Antitrust

The American Consumer Intstitute just put out a good consumergram on: the DOJ investigation of the Google-Yahoo deal and asks if the search market has reached a tipping point.

• The ACI consumergram is asking the right questions.
• More entities should be, and will be, asking these types of questions going forward because the facts and Google's behavior will demand it.

As I explained in detail in my Googleopoly analysis, the search market has already tipped to Google and the Google-DoubleClick merger was a tipping point to enable Google to extend its market power in search advertising to display and online advertising as well.

As I explained the stakes of lax antitrust enforcement in my Senate Judiciary testimony:

"The Stakes of Lax Antitrust Enforcement: Will Google be enabled to become the:

• “Online-advertising bottleneck provider” picking Internet content winners and losers?

A Yahoo-Google search outsourcing pact arguably faces even more problems with European antitrust authorities than the reported U.S. DOJ antitrust investigation, for two reasons:

Dominant #1 Google, in calling #2 Yahoo to discuss a slow competitive search surrender by Yahoo to Google, in order to thwart a purchase of Yahoo by #3 Microsoft, apparently succeeded.

Interested observers in the Microsoft-Yahoo-Google-AOL-Ask.com-MySpace incestuous soap opera called search advertising, would be wise to bone up on the fine line between acceptable industry collaboration and illegal collusion, if recent reports prove true.

• The Wall Street Journal reports that Yahoo may be days away from announcing "an agreement to carry search advertisements from Google.." and that Google feels "that the upside is much greater than the potential downside" from the arrangement."  
• The Financial Times broke the story that the Department of Justice was investigating Google's interaction with Yahoo and that "the prosecution of collusion is a top priority."     

The fine line between collaboration and collusion. 

First, while many may be aware that a Google-Yahoo outsourcing deal "would likely attract intense antitrust scrutiny" there is precious little analysis on this linchpin issue -- hence the genesis of this piece.

I believe the pattern of Google becoming the outsourced search engine for most all of the Internet -- save for a few properties -- is one of the most important and least understood competitive Internet issues.  

Only Google, which never met a self-serving, double-standard that it did not embrace, could overtly enter the business of selling network capacity and bandwidth to the public like broadband providers do, and still oppose net neutrality for themselves. (See my previous post where Google's Board recently recommended that shareholders vote against applying net neutrality to Google.)

On April 7th, Google had a press announcement: "Previewing Google App engine: run your apps on Google's infrastructure" (which was also picked up in a story by the Wall Street Journal). In that Google press annoucement, Google it made clear that it was going to sell network bandwidth to developers:

• "The preview release of Google App Engine is limited to the first 10,000 developers that sign up, all of whom will be restricted to the free quota of 500MB of storage and enough CPU and network bandwidth to sustain around 5 million page views per month for a typical app. The preview phase is intended to gather feedback from developers. Eventually, developers will be able to purchase additional storage and bandwidth." [bold added]

Can any of the Google-defenders that regularly read this blog, and there are lots, please explain to me in a comment, how Google selling network capacity and network bandwidth to developers does not put Google clearly in the network or broadband business --competing directly with all the network providers, which Google has been lobbying furiously to apply network neutrality regulations to?

National Public Radio's All Things Considered" did a great 5 minute segment on: "Some Libraries Shun Google in Book Battle."

The story is set up as who should control the world's future virtual libraries as libraries and Google rush to digitize the world's books?

• Several public libraries object to Google digitizing all their books and are doing it themselves.
• They worry about a "single corporate entity" having so much power over the world's information.
• If the old adage is true, that information is power, there is reason to worry.

I note this story because these libraries are a spontaneous and very real grass roots response to Google's megalomaniacal mission: to organize the world's information and make it universally available and useful."

• These public library advocates worried out loud about how much more effective censorship could be if "a single corporate entity" controlled the world's main library and how would they respond to political pressure to ban a book or an author?
  • This is a relavant concern because Google has censored search results in China, Turkey and Thailand to name a few known instances. 

Google should take note. Here is a grass roots rebellion brewing from their left flank, which looks un-willing to be bought off by Google to go away. 

The big surprise of the hearing was that Chairman Martin was a last minute witness. The Committee created a new first panel for just Chairman Martin, which ended up consuming about 60% of the allotted time for the whole hearing, and which was also the prime time when most of the Senators and press were in attendance. This surprise testimony practically relegated the other panel, which was expected to be the main event, to more of sideshow status.

Overall, this hearing was slightly more balanced than its House counterparts. Chairman Innouye continued his very measured and balanced approach, in that he said things that each side wanted to hear.

• Given that the Senate Commerce Committee is historically quite bipartisan, and that this committee remains split largely down the middle, I doubt if we will see much real movement on Dorgan-Snowe's net neutrality bill this session.
• If Chairman Inouye actually thought net neutrality legislation should make progress, he wouldn't have waited fifteen months since the introduction of the Dorgan-Snowe bill to hold the first hearing on it.
• It appears the real purpose of this hearing was basically to let off steam and throw the net neutrality activists a bone. 

The real import of the hearing was two-fold: 

The Wall Street Journal's scoop that Yahoo is considering a two week trial of outsourcing search to Google -- is also a trial balloon testing the FTC's antitrust mettle.

If you don't remember, the last sentence of the FTC's Majority opinion approving the Google-DoubleClick merger was a clear warning to Google:

• "We want to be clear, however, that we will closely watch these markets and, should Google engage in unlawful tying or other anticompetitive conduct, the Commission intends to act quickly."

Let's also put this into context.

Google's CEO Eric Schmidt must have an extremely dry sense of humor.

• He recently told reporters with a straight face that: "We would be concerned by any kind of acquisition of Yahoo by Microsoft"... "We would hope that anything they did would be consistent with the openness of the Internet, but I doubt it would be."  
  • This guy could win "Last Comic Standing!"
  • Give him an Oscar! an Emmy! any acting award for communicating that Google's deep heartfelt concern is only for the Internet and its openness.... and of course for "the children," rainbows, puppies, Moms, apple pie and all humankind....
    • Google has now transcended any self interest at all in a Microsoft-Yahoo hook-up... they have become virtual goodness, wholesomeness, and cookie smells.. in all that they do...  ooooooohhhhhhhmmmmmmmmmmmm......

New evidence exposes that Google has much more serious financial conflicts of interest and is much less of an "honest broker" of online advertising than most appreciate.