Antitrust

Mr. Brin Goes to Washington

Google does unto Microsoft what Microsoft has done unto them

|

This is what happens when you set up a Washington office.

One day, you're the victim. The big, bad, established corporations are using their influence with Congress to beat up on you and stall important business deals. All you're trying to do is defend yourself from the onslaught. You bring in a lobbying team to defend your reputation and keep an eye on potential future attacks, and then, the next thing you know, you are the big, bad corporation using your influence on Congress to beat up your competitors. What happened? Let's examine a case study.

In April Google set out to purchase DoubleClick, an online ad network, for $3.1 billion. The deal immediately encountered resistance from privacy advocates who fretted about ever-increasing stores of data in Google's hands, and from competitors and regulators concerned about Google's growing market power. The fear was that Google's already significant share of online advertising would be dramatically increased with the purchase of DoubleClick, leading to concerns about diminished competitiveness in the market for online ads. The prime mover of these objections was Microsoft, which lost out to Google in the bidding for DoubleClick.

After much sturm und drang, Google finally got the OK from the Federal Trade Commission (FTC) on the purchase last month, and is likely to get similar approval in Europe shortly.

In its finding [PDF] about the possible harm to competition resulting from the merger, the FTC noted that "the clear majority of third parties expressing such concerns were Google's current or potential competitors." Surprise!

This is just the most recent chapter in a story that begins way back in 2004, when a few people began grumbling about privacy concerns with Google's email service, Gmail. A couple of legislators stuck their noses into the issue and Google started to feel a chill in the air. It was time, they realized, to set up shop in the Capitol City.

Conventional wisdom says that the most important thing for an up-and-coming corporate powerhouse is not to make The Microsoft Mistake: Bill Gates ignored all things political until he woke up one morning to find that his company was monopolist public enemy number one. Charged with illegal bundling of Internet Explorer into its operating system, it looked like the company might actually be broken up into small fragments, as when AT&T was smashed into the "Baby Bells." The battle that followed between Microsoft and the Department of Justice bloodied the company and locked in Microsoft's reputation as the big-bellied robber baron of the digital age (a reputation reason contested in our November 2001 cover story on antitrust hysteria).

To avoid that pitfall, Google decided to get some loafers on the ground in Washington while people can still remember the company's motto ("Don't be evil") and most congressmen felt rather warm and fuzzy about Google (with an emphasis on the "fuzzy," Congress is not remarkably tech savvy, by and large).

"We're seeking to do public policy advocacy in a Googley way," said Andrew McLaughlin, Google's director of public policy and government affairs. Adorable. Harmless. A reasonable precaution, nothing more. Riiiiight.

As the DC shop got set up, things looked fine. Google's manifesto for its Washington office is good—really good. They're pro-net neutrality, the dullest important political issue on the table in America today (which is saying something). Reasonable people can disagree on the issue, and reasonable people do—the combination of boring and byzantine makes it hard to build consensus—but the logic of Google's stance is solid, and consistent with the rest of its policy.

Their position on copyright enforcement is moderate and well considered. They seek to maintain the status quo on liability for third party providers online. This is something Google has an obvious stake in, but most reasonable people, including many distinguished judges, agree that no one benefits if someone can sue Facebook because they were offended by party photos posted by a user.

But then, in June 2006, Google co-founder Sergey Brin comes to Washington and has trouble setting up meetings with congressmen. The shop takes things up a notch, hiring another dozen lobbyists and professionalizing the operation.

Last Friday, Microsoft announced a $44.6 billion bid to take over Yahoo!. On Sunday, Google exec David Drummond posted a note on the official Google blog musing aloud about the possibility that Microsoft, were it allowed to bid for Yahoo, would "attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC."

Apparently, Google has decided to take things further by opting for the "do unto others as they have done unto you" strategy.

When a company seeks advantage over its rivals by manipulating the economic and legal environment rather than through open competition, economists call it rent-seeking. It's not a flattering term. The temptation of rent-seek is almost irresistible, especially once you have a lobbying staff in place.

This most recent lashing out at Microsoft isn't the first of its kind. Last summer, Google took on Microsoft's Vista, claiming that the desktop search function discriminated against Google's competing product. Microsoft caved, tweaking Vista to allow Google Desktop. This was a pretty obvious follow-on from the initial antitrust case, and it would have been almost impossible for Google to resist the temptation to take Microsoft down a peg, but it's rent-seeking nonetheless.

Regulatory capture is a related phenomenon. When a company has a longstanding lobbying presence, there's bound to be a certain amount of fraternizing with the enemy. Government agencies often rely on the companies that they are supposed to be monitoring for information about the industry. The tech sector is particularly vulnerable to this problem since entirely new kinds of problems can appear rapidly.

In addition, while it's not technically a manifestation of regulatory capture, the way presidential candidates have been popping in and out of the Googleplex, you'd think it was a diner in Iowa, with Sen. Hillary Clinton (D-N.Y.) and Sen. John McCain (R-Ariz.) both visiting early last year.

And naturally, inevitably, as night follows day, congressional anti-trust hearings are set to follow. The House anti-trust task force has hearing scheduled for tomorrow, February 8, with the Senate threatening similar action if Yahoo moves in the direction of Microsoft's offer.

Google can (and does) quite fairly point at Microsoft and say "They started it!" But moms never accept that kind of finger pointing after a playground brawl, and we shouldn't either.

Katherine Mangu-Ward is an associate editor for reason.

Advertisement

NEXT: Wikimocracy

Editor's Note: We invite comments and request that they be civil and on-topic. We do not moderate or assume any responsibility for comments, which are owned by the readers who post them. Comments do not represent the views of Reason.com or Reason Foundation. We reserve the right to delete any comment for any reason at any time. Report abuses.

