Antitrust

Choice, having the benefit of a selection of different alternatives to choose from, springs from the risk and opportunity of market competition  -- not from Government economic regulation.

Yahoo lost 11% of its search revenue share to Google during the first six months of 2009 versus the last six months of 2008, per Yahoo's and Google's 2Q09 earnings reports. 

• This time period comparison was selected because it represents most of the time period since DOJ blocked the Google-Yahoo ad partnership 11-05-08, where the DOJ concluded that Google and Yahoo had combined market shares of 90% and 95% in the relevant antitrust markets of search advertising and search advertising syndication. 

It is relevant, interesting, and instructive to analyze what has happened since the DOJ's 11-05-09 action, and since the economic downturn, given that the DOJ concluded Google and Yahoo commanded 90% and 95% market shares at that time.  

This relative revenue share transfer analysis is straight-forward.

The DOJ has opened an initial review of the telecom industry, per WSJ reports, as part of the Obama Administration's and the Varney Antitrust Division's "aggressive stance on antitrust enforcement."

Antitrust enforcement is fact-driven, since it ultimately must be proven in court. The competitive facts in the telecom industry will speak for themselves; the industry is clearly and overtly competitive and trending more competitive. 

This review will not be difficult or take long since the DOJ has vast and deep experience with the U.S. telecom industry -- having overseen the AT&T Consent Decree 1984-1996, been intimately involved with the drafting and implementation of the 1996 Telecom Act including the detailed development of local competition and Bell entry into long distrance. The DOJ also has reviewed and approved a number of telecom mergers over the last several years, most recently the approval of Verizon-Alltel and Centurytel and Embarq.

• It is important to note that the scrutiny standard of approving a merger is a dramatically tougher standard than that of a Sherman antitrust action.
• Generally as a rule of thumb, the DOJ prevents proposed mergers that would create combined market share of over 30%, while the market share standard to prove a Sherman antitrust case generally requires at least a 50% share and more likely 70-90% share.    

Moreover, the DOJ will examine the telecom marketplace to see if it exhibits the core characteristics of a competitive market:

An unusual and notable pattern appears to be developing with Google and DOJ antitrust enforcers. 

• Twice in less than a year, the DOJ has formally investigated Google for trying to anti-competitively extend its monopoly market power via a market agreement.
  • It is unusual for the DOJ to seriously investigate a single formal market agreement/settlement for anti-competitive behavior because normally antitrust lawyers can convince a company's leadership to stay away from the anti-competitive line that possibly could prompt a DOJ investigation and/or suit.
  • What is exceptionally unusual is for a company to propose two non-merger-related market agreements in less than a years time that prompt serious antitrust investigations from the DOJ.
• Today, the DOJ Antitrust Division wrote a letter to the Federal Judge overseeing the Google Book Settlement deal "to inform the court that it has opened an antitrust investigation into the proposed agreement between Google and representatives of publishers and authors... we have determined that issues raised by the proposed settlement warrant further inquiry."

This is the second formal agreement in less than a year that Google has negotiated and drafted that has "crossed the line" prompting DOJ antitrust officials to have to formally and publicly investigate. 

"One click away from competition" is Google's ever-present, antitrust defense slogan that Google does not have any market power to anti-competitively exercise. 

In today's New York Times, Google's CEO Eric Schmidt ratcheted up the centrality of that slogan to Google's antitrust defense by claiming it applied to Google's user "customers." CEO Schmidt said:

• “We are one click away from losing you as a customer, so it is very difficult for us to lock you in as a customer in a way that traditional companies have.”

The problem with Google's "one click away" slogan is that it is untrue and deceptive; it simply does not withstand close scrutiny of the facts or logic.

I. It is untrue -- a false claim.

A. The claim fails the dictionary test.

The dictionary definition of a "customer" is "one that buys goods or services."

In some of the worst sophistry I have seen in a long time, several pro-regulation groups, who obviously oppose competition policy for communications, petitioned the FCC with a classic straw man argument that essentially asserts that because wireless competition is imperfect, its "demonstrably uncompetitive" "and "produces active and ongoing consumer harms."   

• Any open, transparent, balanced and fair-minded review of the real competitive facts in the U.S. wireless industry will expose these assertions as un-true and un-supported by the balance of available evidence. 
• The sophistic comments, which can be found at the bottom of this Media Access Project press release are an obvious "stalking horse" for those who advocate abandoning private enterprise competition policy in favor of common carrier regulated public infrastructure policy.

The comments consistently present fallacious "black or white" arguments that if a competitive imperfection can be asserted, however thin, unsupported, irrelevant or out-of-context, one must  conclude that the market is anti-competitive requiring ongoing government regulation of prices, terms, conditions, operations and network management. 

Google's public policy blog said a new Wired article by Steven Levy is "a must-read for policymakers who want to understand online advertising." 

First, I agree; there is a lot to learn from the article.

Google has begun to admit and make concessions that the Book Settlement it originally negotiated with authors and publishers is anti-competitive.

To try and win the support of the biggest libraries, Google has now cut a potentially exclusive side deal giving the largest libraries the benefit of a price oversight/arbitration mechanism per the New York Times.

Reports that Google's CEO Eric Schmidt sees no reason to step down from Apple's Board in the face of a public FTC antitrust investigation over it, is emblematic of Google's long pattern of disrespect for the rule of law in competition, privacy, and copyright/trademark matters.

Google's consistent pattern of behavior is to push the envelope of legality farther than any other entity is willing to, and then arbitrage that unique edge, for (anti-)competitive advantage as long as possible.

The DOJ investigation of the Google Book Settlement suggests that a broader antitrust spotlight may be returning to Google.

• Apparently the DOJ is investigating whether the Book Settlement sets a competitive or anti-competitive trajectory for the search of digitized books, and of "orphan works in particular.
  • Google argues the settlement is pro-competitive and increases access to books.
  • The DOJ's antitrust investigative scrutiny suggests otherwise. 
• Since little involving the Internet happens in a vacuum, this antitrust investigation may have much broader implications than most appreciate for:
  • The new Administration's overall antitrust approach;
  • The FTC's oversight of behavioral advertising, and
  • The FTC/Congress' focus on online privacy.   

To start however, it is important to get an update of important facts since antitrust is so fact-driven. Recent facts only confirm and bolster the DOJ's public assessment 11-05-08 that Google had monopoly market power in search advertising and search advertising syndication.