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My House Judiciary Antitrust Testimony -- The Blue Whale in the Antitrust Room -- Googleopoly

(Don't miss the eye-opening numbers at the end of this post.)

I am testifying tomorrow before the House Judiciary Competition Subcommittee hearing on "Competition in the Evolving Digital Marketplace."

 

 

The other witnesses I have heard that are testifying are: Ed Black of CCIA, Morgan Reed of ACT, Mark Cooper of Consumer Federation, and Geoff Mannes of Lewis and Clarke Law School.

It is a particularly timely hearing given Google's pending acquisition of ITA Software, which is under review at the DOJ, and which is a quintessential example of how Google exploits the soft underbelly of antitrust enforcement to buy its way to monopoly power in vertical markets like travel. My testimony attachment explains how Google already bought its way to a Internet video monopoly via its acquisitions and integration of YouTube, DoubleClick, and AdMob.

Googleopoly VI -- How Google Monopolizes Consumer Internet Media (41 page PowerPoint Presentation)

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

Google's Deep Tracking Inspection -- a privacy nightmare

In one of Google's worst misrepresentations about privacy to date, Google's Head of Product Development for Google Enterprise, Matt Glotzbach, told the FT that Google did not believe that its new gmail feature -- that ranks emails automatically based on what Google's algorithm judges are the most important emails to be read first -- would raise any privacy concerns. "We're not creating any new information, we're leveraging information that is already there."

Unbelievable. This is grossly deceptive and untrue.

 

  • Google is claiming that new Google-created information analysis with sophisticated conclusions about importance and urgency, is "not creating any new information?"
  • How can Google claim this additional feature as an innovation or as new, if it is not substantially "new information" that Google is providing and using? Their logic is circular.
  • And under what warped sense of privacy does the notion of opening, reading, analyzing, and judging the importance of people's private electronic mail without their permission -- not raise "any privacy concerns!?"

 

By any measure this is what I would call Google's "Deep Tracking Inspection."

 

Why Privacy Is an Antitrust Issue & Why Google is its Poster Child

The fateful policy decision by the FTC/DOJ to exclude privacy as a factor in antitrust enforcement has fostered a perverse market dynamic where many online advertising companies now effectively compete on the basis of who can most take advantage of consumer privacy fastest, rather than compete on the basis of who can best protect consumer privacy. 

  • Consumers' online privacy Waterloo was the FTC's failure in its 2007 review of Google-DoubleClick to fundamentally understand the online advertising business model, i.e. that consumers are not the "customer" of online advertising, but the "product" that Google and DoubleClick effectively sell to advertisers and publishers.
  • In getting it wrong that consumers are the real "customer" in Google's online advertising brokering-triangle of advertisers, publishers and users, when users don't pay Google at all, the FTC fundamentally misunderstood consumers' real interests.
  • The FTC unwittingly aimed the worst part of this business model's privacy arbitrage at consumers' vulnerabilities rather than aiming it at protecting consumers' privacy. 

This analysis will show: 

  • The implications of exempting privacy from antitrust enforcement;
  • Why privacy is an antitrust issue;
  • How consumers are harmed by exempting privacy from antitrust enforcement; and
  • In conclusion, how Google has become the "poster child" of this problem.  

I.   Implications of exempting privacy from antitrust enforcement.   

Google's Growing Vertical Conflicts of Interests

In ominous cross-pond agreement for Google, the Financial Times and the New York Times agree that Google needs more antitrust accountability:

  • See the FT editorial; "Google should be watched carefully"
  • The the NYT editorial: "The Google Algorithm."

Google itself has put the issue of "search neutrality" on the map with its FT op-ed and Google blog post and by saying they are for now for search bias after being against it.

Google's proposed acquisition of ITA software to beef up the Google Travel vertical, has put on everyone's radar screen the anti-competitive potential of Google continuing to extend, tie,and leverage its global search monopoly into content verticals like travel.

