Intellectual Property

The evidence is increasingly difficult to ignore that the FTC & DOJ, over the last two Administrations, repeatedly failed to enforce Section 7 of the Clayton Antitrust Act, and have allowed Google's acquisitions of YouTube, DoubleClick, and AdMob to illegally "substantially... lessen competition" and "tend to create a monopoly."

• This analysis will spotlight that Google's display advertising and mobile businesses would not be tending to monopoly, and would not be anti-competitively lessening competition, but for the illegal acquisition of market power via YouTube, DoubleClick, and AdMob.
• This analysis is also a sobering backdrop of the exceptionally high stakes for the competitiveness of the online travel vertical if Google is allowed to acquire even more market power via its proposed acquisition of ITA Software.

I.  Absentee Antitrust Enforcement & Market Failure

Free markets depend on both the rule of law and the equal enforcement of the law to prevent illegal monopolization.

We learned today that Google has the lowest foreign tax rate of the top five U.S. tech companies, an eyebrow-raising 2.4%, and that Google "cut its taxes by $3.1b in the last three years using a technique that moves most of its foreign profits through Ireland and the Netherlands to Bermuda," per an outstanding investigative expose by Jesse Drucker of Bloomberg.

This exceptional tax dodging feat, while reportedly technically legal, nonetheless raises some important questions that no one has yet asked Google.

Why are the Big Four networks Fox, NBC, ABC, and CBS, not flocking to Google TV, the largest digital video distribution network in the the world -- by far? And why did Forrester's analyst characterize Google TV's programmer sign-ups to date as "underwhelming?"

The core reason is a profound vision and business model clash between existing programmers/distributors and Google Inc. Why?

In his latest display of no-self-awareness, Google's CEO Eric Schmidt, in an interview with the Atlantic, said:

• "China can be best understood as a large, well run business... and China has roughly the following objectives: It wants  to maximize its cash flow; becoming the creditor, if you will, the bank of the world. And Second it wants to maximize both its internal demand as well as export demand. And the entire country seems to be organized around that principle."

Is Google's CEO the only sentient being on the planet that isn't aware that China is organized around the principles of China's National Communist Party?

"If China is best understood as a large, well-run business," why does Communist China censor and imprison their Chinese "customers" if they object too much to China's products and services?

I'm in Tokyo Japan and just got done giving the keynote speech to about 100 Japanese industry representatives at a forum on the negative impact on competition and innovation of the partnership between Yahoo-Japan and Google, which will control over 90% of the Japanese search advertising market.

• The remarkable thing about the event was that it was literally the first public debate or 'open' discussion of the deal among affected stakeholders in Japan since the deal was approved secretly a few months ago!

I explained the three "Ds" of the deal: dependency, decline and disintermediation (see the full speech below.) There was a Google-friendly panel of two professors and a journalist that critiqued my speech and I was afforded full opportunity to rebut all their points.

It is amazing to me that a deal that has such far-reaching negative effects on Japanese industry, Japan's economy, identity and culture, as this, was decided without any consultation or input from industry or other parts of Government affected by the deal.

The link is here to: "Googleopoly VI -- How Google is Monopolizing Consumer Internet Media and Threatening a Price Deflationary Spiral and Major Job Losses in a Trillion Dollar Sector" -- It is a 41 page PowerPoint presentation with 18 pages of pictorial analysis.

Below is the Executive Summary: (The PDF link is here.)

Executive Summary

Googleopoly VI – Seeing the Big Picture: How Google is Monopolizing Consumer Internet Media

And Threatening a Price Deflationary Spiral & Major Job Losses in a $Trillion Sector

By Scott Cleland* President of Precursor LLC, September 13, 2010

Anyone that cares about freedom generally, and freedom of the press in particular, must read PFF Adam Theirer's outstanding Big Government expose/op-ed putting the spotlight on neo-marxist "FreePress:" "How America's Hugo Chavez Fan Club Plans to 'Reform' the Media Marketplace."

• Adam's analysis and case are brilliant and dead-on; FreePress has one of the most destructive public policy agendas out there, period, full stop.
• It is frightening how much credence this Administration, FCC, FTC and Congress give to FreePress' anti-freedom-of-the-press dsytopian policy agenda.

Thanks Adam. Forewarned is forearmed.   

Viacom is likely to ultimately prevail in its appeal of the lower Court decision in the seminal Viacom vs. Google-YouTube copyright infringement case.

• If one only reads either the lower court's decision or the press reports of it, without considering likely appellate arguments and the broader constitutional context of copyright protection, it is easy to missread the likely ultimate outcome here. 
• Both sides agreed to an expedited summary judgment process in the lower court, because both sides fully expected this case to ultimately be decided at the appellate level, and most likely by the U.S. Supreme Court.
• Expect the Second Circuit Court of Appeals in New York to decide Viacom's appeal in 2011 and the Supreme Court to likely take the case and decide it in 2012 -- given how central this case is to maintaining copyright protection in the Internet age.

Why is Viacom likely to prevail on appeal?

American consumers clearly want online privacy, per a national poll conducted over the weekend by Zogby International, that was commissioned by Precursor LLC. 

• In a nutshell, over 80% of Americans are concerned about the security and privacy of their personal information on the Internet; about 90% of Americans consider some common industry behaviors to be unfair business practices; and about 80% of Americans support a variety of stronger consumer protections of their privacy online.

More specifically, this Zogby poll asked eight timely questions that are highly pertinent to:

Whatever the Atlantic's national correspondent Mr. James Fallows calls his Atlantic cover story: "Google: Inside the company's daring plan to save the news (and itself)," it can't be journalism.

It was one of the most vacuous 12-page puff pieces I have ever read. Like Jeff Jarvis described: "It doesn’t break a single new nugget of news." It was the literary equivalent of a puppy jumping up incessantly to lick the face of the person in closest proximity. 

How ironic is it that a journalist, that made a point of telling the reader that he taught journalism for several years, wrote the functional equivalent of Google PR brochure extolling all the good Google has done for journalism/newspapers -- with no journalistic critical thinking or balance.   

It is hard to fathom that in twelve pages there were: