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Google’s ‘monopoly’ hex

Google’s ‘monopoly’ hex
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First Published: Tue, Jul 12 2011. 01 02 AM IST
Updated: Tue, Jul 12 2011. 01 02 AM IST
Regulators abhor a vacuum, so it is fitting that on this month’s 10th anniversary of the antitrust judgement against Microsoft, the US Federal Trade Commission alerted Google that it’s now under investigation as a monopolist. Considering how much intense competition Microsoft has faced for years, a government claim of monopoly is best understood as a hex—and a lagging indicator that, to the contrary, Google has passed its greatest point of market power.
Google must now amass an untold number of lawyers, lobbyists and public relations firms to fight the antitrust action. There is a real risk Google will become less of an innovator as its focus switches to Washington from Silicon Valley and to lobbying regulators from pleasing consumers.
At least in the case of Microsoft, regulators claimed some harm to consumers. Microsoft’s insistence that manufacturers of personal computers install Internet Explorer and not other browsers, it was alleged, suppressed consumer opportunities by perpetuating overwhelming market share in a closed system.
In the case of Google, the perverse claim apparently is that it serves consumers too well, making it too tough for competitors. In the US, Google has a 65% share of the search market, but one of the virtues of the open Web is that other search providers, including Microsoft’s Bing, are just a click away.
Indeed, Google has long invited search competition, including from its founding, by having a search option on its site called “I’m Feeling Lucky” that jumps directly to the top page found. Steven Levy, author of the recent book In the Plex, calls this a “startling bid of confidence that implied that, unlike the competition, Google was capable of nailing your request on the first try”.
Instead of letting consumers choose, other search companies, including Microsoft, are funding FairSearch.org to lobby regulators and politicians to stop what it calls “Google’s march towards an ‘unregulatable monopoly’”. Legal academics Geoffrey Manne and Joshua Wright wrote a recent article entitled “If Search Neutrality is the Answer, What’s the Question?” They ridicule the regulatory idea of a “Federal Search Commission” to monitor providers. By serving consumers well, Google makes it harder for competitors, but that’s not an antitrust violation.
The traditional gap between the real world and the regulatory world is widening as the pace of technology change accelerates. Just when regulators decide to go after Google, Microsoft’s Bing has boosted its market share 40% over the past year by providing better search results, often with less intrusive advertising than Google. Start-ups such as Blekko offer “curated” results that give priority to more credible sources.
Venture capitalist Ben Horowitz recently wrote on his blog that the reason Google co-founder Larry Page replaced Eric Schmidt as chief executive is that Page “seems to have determined that Google is moving into war and he clearly intends to be a wartime CEO,” competing with all comers. On Friday, Morgan Stanley noted that Google is straining to move beyond search, from which it gets 90% of its revenues, and it downgraded the stock, saying: “Google faces stiff competition from incumbents who have a first-mover advantage.” The company recently launched Google+, hoping to make progress in social media against Facebook, where people now spend more time than on Google services.
Silicon Valley tends to look on earlier cutting-edge industries as benighted, but when it comes to big government, too many digerati are political naïfs. Entrepreneurs who build successful technology firms often end up urging regulators to go after new competitors. Microsoft of all companies should be wary of the unpredictable results on firms and industries once the furies of regulators, legislators and plaintiff lawyers are unleashed.
Unlike regulators, few in Silicon Valley these days view Google as an unstoppable force. Entrepreneurs and venture capitalists should recall that leaders of earlier industries such as steel and autos were at least sophisticated enough to know that business executives need to hang together against regulators or risk getting hanged separately.
L Gordon Crovitz is a columnist for The Wall Street Journal
The Wall Street Journal
Edited excerpts. Comments are welcome at otherviews@livemint.com
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First Published: Tue, Jul 12 2011. 01 02 AM IST