Thursday, June 23, 2011

US Studying Google for Antitrust? Really?

The Wall Street Journal broke the news that the FTC is ready to subpoena Google for information on its trade practices.
This is likely to help Google's competitors. But it's hard to see how it's going to help consumers. And antitrust law in America is fundamentally designed to give consumers a fair shake.
(I'm an enthusiastic user of many Google services, but I don't own any stock in the company).
It's hard to imagine a company that treats consumers more fairly than Google does. It figured out a way to let people find almost any information free. It did it by giving them ads for products and services that they were likely to want rather than bombarding them with irrelevant ads. That has worked so well for businesses that they have halved their advertising in newspapers and generally reduced ad budgets because they get more effective returns for less money online.
Google has used its incredible profitability to expand its footprint on the Internet through more free services, most of which have only indirect financial returns, if any. It stores much of the world's video information free on YouTube. It runs a great free e-mail service that prevents spam better than any costly corporate e-mail services I'm aware of. It runs free Google office apps in the cloud, so you can access them from any computer. It introduced a really good, credible alternative to the iPhone at a time when Blackberry couldn't figure out how and Microsoft was fiddling and diddling with shrinking a bloated operating system into a pocket-sized package.
Google even stood up to the Chinese and moved out of that country -- an incredible example of corporate morality. Much of the criticism of Google comes from competitors and advertisers who want to game its system and bother innocent consumers with unwanted sales pitches rather than the products they actually want.
The FTC better not mess up the Google system to the point that consumers get less.
As Dan Lyons points out at Daily Beast this is certainly bad for Google. Even though the Feds may not succeed in getting the courts to find Google's actions illegal or force many operating changes, Google will have to think about something besides the customer benefit of any new service it provides. Everything it does from now on will be constrained by the need to consider what the government thinks.
The government's unsuccessful antitrust prosecution of IBM marked the beginning of the end for Big Blue's long run of dominance. Similarly for Microsoft. Those cases hinged on the giants' abilities to bundle software with existing mainframes or operating systems in a way that prevented competition from getting a toehold. Locking out competition is bad for consumers, and those actions arguably led to a better marketplace.
From a competitor's point of view Google undoubtedly looks like a voracious monopoly. But there are serious, cash rich competitors in the same space that can take care of themselves. Apple has a market cap substantially higher than Google's, a lock on the most lucrative smart phone and tablet users and control of the music industry. Microsoft has revenue and cash flow that would make most national treasuries weep, and a lock on the CIOs of the world. Facebook gets a lot more time everyday with Internet users than Google does and it knows a lot more about them.

Google provides a greater consumer service, for less money, than any other company in high tech (although Facebook is coming close). It will be tragic if that is lost due to antitrust action.

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