April 2011

As reports swirl that the FTC and DOJ may be considering a formal antitrust investigation of Google, like the EU already launched in November 2010, Google continues its deceptive, one-dimensional, superficial, antitrust defense mantra that "competition is one click away," and that Google is only focused on users and innovation.

• It is telling that just last week the FTC charged Google with deceptive privacy practices, and Google tacitly admitted its public deceptiveness and misrepresentation in submitting to the FCC's consent order; so I am not alone here in charging that Google is deceptive and misrepresents itself to the public.

So how is Google's antitrust defense deceptive?

First, Google's stale four-year antitrust mantra that competition is but a click away and Google puts users first, is deceptive because Google knows full well that competition and antitrust involves much more than just users -- as they claim -- but an entire competitive ecosystem.

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.

• (See: Complaint, Competitive impact Statement, Proposed Final Judgement, Order, Release.)

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.

The House's rejection of the FCC's December Open Internet order 240-179 is just the latest in an ongoing high-profile accountability gauntlet for the FCC's unauthorized, unwarranted and unjustified net neutrality rules.

• While the wheels of democracy, public accountability, and the rule of law can turn slowly, they do turn steadily.
• And from what we have seen so far, the FCC's out-of-the-mainstream, over-reach effort to regulate the Internet for the first time, has been pummeled in our Government's accountability process gauntlet to date, and it can be expected to continue to be pummeled going forward.

The Net Neutrality Accountability Gauntlet:

First, the President's January Executive Order, "Improving Regulation and Regulatory Review" to seek the "least burdensome" regulations, was a big post-mid-term election political pivot by the Administration to be more sensitive to business, economic growth and job creation concerns.

• Through the new lens of the President's Executive Order, the FCC's pre-mid-term-election-mindset net neutrality rule making has been viewed as badly out-of-focus with the renewed bipartisan interest in economic growth and job creation.

Expect Google's bull-in-a-china-shop entry into social, to try and neutralize FaceBook, to bring lots more major unwanted privacy attention to the privacy-challenged social media business model, and to contribute to the eventual bursting of the Internet investment Bubble 2.0.

• The hot air that is inflating the social media Bubble 2.0 is that people somehow want to forfeit their privacy to socialize more efficiently, and that social media business models can indefinitely monetize privacy arbitrage against users' interests without consequence.
  • (See Part I of this series here.)
• Ironically, the investment fate of social media, and Bubble 2.0, will depend less on what social media companies do, and more of what the leviathan Google does in social media.
  • The venture capital community has long been painfully aware of the Google-leviathan's  outsized effect on every other VC investment, because they always ask start-ups "What if Google Does It?"

I.   Privacy Baseline is on the Move: Bipartisan Interest in Privacy Protection Strengthening

Anyone following social media or Google would be remiss to not notice the flurry of recent bipartisan, bicameral, and bi-branch interest in increasing privacy protection of online users in just the last few weeks.