Antitrust

Google's proposed purchase of ITA Software is likely to be blocked by the DOJ for five big reasons.

First, the announcement of a new FairSearch.org coalition of Google's Travel competitors opposed to the Google-ITA deal, which was first reported by Tom Catan of the WSJ, provides the DOJ with most all the elements necessary for the DOJ to block the deal: broad and deep evidence of anticompetitive effects from multiple competitors with deep understanding of the market, a sound theory of the case, and a number of credible witnesses willing to take the stand in court to block the deal.

Second, a key opposition counsel who represents IAC's Expedia, is none other that Tom Barnett, who was the DOJ Antitrust Chief in 2008, who blocked a previous Google attempt to monopolize in the Google-Yahoo Ad Agreement.

With Canada, Spain, the UK, and 38 U.S. states all cracking down on Google's wanton wardriving spyfi scandal, where is the U.S. Federal Trade Commission (FTC), the supposed lead agency on protecting consumers online privacy?

The FTC's silence and apparent absence from the online privacy enforcement playing field is particularly perplexing and alarming... because now it appears that we have a company that is out-of-control in tracking consumers' private actions online, and creating total information awareness power, while we have a supposed lead privacy regulator that appears not to be leading in protecting consumers' privacy...

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.

Japanese online retailer, Rakuten, has formally objected to the Yahoo-Japan/Google monopoly deal in a complaint to Japanese antitrust authorities (JFTC).

• I expect others in Japanese industry to also complain both publicly and privately to the JFTC.
  • First, the Yahoo-Japan/Google partnership would control over 90% of the Japanese search and search advertising business and also subordinate all Japanese online businesses, that depend on search to be found and/or monetized.
  • Second, the JFTC approval was a secret technical decision that amazingly did not consult or consider the views of any other Japanese stakeholders, even though the decision could eventually put much of Japan's online industry out of business in the years ahead.

In my Tokyo speech to industry stakeholders last month, I explained how a Yahoo-Japan/Google search advertising monopoly inevitably would lead to dependency, decline and disintermediation for Japan's high tech industry and economy.

It is logical, sensible, and basic survival instinct for Japanese stakeholders -- whose fate would be totally at the mercy of a Japanese Googleopoly -- to voice serious objections privately and publicly to Japanese regulators.

Apple's CEO Steve Jobs is wise to publicly debunk Google's claim that: Google defines "openness" (aka -- good), and Apple defines "closedness" (aka -- evil).

• As Google CEO Eric Schmidt said: Google's concept of "openness" is "much easier to understand by opposition" so he defined Google's approach as the "inverse" of Apple's.

Google is right that they are the inverse/opposite of Apple, but not in the way that Google claims -- being open/neutral vs. being closed.

Google announced it is working on an economy-wide Google Price Index, but has not decided whether to make it public, per Google Chief Economist, Hal Varian, who spoke at the National Association of Business Economists conference this week.

• This development has under-appreciated implications for insider trading and also spotlights how Google's online dominance of market-relevant information suggests market failure and a new potential systemic vulnerability to the integrity of global capital markets.

I.  Insider Trading

In March, Google CEO Eric Schmidt said: "One day we had a conversation where we figured out we could just try and predict the stock market... and then we decided it was illegal. So we stopped doing that."

Now any hedge fund (or market regulator not born yesterday) understands that if Google is actively working on a Google Price Index, Google has not stopped trying to use its uniquely comprehensive and timely, repository of sensitive market information to predict information highly useful to predicting the stock market.

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.