Antitrust

A helpful way to understand and put in perspective Google's proposed purchase of ITA Software, the dominant provider of flight search technology, is to identify Google-ITA's best historical and logical analog. That would be Microsoft's 1995 proposed purchase of Intuit-Quicken, the then dominant provider of financial software technology. That transaction was blocked by the DOJ as anti-competitive and was a key precursor decision to the DOJ's ultimate decision to sue Microsoft in 1998 for monopolization under the Sherman Act.

The reason so many people ask: "Is Google the next Microsoft?" is because the analogy is so apt.

First, in over thirty years, Microsoft is the only major company other than Google to establish a national monopoly via technology, generate broad serious antitrust complaints, and attract a Sherman Act anti-monopolization case from the DOJ.

Second, Google-ITA is very similar to Microsoft-Intuit as both attempted to leverage their horizontal industry dominance vertically into a non-tech market vertical of the economy, i.e. Microsoft into personal finance software and Google into travel search software.

For an "unusual behind-the-scenes" look at how Google, by far the world's-leading source of information, proactively seeks to censor information critical of Google from becoming more "accessible and useful" to the world, please read this Investor's Business Daily,"Managing for Success" feature article by Brian Deagon, entitled: "When Analysts Look Over Their Shoulders."

If this is Google's "typical" treatment of its critics, what else is Google doing "behind-the-scenes" to people with information that Google disagrees with or that Google does not want to be "accessible and useful" to the world?"

In a rare public antitrust defense, Google posted a rebuttal of Washington Post columnist Steven Pearlstein's challenge of Google's strategy of buying its way to broader market dominance (via its pending acquisition of ITA Software that is being reviewed by the DOJ.)

Google's standard misdirection warrants fact-checking.

First, Google claims: "All companies make 'build vs. buy' decisions. The clear subtext here is that Google is no different than any other company making acquisitions, so if others have had their mergers approved so should Google -- fair is fair.

This is misleading because Google is omitting highly material facts of how Google is very different than other companies, and why ITA arguably is a very special case.

Google's signaled change in its business model toward "contextual discovery," represents maybe the most overt and profound conflict of interest ever in Google's already massively-conflicted business model.

• At Le Web in Paris, Google senior executive Marissa Mayer said (paraphrased by Techcrunch): "It is also contextual discovery. Take a users location as a piece of context for finding what they want without them actually searching for anything. We have a couple of things we are experimenting with, but it will be out in the next year."
• Mayer went on to declare: "The idea is to push information to people."

So what's Google's "Pushmepullyou" conflict of interest?

• (A Pushmepullyou is a mythical four-legged llama-like animal in the movie Dr. Doolittle that has two heads at each end facing in opposite directions. See here.)

Remember Google's search engine is a classic "pull" product and business. A user directs a search, and "pulls" in the requested results to their device.

• Google has built its now monopoly search advertising business on being the most efficient site for users to direct searches of the web with the ostensible promise of objective and unbiased results.

In officially approving the Google-Yahoo-Japan search and advertising partnership, Japanese antitrust authorities have inexplicably declared that granting Google an increase from ~40% share to ~90% of the Japanese search market wouldn't "immediately" violate antitrust rules. Huh?

It is obvious that this decision will end very badly.

The EU's decision to launch a formal antitrust investigation into Google's business practices has many highly significant implications going forward.

Takeaways:

First, it is obvious that the EU antitrust authorities have concluded informally that Google is a monopoly.

• That conclusion is implicit because the Google behavior the EU is now formally investigating would only be anti-competitive, if Google was indeed a monopoly.
• Also implicit in this action is that monopolies, or companies which have dominant share, cannot behave in the same way that competitors without market power do.
• Simply, because monopolies inherently have the market power to anti-competitively disadvantage competitors, they have a implicit legal obligation to not do so.

Second, this is a sweeping investigation, looking into multiple ways that the EU suspects Google has operated anti-competitively:

• Discriminating against competitors in unpaid and paid search results;
• Self-dealing in favor of Google's products, services and content;
• Imposing "exclusivity obligations on advertising partners;" and
• "Restrictions on the portability of online advertising campaign data."

What this means is that the EU apparently has deep and wide concerns about multiple patterns of alleged anti-competitive behavior.

Google's latest privacy controls are a bad joke, certainly not sufficient to warrant the FTC completely absolving serial privacy violator Google from all responsibility in the Google WiSpy Affair, especially given that other law enforcement bodies have found misrepresentation of facts and violation of users' privacy.

• Hopefully, the FCC's investigation of Google WiSpy will not look the other way like the FTC apparently did, when a Fortune 200 company with the industry's longest privacy violation rap sheet, was caught red-handed violating millions of Americans' privacy and found to have misrepresented facts and misled investigators, got off without any FTC sanction, oversight or accountability whatsoever.

Why are Google's latest privacy controls insufficient?

First, Google's leadership is clearly not publicly supportive of more privacy controls, but openly skeptical and defiant that Google does not need to alter its approach to innovation to better protect privacy and security.

Google's 'Wi-Spy' vacuuming of all of everyone's WiFi signals was no "mistake" -- as Google has repeatedly asserted -- but part of a purposeful and comprehensive Google business expansion plan to enter, catch up and compete with SkyHook Wireless, Google's only significant competitor in mobile location services. (In September, Skyhook sued Google for deceptive and unfair trade practices and patent infringement.)

Press reports of AOL's interest in buying or partnering with Yahoo appear to have missed another potential serious deal complication -- antitrust scrutiny.

• Let me be clear, I am not suggesting an AOL-Yahoo combination on its own would raise direct traditional antitrust issues, but its hard to see how it would not attract substantial antitrust/collusion scrutiny given all the indirect antitrust red flags an AOL-Yahoo tie-up would raise -- i.e. Google vs Yahoo-Microsoft, Google-ITA Software, Google's tying of search and Google Maps for Google Places/Android, etc.

First, AOL is financially-dependent on Google; Google is Yahoo's biggest and most stable long-term client feeding AOL with about a fifth of its revenues -- via a recently signed 5-year agreement for Google to continue to be AOL's search monetization engine. This deal was negotiated by AOL's CEO, a former longtime senior executive at Google. Simply in antitrust terms, AOL can be viewed as a satellite of Google, because AOL has hitched its financial/business/growth wagon to Google Search, Google Mobile/Android and potentially Google Places.

Congress needs to conduct oversight hearings to learn why the FTC is apparently giving Google special treatment, and more specifically why the FTC inexplicably dropped its Google StreetView spi-fi privacy probe without any charges, before it even learned all the facts, and without any accountability mechanism in place to protect consumers or prevent repeat violations.

Google's wanton wardriving in 33 countries for over three years secretly recording people's WiFi transmissions, including full emails and passwords, arguably is the single broadest privacy breach in the Internet era. And the FTC did nothing. And the FTC sees no need for any further action. Amazing.

What's wrong with this picture? A lot. A better question might be what's right with the FTC-Google privacy enforcement picture?