Advertising

Originally published September 19, 2011 at 8:30 PM | Page modified September 20, 2011 at 6:40 AM

Senate antitrust panel to probe Google's clout

Concerns about power — especially whether Google gives its own businesses preferred placement in search results — will have their most public airing to date when Google Executive Chairman Eric Schmidt testifies Wednesday before a Senate antitrust panel.

The New York Times

quotes "Google is a great American success story, but its size, position and power in the... Read more
quotes I'd say until these crimes clarified to the public and concurred at authorities, Eric S... Read more
quotes "Google is a great American success story, but its size, position and power in the... Read more

advertising

Google's slogan may be don't be evil, but a growing chorus of antitrust regulators in the United States and Europe wants to know if the company has lived up to that creed.

On Wednesday, those concerns — especially whether Google gives its own businesses preferred placement in search results, thwarting competition and harming consumers — will have their most public airing to date, when Google Executive Chairman Eric Schmidt testifies before a Senate antitrust panel. Some of Google's competitors will also appear.

The Senate proceeding is just one of the inquiries into Google's behavior by federal and state regulators, as well as by regulators in Europe and Asia.

And though the company is different, there are echoes from 13 years ago of a hearing before the same Senate body, the Judiciary antitrust subcommittee, investigating an American technology powerhouse: Microsoft. Later, the federal government, joined by 20 states, sued Microsoft.

"Google is a great American success story, but its size, position and power in the marketplace have raised concerns about its business practices, and raised the question of what responsibilities come with that power," said Sen. Richard Blumenthal, D-Conn., a panel member. He played a leading role among the states that sued Microsoft when he was attorney general of Connecticut.

Today Google, like Microsoft then, is both admired and feared. Google has used the riches from its dominance in search and search advertising to expand into video distribution with YouTube, smartphone software with Android, and Web browsers with Chrome.

It has added online commerce offerings in local retail and restaurants, comparison shopping and travel, and has folded them into its search engine, prompting complaints that Google is giving its businesses preferred placement in its search results.

Google has consistently said its search results are the product of extensive user testing and do not favor its own offerings. If users become dissatisfied with Google search results, the company argues, they will go to rival search engines like Microsoft's Bing, sites that focus on specific products or services like Yelp, or social networks like Facebook.

"Using Google is a choice," Amit Singhal, a senior engineering manager at Google, wrote on the company's blog in June, after the Federal Trade Commission began its investigation. "And there are lots of other choices available to you for getting information."

Competitors disagree. Yelp, the popular website for user reviews and recommendations for restaurants and other businesses, has noticed a difference in search rankings since Google established its own online businesses, said Jeremy Stoppelman, co-founder and chief executive of Yelp, which gets half its traffic from Google searches.

Two years ago, Google offered to buy Yelp, but the talks broke down. Last year, Google introduced Places, a Yelp-like service for listing businesses and collecting consumer reviews.

A Google search for a restaurant typically displays the Places entry — linked to a map, user-generated reviews and other services — ahead of Yelp, Stoppelman said.

"Google develops its own in-house properties and it preferences those, so it's leveraging its dominance in Web search," said Stoppelman, who is to testify Wednesday.

"When it comes to Web search, Google says you have great content, you rise to the top and that's historically been true for us," he said. "But we do feel like that world is changing because Google has decided it's not enough to own and dominate Web search."

This month, Google acquired Zagat, the restaurant listing and review service, to strengthen its local commerce offering. Yelp is Zagat's leading online rival.

Google, legal experts say, presents some challenges for the traditional doctrine of antitrust. The Microsoft case, too, required adapting antitrust principles to modern technology, and the complaint filed against the company was filled with technical computing terms like "cross-platform middleware" and "application programming interfaces."

Yet Microsoft's dominant product — the Windows operating system — was something consumers and companies paid for, as with any conventional good.

Google's search service, by contrast, is "free and anyone who wants to use it can use it," said Herbert Hovenkamp, an antitrust expert at the University of Iowa College of Law, so higher prices for consumers — a hallmark of competitive harm — is not an issue.

But in other ways, the accusations against Google fit comfortably into antitrust. "If it is proven that Google discriminates in favor of its own online properties, you certainly have an antitrust issue," Hovenkamp said.

While the technical ingredients may be different, the Google recipe is the same one used by Microsoft years ago, said Gary Reback, a lawyer who represents some of Google's rivals.

The Microsoft case revolved around Netscape, maker of the first commercially successful Web browser, and the bullying tactics Microsoft used to thwart the threat it represented.

"Websites like Yelp and others in travel and shopping that help people find things are partial substitutes for Google in the same way that Netscape was a partial substitute for Windows," said Reback, who also played a key part in the case against Microsoft.

"The similarity between Google and Microsoft years ago is the potential for harm, the risk that a dominant company uses its power to disadvantage others," said Mitchell Kapor, a longtime Silicon Valley technologist and investor. "But Google was born on the open Internet, and things are just generally far more open to innovators and startups than in the Microsoft era."

And, as proof of the rapid turn of fortunes in technology, Microsoft is now the underdog, trailing well behind Google in search and search advertising, urging government officials to take action. Microsoft has met regularly with antitrust investigators in America and filed a complaint against Google in Europe this year.

"We appreciate the irony," Brad Smith, Microsoft's general counsel, said in an interview this year.

News where, when and how you want it

Email Icon




Advertising