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Implications of DOJ-Google/ITA Antitrust Settlement

There are many major going-forward implications resulting from the DOJ's latest antitrust enforcement action against Google -- this time to mitigate the anti-competitive effects of the proposed Google-ITA transaction.

 

 

 

Summary of Implications:

  1. Google is clearly the DOJ's main antitrust concern.
  2. DOJ is 4-0 against Google while FTC is 0-2.
  3. DOJ concludes Google is a monopoly -- again.
  4. Remarkably, Google is actively choosing a regulated future for itself.
  5. Google is choosing the trajectory of a regulated antitrust remedy long term over the trajectory of a break-up remedy.
  6. The narrow market definition is good news for those privately suing Google for antitrust violations.
  7. The Google-ITA "firewall" will prove very difficult for the DOJ to police effectively.
  8. The complaint mechanism is important.

 

Implications:

1.   Google is clearly the DOJ's main antitrust concern.

This is the fourth major official DOJ antitrust action against Google in just 29 months, making Google DOJ's only current serial antitrust offender requiring regular antitrust enforcement.

  • DOJ blocked the Google-Yahoo Ad Agreement 11-5-08 by threatening a Sherman Section 2 case.
  • DOJ sued Google and 5 others for "naked restraint of trade" in colluding to prevent poaching of each others' employees and Google et al settled requiring 5-year supervision by the DOJ.
  • DOJ opposed the Google Book Settlement on antitrust, copyright and civil action grounds and Judge Chin followed the DOJ's advice in rejecting the Google Book Settlement last month.
  • DOJ required 5-year DOJ supervision of Google-ITA transaction.

 

2.   DOJ is 4-0 against Google while FTC is 0-2.

Concerning the big issue/debate in the media -- whether the DOJ or the FTC should be the lead agency to pursue a broader antitrust investigation of Google -- the substantial record to date is obvious, that on the merits it should be the DOJ.

 

  • In antitrust enforcement, the DOJ has taken the Google threat seriously and proved consistently tough in addressing the Google monopoly/anti-competitive threat -- as listed above.
  • Clearly politically-connected Google would prefer to be investigated by the more politically influence-able five member public FTC commission rather than the harder to politically influence DOJ prosecutors.
  • The FTC's 4-1 approval of Google-DoubleClick effectively tipped Google to monopoly by giving Google most all the users, advertisers and publishers Google did not already have. And the FTC promised to be vigilant for problems in approving DoubleClick, but has been largely AWOL since.
  • And the FTC approved Google-Admob with no conditions or ongoing oversight, despite supposedly having "serious antitrust concerns." Once again, the FTC basically tipped Google to a monopoly trajectory again, this time in mobile advertising.
  • Expect Google to try and leverage its political influence to try and self-select the FTC as its broad antitrust investigator, if the Administration allows an antitrust investigation of Google to proceed at all.

 

3.   DOJ concludes Google is a monopoly -- again.

While the DOJ was nuanced in its Google-ITA language, its legal conclusion was clear -- that DOJ views Google as a monopoly.

 

  • This Google-ITA settlement is highly unusual for a vertical transaction; just like it was highly unusual for the DOJ to approve the Microsoft-Yahoo 3-to-2 search combo.
  • Both of these decisions by the DOJ make it clear that it considers Google a monopoly and that they are concerned about it acting anti-competitively.

 

4.   Remarkably, Google is actively choosing a regulated future for itself.

If Google wanted to avoid antitrust oversight/regulation -- they could have just walked away from the transaction. That was the simple clean solution, but they did not choose it.

 

  • After settling with the FTC over privacy last week, settling with DOJ this week, and all but begging the EU's Mr. Almunia to quickly settle with Google in Europe, it is increasingly obvious that Google is in Settlements-R-Us mode.
  • This should embolden those who feel aggrieved by Google to sue or complain to antitrust authorities, because Google is obviously spooked and running scared.

5.   Google is choosing the trajectory of a regulated antitrust remedy long term over the trajectory of a break-up remedy.

 

In choosing to submit to 5 years of travel search regulation/oversight by the DOJ, Google rejected the option of "breaking up" the Google-ITA planned integration in favor of submitting to temporary (5-year) government regulation. This is a very telling strategic signal Google is sending everyone.

  • Put another way, Google in wanting to integrate Google and ITA so badly signals that what Google really wants/covets is to be the de facto one-stop essential facility of the Internet, and if that involves regulation, so be it as long as Google is the one and only one that dominates and controls information access on the Internet.
  • If a broader investigation of Google occurs with the DOJ/FTC, Google is basically conceding that they will submit to regulation in return for keeping their monopoly power -- much like the grand deal AT&T made a century ago in the Kingsbury Committment.
    • This is a scary future -- where information access would be increasingly regulated rather than making the tough decisions to preserve competition among existing information access providers like Google and ITA.
  • The only thing worse than an information access monopoly is a regulated information access monopoly.
    • The dystopian perils of this enforcement path long term are mind-boggling.
    • Market competition is vastly superior to regulatory managed competition where both the monopoly and the government have the opportunity to choose information winners and losers, not users/consumers.

 

6.   The narrow market definition is good news for those privately suing Google for antitrust violations.

The DOJ's market definition, that Google acceded to, is very narrow -- comparative flight search services.

 

  • This should greatly hearten and embolden TradeComet and MyTiggers, who have sued Google privately for antitrust violations.
  • Now they have the DOJ's favorable market definition analysis on their side in court.

 

7.   The Google-ITA "firewall" will prove very difficult for the DOJ to police effectively.

Overall this settlement will be very difficult to police, because DOJ has very limited resources, and Google has almost limitless arcane activities and programming abilities that DOJ will never be able to stay on top of.

 

  • My guess is that this settlement will prove an enlightening and humbling experiment for the DOJ about the limits of effectively posting a few lifeguards to patrol all of Google's millions of beaches.
  • Google knows what they know and also how little the DOJ knows about how they collect and analyze others proprietary information without permission.
  • It is unlikely the DOJ will be able to detect if and when Google accesses competitors' metadata.

 

     

    8.   The complaint mechanism is important because there will be lots more complaints coming -- if the EU's investigation experience is any guide.

     

    • The EU received over 500 responses from concerned parties in Europe in its current investigation.

     

     

    In sum, the DOJ-Google/ITA settlement is illuminating for the many rich additional data points it provides to better see what the trajectory of Google antitrust enforcement is likely to be going forward.

     

    • This settlement affirms that Google and antitrust authorities will only be getting to know each other more intimately going forward.