The FT got the concern over vertical abuse right: "...the potential for antitrust abuse through the tying of vertical services to search raises clear concerns."  

However, the NYT missed the mark on vertical abuse: "Forbidding Google to favor its own services -- such as when it offers a Google Map to queries about addresses -- might reduce the value of its searches."  

Google: we're "the biggest kingmaker on this earth" -- Googleopoly Update

The evidence mounts that Google is increasingly throwing its monopoly weight around anti-competitively without much apparent fear of antitrust enforcement. This Google antitrust update will spotlight:

  1. New evidence of Google's unfettered "kingmaking" power (lack of search neutrality) to anti-competitively self-deal with highest search rankings and sabotage competitors' rankings;
  2. Google's latest anti-competitive pattern of behavior, i.e. Google's wholesale-retail vertical squeeze play; and
  3. Why the antitrust risk Google faces comes from the EU and the DOJ, not from the FTC.   

I. Latest Evidence of Google's Anti-competitive Search Discrimination:

Google's behavior continues to raise serious antitrust concerns about whether Google's dominant search business is treating competitors neutrally as it claims, or whether it is anti-competitively picking itself and its partners as content winners and its competitors as content losers. 

  • Google's website assures users: "We never manipulate rankings to put our partners higher in our search results and no one can buy better PageRank."
  • Mounting evidence indicates this representation is patently false and a deceptive trade practice. 

A. Search Discrimination:

Google protesteth too much...

Google unwisely brought closer scrutiny to Google's public representation of its business model by pushing WSJ columnist, Holman Jenkins, to run this footnote/correction

  • "Google objected to a line in a column two weeks ago that summarized its business in part as "collecting data it can sell to advertisers." We didn't say "user data," but Google nonetheless wants you to know it doesn't sell any data directly to advertisers, and doesn't employ user data to sharpen the efficiency of its search advertising, but only its display ads."

With all of the controversy surrounding Google's business model (WiFi privacy-invasion investigations on four continents... a massive private data spill from Chinese hackers stealing Google's password security system... and increasing calls for the DOJ/EU to bring an antitrust case against Google), it seems particularly ill-advised for Google to be nitpicking about how Google wants to represent/misrepresent its business model to the public.

Let's parse Google's misleading nitpicking.

First, Google is being too cute by half in insisting its business is not as Mr. Jenkins succinctly encapsulated it to be: "collecting data it can sell to advertisers."

Google's goobristic permission policy: We never need your permission, but you always need ours

Google's CEO Eric Schmidt, dismissed the notion that Google was "arrogant" in an FT interview.

  • Mr. Schmidt: "The arrogance comes across because we trying to do things for end-users against organised opposition from stakeholders that are unhappy -- and they paint us as arrogant. But I am sure that all successful organisations have some arrogance in them."  

It seems to me that "the arrogance comes across" with Google because Google operates, and expects to operate, under a double standard -- where rules, laws and expectations apply to others, but do not, and should not, apply to Google -- because Google is somehow special.

The latest example  of Google's expectation to be treated differently and better than Google treats everyone else -- is Google's "permissions" policy (See the Goobris Series below for other examples.)

Google's "Total Information Awareness" Power -- A one-page graphic of all the information Google has

To help you picture both the enormity and unprecedented power of what Google knows about you and the world's information: public, private and proprietary, I have organized all the world's information types that Google collects onto a one-page chart/PDF: "Google's 'Total Information Awareness' Power."

For those who really want to understand Google and its impact on most everyone and most everything, please read and study this one-page chart/PDF, because much valuable work and insight has gone into it.

  • While the chart is visually packed with information that many may find difficult to unpack or digest, the chart itself is an apt metaphor for both how much information Google has, and also how difficult it is for all of us to get our head around all the information Google routinely collects and uses.

A short refresher on where the term "Total Information Awareness" came from and why it is aptly employed here.

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Q&A One Pager Debunking Net Neutrality Myths