Thursday, October 20, 2011

Is Google “Cooking” it? (Article)

By Arusyak Abrahamyan

It was not long ago when Google was under the spotlight for Google Books Settlement. Now it looks like the lawsuits are piling up on Google. There are about 9 antitrust cases filed against the mega-search engine in the EU, one of which was filed by Microsoft against Google for dominating the search market as well as other areas such as the mobile-related realm. A number of small companies have also filed complaints against Google here in the US. The Department of Justice (DOJ) will review Google’s $400 million purchase of Admeld Inc., an Internet advertising company, to investigate whether the deal had an adverse effect on competition. Furthermore, the Federal Trade Commission (FTC) is conducting an antitrust investigation of Google’s dominance in the search-engine industry.

On September 21st of this year, Google Executive Chairman Eric Shmidt testified on Capitol Hill in front of the US Senate at a hearing billed as “The Power of Google: Serving Consumers or Threatening Competition?”. As various media sources have reported, Google is under scrutiny for allegedly stifling competition by favoring its own sites in search rankings. The fact that Google’s products “magically” appear as third in all search results makes Republican Mike Lee of Utah believe that Google has “cooked” it. Nextag and Yelp also testified against Google raising concerns that Google is not playing fair given that it no longer sends consumers to the best destination via search results; rather, Google now offers its own products such as travel and shopping sites. 

Additionally, Google was also accused of spending billions to destroy Groupon.com after the expected deal in November of 2010 did not go through and Google was not able to buy Groupon. Following the failed deal, a few new websites appeared in the market that are very similar to Groupon. DealOn, LivingSocial, TravelZoo, Trubates, Rue La La, Jetsetter, Ideeli, Teepr, Deal Surf and many other sites similar to Groupon popped up like mushrooms after the rain. Additionally, Google itself sends users Google deals to gmail.com subscribers. 

Given the accusations, the Antitrust Division of the Justice Department and the Federal Trade Commission will have to determine whether Google is a monopoly and whether or not to file a lawsuit against the search engine giant. Holding a dominant position or a monopoly of a market, however, is not illegal in itself; rather, attempted monopolization is illegal. 

Section 2 of Sherman Act proscribes attempts to monopolize: "Establishing attempted monopolization requires proof " that the defendant has engaged in predatory or anti-competitive conduct with a specific intent to monopolize and a dangerous probability of achieving monopoly power." It is "not necessary to show that success rewarded [the] attempt to monopolize; rather, "when that intent and the consequent dangerous probability exist, this statute, like many others and like the common law in some cases, directs itself against the dangerous probability as well as against the completed result." 

Attempted monopolization requires (1) anticompetitive conduct, (2) a specific intent to monopolize, and (3) a dangerous probability of achieving monopoly power. 

Do Google’s action prove the elements of attempted monopolization? 

Samuel R. Miller, UC Berkeley School of Law professor and partner at Sidley Austin LLP, was recruited by the Antitrust Division of the US Department of Justice as lead counsel in the first Section 2 monopolization case against Microsoft. "Having prosecuted the Microsoft case, its seems to me that Google, as a monopoly, is engaging in the same tactics to keep its dominant position as Microsoft was engaging in. Those are the same tactics that got Microsoft in trouble,” commented Professor Miller in response to Google’s conduct. 

In his testimony before the U.S. Senate, Eric Shmidt said, "We get it. By that, I mean that we get the lessons of our corporate predecessors. What we ask is that you help us ensure that the Federal Trade Commission's inquiry remains a focused and fair process, so that we can continue creating jobs and building products that delight our users." Not mentioning Microsoft’s name specifically, Eric Shmidt clearly implied that Google is trying not to repeat what Microsoft did ten years ago. 

On the other side of the coin, many supporters of Google believe that Google’s efforts to provide consumers with what they want lead to many winners and losers, and it is the losers that are complaining. For some, it is clear that some sites will rank higher than others—that is what search engines are designed to do. Improving the user experience cannot be an antitrust violation. While Bing and Yahoo have focused search options, Google claims to be striving to make the best product in the market. Bing today is available ubiquitously as the default search engine on over 70% of all the computers sold in the U.S. and is the exclusive search engine partner for Facebook (the most visited site on the Internet). Despite this, Google is still more popular. 

At this moment the investigation is still pending and it is up to the FTC and DOJ to decide whether to file an antitrust lawsuit against Google or not.

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