing divestitures or asking Google to operate under a consent decree — seem more anticompetitive than the supposed problems they might cure. Do we want the U.S. government constantly fiddling with Google’s algorithms?
Fortunately, better approaches are at hand. In highly technical fields, such as health care or engineering, regulators routinely convene expert panels to help make specialized judgments or set industrywide standards. Google, its critics and the FTC should sign on to a similar, binding approach. Doing so would let them negotiate contentious issues calmly and efficiently. Other thorny matters, such as how to allocate Internet domain names, have been resolved by forming international, multiparty rule-setters.
Privacy Concerns
The ultimate answers on licensing, copyright and privacy may require legislation some day. In the meantime, face-to-face negotiation is bound to be more efficient than a drawn-out antitrust suit. An example: In March, the FTC announced a well- crafted resolution of privacy concerns regarding Google’s Buzz social-networking service, barely a year after lawmakers and advocacy groups asked the agency to investigate.
The FTC’s rightful role in watching Google may be more as a convener of working groups on specific Internet business issues than as an old-fashioned trust-buster. That’s less exciting than trying to gear up for a big antitrust case. But a tighter focus avoids debacles like the 13-year government probe of International Business Machines Corp., which ended in a big “never mind” in 1982. That inquiry became a litigation time capsule — trapped in debating an outdated set of facts while the information economy kept rolling forward.
Read more Bloomberg
July 13 (Bloomberg) — When Google Inc. went public in 2004, its founders declared that the search-engine leader wasn’t a conventional company and didn’t intend to become one. This maverick attitude has defined Google ever since, especially in its hot-and-cold relations with the world’s governments.
Regulators constantly find some aspect of Google’s business that demands attention. There are bogus advertisers to be shut down and offensive YouTube videos to be challenged. Authors fret about copyright issues involved in digitizing old books. Privacy-minded citizens worry about unwanted visibility from Google Maps and Google Earth. The controversies are endless. To date, regulators have acted as if Google is moving in the right direction but needs to be more careful about how it proceeds.
Now some of Google’s fundamental business practices are under fire. At issue is the company’s dominance in online search, with more than 60 percent of the U.S. market and an even larger share in Europe. The biggest critics, which tend to be other online businesses, argue that Google is skewing search results to favor its own services, that it is making it hard for other businesses to win top ad placements, or that the company using other sites’ content in unwelcome ways.
The Federal Trade Commission has embarked on a wide probe of Google, looking for antitrust violations. The agency is adopting the time-honored way of dealing with market dominators, going back to the meatpackers and steel companies of the 1920s.
The protracted rituals of antitrust, however, were built for a world in which monopolists stymied innovation, jacked up prices, stifled competition and arm-twisted customers into buying extra goods or services they didn’t need. It’s not that simple in high tech.
Refining Algorithms
Google hardly acts like a classic monopolist. It innovates furiously, having made 500 refinements to its search-engine algorithms last year alone. Google gives away most of its products. Google’s easy-to-use AdWords and AdSense products have helped thousands of businesses get started. And for all its supposed market clout, Google has launched its share of flops, such as Google Health.
The Mountain View, California-based company argues that rival search engines are just a click away. It also points out, rightly, that the marketplace would punish it if Google puffed up its own offerings in search results. Both Microsoft Corp. and AOL Inc. got carried away promoting their own content in the late 1990s; it didn’t work out well for either.
Jitters about Google’s ability to run its own ads next to search results seem overblown. Although such “house ads” could push up other advertisers’ costs, Google’s ads equate to less than 0.5 percent of all spending on the site. Besides, similar house ads have long been accepted in print and broadcast.
Antitrust Cudgel
Complaints about Google overstepping its right to treat others’ data as public-domain material may carry more weight. Here, though, the antitrust cudgel is an ill-suited fix. The decade-long pace of many antitrust cases makes it impossible to cure problems as they unfold. What’s more, the classic trust- busters’ remedies — forcing divestitures or asking Google to operate under a consent decree — seem more anticompetitive than the supposed problems they might cure. Do we want the U.S. government constantly fiddling with Google’s algorithms?
Fortunately, better approaches are at hand. In highly technical fields, such as health care or engineering, regulators routinely convene expert panels to help make specialized judgments or set industrywide standards. Google, its critics and the FTC should sign on to a similar, binding approach. Doing so would let them negotiate contentious issues calmly and efficiently. Other thorny matters, such as how to allocate Internet domain names, have been resolved by forming international, multiparty rule-setters.
Privacy Concerns
The ultimate answers on licensing, copyright and privacy may require legislation some day. In the meantime, face-to-face negotiation is bound to be more efficient than a drawn-out antitrust suit. An example: In March, the FTC announced a well- crafted resolution of privacy concerns regarding Google’s Buzz social-networking service, barely a year after lawmakers and advocacy groups asked the agency to investigate.
The FTC’s rightful role in watching Google may be more as a convener of working groups on specific Internet business issues than as an old-fashioned trust-buster. That’s less exciting than trying to gear up for a big antitrust case. But a tighter focus avoids debacles like the 13-year government probe of International Business Machines Corp., which ended in a big “never mind” in 1982. That inquiry became a litigation time capsule — trapped in debating an outdated set of facts while the information economy kept rolling forward.
Read more Bloomberg View editorials.
–Editors: George Anders, Paula Dwyer
View editorials.
–Editors: George Anders, Paula Dwyer
Leave a Reply