New Mood In Antitrust May Target Google

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Published on Sunday, 17 May 2009

Written by Steve Lohr & Miguel Helft, NY Times

Last week, the Obama administration declared a sharp break with the Bush years, vowing to toughen antitrust enforcement, especially for dominant companies. The approach is closer to that of the European Union, where regulators last week fined Intel $1.45 billion for abusing its power in the chip market. In this new climate, the stakes appear to be highest for Google, the rising power of the Internet economy.

For decades, the nation's biggest antitrust cases have centered on technology companies. And they have all been efforts by the government to deal with powerful companies with far-reaching influence, like AT&T, the telephone monopoly; I.B.M., the mainframe computer giant; and Microsoft, the powerhouse of personal computer software.

Last week, the Obama administration declared a sharp break with the Bush years, vowing to toughen antitrust enforcement, especially for dominant companies. The approach is closer to that of the European Union, where regulators last week fined Intel $1.45 billion for abusing its power in the chip market.

In this new climate, the stakes appear to be highest for Google, the rising power of the Internet economy.

The new antitrust leadership, legal experts say, is likely to scrutinize networks -- technology platforms that become so dominant that everyone feels the need to plug into them. The advantages to the companies that control such networks snowball as they attract more users, advertisers or software developers.

Internet search and search advertising, like personal computer operating software, is one example, said Herbert Hovenkamp, an antitrust expert at the University of Iowa law school. "Google is a dominant network, as is Microsoft," Mr. Hovenkamp said. "Networks become competitive only if everyone has the same chance."

Google's corporate behavior is already being closely monitored. Last year, Google abandoned a planned search advertising partnership with Yahoo after the Justice Department said it intended to file suit to block the agreement on antitrust grounds. Google has 64 percent of the Web search market in America, while Yahoo has 21 percent and Microsoft 8 percent, according to comScore, a research firm.

In recent weeks, antitrust officials have opened two inquiries. The Justice Department is looking into Google's settlement with authors and publishers for its book-search service to see if it violates antitrust laws. And the Federal Trade Commission is examining whether Google's sharing two board members with Apple reduces competition, because both companies offer Web browsers and phone operating systems.

Eric E. Schmidt, Google's chief executive, said this month that the close scrutiny was not surprising. "Information is incredibly important, and we should expect governments around the world to pay attention to what we do," he said.

Google's power is a cause of worry in many industries -- media, advertising, telecommunications and software. Yet being large, successful and ambitious is not an antitrust violation. "You've got to be big, and you have to be bad," observed Andrew I. Gavil, a law professor at Howard University. "You have to be both."

In the Microsoft case, the software giant's monopoly in personal computer operating systems was not an antitrust problem. It was its corporate actions, including using contracts and bullying tactics to stifle competition, that broke the law, the federal courts ruled. Such strong-arm practices, legal experts say, have not been part of the Google story.

Unless Google is shown to engage in a pattern of anticompetitive conduct, the company is likely to face constant scrutiny, but not a major federal suit, antitrust experts say. Even with misconduct, they say, complex antitrust cases like the one against Microsoft take years to come to fruition. "There will be a lot of agonizing about Google, and it will raise concerns, but I don't see a big Google case in the offing," said Michael Katz, an economist at the Stern School of Business of New York University.

Instead, Google is likely to be watched step by step. One area to observe, antitrust experts say, is whether Google uses its search engine to give it a leg up in new businesses.

Last month, the company announced that Google Profiles, a service that gives people a page to publish their name, photo and other personal information, would be featured below Google's search results when someone typed in a name. That could give Google Profiles an edge over profiles from Facebook and other social networks, which have to earn their search result rankings.

Google, said Randal C. Picker, an antitrust expert at the University of Chicago law school, is using its search engine to "leverage" another Google service. Such tactics, he said, echo Microsoft's linking of its Windows operating system to its Web browser. "It is the kind of thing that is likely to get antitrust attention," Mr. Picker said.

The company says Google Profiles is an effort to improve Web search, and comes in response to users' requests for greater control over their online identities. Google also says its software scans other social networks, and those results typically appear near the top of a search for a person's name. "We designed Profiles to encourage user choice, not limit it," said Adam Kovacevich, a Google spokesman.

In her speech last week, Christine A. Varney, head of the Justice Department's antitrust division, said the touchstone of antitrust policy should be "the protection of consumer welfare."

By that standard, Google seems an elusive target for antitrust enforcers, since most of its services are free. And in the new markets it is entering, including cellphone software and online alternatives to desktop programs, Google is an insurgent going up against large, well-heeled rivals, notably Microsoft.

"If what Google really has is an enormous scale advantage in Internet search and advertising -- and it is not engaged in exclusionary or other bad behavior -- I would be very reluctant to step in," said Mr. Hovenkamp of the University of Iowa.

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