Tuesday 9 June 2009

Google and Antitrust

The Washington Post lays out the issues nicely.
But that raises the question: "Why bother?" There's no law against trouncing your business competitors. Ever since Judge Learned Hand's landmark decision in U.S. v. Aluminum Co. of America 64 years ago, the court has recognized that under certain circumstances a company may come to dominate its field through "superior skill, foresight, and industry."

It's hard to see Google as anything other than a model example of such a company.

Moreover, nobody's come up with a particularly good case that the company has been stifling other companies. ...

Still, Google has reason to dread the perception of even benign dominance. Just ask Gary Reback, an attorney for Carr & Ferrell who played a big role in pinning monopoly status to Microsoft in the 1990s. Even if U.S. antitrust law allows for justly earned monopolies, it's rare that a high-profile company ever gets to enjoy that status in peace.

As Reback puts it, the government's approach has traditionally been: "We won't punish you for being successful. But if you're a monopolist and you spit on the sidewalk, we'll break up your company."

Thus monopoly Google could expect a relentless stream of litigation. Historically, this has been a nightmare for the target companies, hemming in their management and constraining their business decisions. It was an antitrust problem that forced AT&T to license the transistor in 1956 at no cost. And as Reback notes in a recent book, "Free the Market!," advocating for more interventionist competition policies, it wasn't a government monopoly lawsuit that broke Standard Oil's power -- it was Texas regulators' decision to hound Standard Oil with litigation. With Standard unable to exploit major new oil discoveries in the state, new competitors such as Texaco arose.

Substitute tech fields for oil fields and you've got an approximation of Google's potential problem. Many routine parts of the company's growth, such as buying small companies to stake out a position in search-related fields, could potentially be construed as anticompetitive if Google is already deemed to have market dominance.

"I think they're going to have trouble with damn near any acquisition, including acquiring your local dry cleaner," Reback said.

How times change. Seven years ago, Don Boudreaux and I gave Google as a counterexample to claims of Microsoft lock-in. If the lock-in story about Microsoft dominance were true, then surely Microsoft also would dominate search: versions of Internet Explorer then in existence would redirect browsers to Microsoft Search in cases of mistyped URLs. Since most folks chose Google despite Microsoft's lock-in advantage, we might similarly view skeptically other claims of lock-in induced dominance. Now Google's the target, simply for having done search better than anyone else. And of course Google will have to redirect productive resources away from innovation and towards protecting itself from FTC, the EC, and others. Depressing.

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