Google off the antitrust hook?

Monday's WSJ reports that Google and the Federal Trade Commission are close to signing an agreement under which Google agrees to change some business practices and the Feds walk away from the litigation option.  Google controls about two-thirds of the search business in the US.  That might be enough to statistically qualify as a monopoly, but as a former FTC employee put it: "We don't want to punish monopolists just for being monopolists."  Lacking evidence of harm to consumers, the FTC apparently concluded it had no case.

The European Union will continue to pursue its case against Google.  The outcome could very well end up being different on the other side of the pond, where harm to competitors (e.g., Microsoft) is grounds for antitrust action. 

Google's turn for antitrust suit?

MBA 505 students will study monopoly and antitrust this coming week.  In discussing the economic consequences of monopoly power and reviewing some key cases (e.g., Alcoa, Microsoft), we will also be looking at Google's situation.  Numerous press reports (see this summary in Wired) indicate that the Federal Trade Commission is considering a suit before the end of the year and that the European Union is doing likewise.

Google has about two-thirds of the search engine market.  This might qualify as a monopoly in and of itself but it does not appear that regulators are concerned on this front.  There was a time not too long ago when Yahoo! was on the top of the heap; Google took Yahoo!'s place by having a better product. 

A key issue in the suit appears to be whether Google favors its own products in search results and thereby extends its monopoly in other product lines.  Examples cited by NYT include Google Shopping, Google Places, and Android. 

My take: I really doubt that Amazon, Yelp and Apple are worried about whether and how Google manipulates search results. Monopoly power in today's internet world is ephemeral.  Remember the big IBM monopoly?  Lotus 123? Microsoft Office/Windows?  It will take five or more years for any Google antitrust case to be settled and one has to seriously wonder what the world of search will look like at that time. 

Will Google be EU's next antitrust target?

NYT thinks the odds are high, according to today's front page story.  The euro-trustbusters are concerned that, for any given search string, Google gives its own services priority over those of rivals.  Google's advertising business also is a focus of the investigation. 

Google has about four-fifths of the search market, so it definitely meets the numerical standard for a monopoly case in the US (where a parallel investigation is taking place).  The EU can charge Google a fine of 10% of its global revenue, a fine that would be twice as much as the London Whale lost for JP Morgan.  Google's defense will be that its dominance is due to having a superior product. 

Antitrust cases typically take many years to settle.  In industries subject to rapid technological change, the issues that launched the case may be moot by the time it is resolved (e.g., IBM, Microsoft).  It is hard to imagine a world without internet searches 10 years from now, but what if someone comes up with a better way of doing it than Google?

First IBM, then Microsoft, now Google

It's not easy being a dominant firm in a winner-take-all market.  WSJ reported last week that the Federal Trade Commission is going to launch an investigation of Google for antitrust violations in the market for web-based advertising.  As MBA 505 veterans know, being a monopoly is in and of itself not a violation.  The FTC would need to prove that Google obtained and maintained the monopoly through unfair business practices.  Getting a monopoly simply because you have the best product, best service and lowest prices is no crime.  Google handles about 2/3 of all internet searches, which is well below the dominance that IBM had in mainframes and Microsoft had in PC operating systems. 

A few predictable consequences:

• this will take 10 years to resolve
• by then commerce will have changed so radically that there is a good chance that current forms of web-based advertising will no longer exist
• job stimulus for antitrust experts on both sides of the case
• the European Commission will chime in with its own set of issues
• Google will still be the dream employer for the best and brightest of today's graduates
• Look out Facebook; now that MySpace has tanked, they're coming for you next!

EU antitrusters strike again

Add Google to the list of successful American companies to run afoul of the antitrust apparatchiks in the European Union.  Their offense?  Dominating the markets for web searches and search advertising.  Fortunately for Google, any legal action is years away (which moves fastest -- a glacier, a tortoise or an antitrust case?) by which time the market situation will likely have totally changed.  European antitrust laws focus as much on protecting competing firms as they do on customers, so the legal threat is real.  Prediction: Google profits will be mildly diluted over the next 2-3 years thanks to increased attorney fees. 

Microsoft: Google monopolizes paid search ads

It's not easy being a monopolist. Microsoft knows. Convicted of antitrust violations in both the US and EU. Losing market dominance to new technologies. Staking its future on me-too products that no one really wants. So what do you do? Yesterday's WSJ headline: "Google, Microsoft Spar on Antitrust." Google indeed has a virtual monopoly on paid search advertising, which may or may not be alarming to you depending on the cross-elasticity of demand between search and other forms of advertising (translation: if small price changes lead companies to switch their ads between Google to other outlets, this isn't a monopoly.) Microsoft's lead outside counsel has filed briefs for small firms in Ohio and New York accusing Google of antitrust violations. The Justice Department is investigating as well.