DOJ is formally investigating another Google deal

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. 

• The other agreement was Google's proposed ad partnership with its leading competitor Yahoo, which the DOJ blocked November 5th by threatening to file suit in court.
  • In the DOJ's statement in blocking the agreement as anti-competitive,the DOJ said:
    • "The Department's investigation revealed that Internet search advertising and Internet search syndication are each relevant antitrust markets and that Google is by far the largest provider of such services with shares of more than 70% in both markets." 
    • "...the Department concluded that Google and Yahoo! would have become collaborators rather than competitors..." 
  • Sandy Litvack who was the lead litigator on the DOJ team investigating Google-Yahoo told Amlawdaily:

    • "The never-filed government complaint would have charged that the agreement violated Sections 1 and 2 of the Sherman Act, Litvack tells the Am Law Daily..."

    • ""It would have ended up also alleging that Google had a monopoly and that [the advertising pact] would have furthered their monopoly", Litvack says."" 

    • ""[The department is] making it clear to the parties and to the world that this is how the division viewed these particular aspects of Google's business," Litvack says."  

• After the deal was blocked by the DOJ, Google was unrepentant.

  • Per the NYT: "A day after Google walked away from an advertising partnership with Yahoo, Eric E. Schmidt, the chief executive of Google, said he believed that the companies would have been successful if they had chosen to defend the deal in court."

  • "While some antitrust experts believe the confrontation involving Google and regulators may be the first of many to come as Google’s business continues to grow, Mr. Schmidt said that his company’s approach to deal-making would not change."

     

So what is the emerging pattern here?

• DOJ is concerned that Google uses agreements to anti-competitively extend its monopoly market power.
• Google has a penchant to push the antitrust envelope and take antitrust risks other companies don't.

Unless the DOJ goes soft, or Google softens its approach to market agreements, expect Google and the DOJ to continue to butt heads over Google's market behavior in the future. 

In closing, the risk now to Google, in seeking court ratification of its Book Settlement with publishers, is that this court settlement mandates ongoing DOJ oversight of the agreement.

• In other words, if Google wants this book deal approved, it now might have to agree to live under a court-enforced DOJ antitrust consent decree...