  1. “And no, she isn’t talking about Microsoft.”

    You mean there are more monopolies in this country than Microsoft and the government! This is news!

  2. What irked me was how fast Google went to the political mattresses on this potential deal. Whatever the merits of government regulation may be, this kind of rent-seeking pisses me off to no end.

    Wonder what this means for Ask and the other players, incidentally?

  3. Off Topic- Romney drops out! Got sick of spending his own money-doesn’t have thousands of supporters who are willing to contribute like Ron Paul does!

  4. OT: Why is SamBrownback on Fox? Oh, wait, that’s MSM hack MarkHalperin. Sorry about the confusion.

    Less OT: Ron Paul will be speaking at CPAC in about four hours. Will Reason be there? I’m going to guess their meeting isn’t far from the Orange Line.

    If any RP supporters want to improve his chances by reducing McCain’s chances, ask McCain this and upload his response. If Reason is going to be there, do they have what it takes to try to ask McCain or one of his helpers that question?

  5. Click ‘n’ Learn: What is this question? I can’t get on youtube at teh works. I saw mention of this in another post yesterday.

  6. Is the question “Do you know AnyMexicans?” or is it “Have you eaten a BeanBurrito?”

  7. This is a nice piece, but Katie M-W, as I fondly call her, might have pointed out that, since government action defines the marketplace, the difference between “fair play” and rent-seeking can be awfully hard to find. Without copyright law, Microsoft would be out of business, but didn’t Bill Gates essentially steal the visual interface from Steve Jobs (who bought it from Xerox)? I wonder if the federal judge who gave the case to Microsoft didn’t feel that the visual interface was “too good” an idea to allow anyone to patent it. Many people, including myself, feel that copyright protection, repeatedly extended at the behest of Walt Disney Inc., lasts too long. But how long is too long? I’ll conclude by quoting Herbert Hoover, as I so often do: “The trouble with capitalism is capitalists. They’re too goddamn greedy.”

  8. Last summer, Google took on Microsoft’s Vista, claiming that the desktop search function discriminated against Google’s competing product.

    The link in the quoted sentence doesn’t work. I’m curious to know what, precisely, Google did that was “rent-seeking”. Is it only rent-seeking if your competitor does it? I don’t use Vista, so I don’t know if Google Desktop was somehow “disabled” on it, but such a situation is clearly wrong if not illegal. If I used Vista and Google Desktop I would *appreciate* Google’s efforts in this area.

  9. The video is embedded here, with the script.

  10. Bought should have quotes around it. I’ve met some ex-PARC guys who are still bitter. Of course, these days, the revisionist history around that makes it look like Apple didn’t steal anything (they did pay for the right to use the GUI concept but not the fifty other things they stole from there). Most major IT companies have similar stories–MS is certainly guilty of wanton piracy, too.

  11. This is some pretty petty rent seeking at best, an official comment on their blog ? Come on.

    How about an article about American car makers or farmers on the same topic ? A lot more meat in those stories for sure.

  12. Windtell,

    There’s more than blog postings going on. Google’s offices in DC are already busy.

  13. steal the visual interface from Steve Jobs (who bought it from Xerox)

    …who were FORCED to sell it because of anti-trust action by the government.

  14. There’s more than blog postings going on. Google’s offices in DC are already busy.

    That may be true – but all this super-lame formulaic article comes up with is: Google wants one its aps to run on Vista; and Google posts something or other on its blog…

    Not worth the pixels.

  15. Thanks, Click ‘n’ Learn.

    As with most things, I agree with the first commenter on that post, I think that he could easily weasel out of the question. Ron Paul has had a far tougher time with his “racist newsletters”. People always try to disqualify a candidate because of one single mistake, which in Ron Paul’s case would be (at best) to put his name on those newsletters without reading the content. I believe that he was extremely busy and completely negligent. A simple human mistake.

    As far as McCain, it’s (unfortunately) easy enough to shrug that off as “He doesn’t make policy. I do.” It’s just the way it goes…

  16. steal the visual interface from Steve Jobs (who bought it from Xerox)

    …who were FORCED to sell it because of anti-trust action by the government.

    I didn’t realize that any article about MS would bring Mac-cultists out of the woodwork. Of course, it’s unsurprising that they have a

    FYI, MS licensed the GUI for Win 1.0 from Mac 3 years before Apple sued MS for their Win 2.0 GUI. It was thrown out because of the prior licensing agreement.

  17. Oops, don’t know why this sentence got cut off:

    Of course, it’s unsurprising that they have a tenuous grasp of facts.

  18. Mo,

    WTF is your problem? I’ve never used a mac in my life. As far as facts are concerned, Xerox and IBM were cutthroat competitors, it would be asinine to think they didn’t lobby against each other while they were suing each other. MS vs. Google is no different. Xerox had to make a value decision and were basically forced into favoring their revenue stream over R&D projects that weren’t generating any revenue and had little in the way of IP protection precedence. Same thing happens at Apple, same thing happens at IBM, same thing will happen at Microsoft and Google.

  19. I’m a Google fan (in fact, a relative of mine works for them), but I think the Yahoo/Microsoft deal will pass regulatory scrutiny, especially if it is reviewed by the Bush administration as opposed to the upcoming Obama or Clinton administration, and if the main bone of contention is their search engines. Google has something like a two thirds share of the search engine market, and Yahoo and Microsoft, combined, have like a 20% share. Now, it might get blocked due to other things (webmail market share, for example), but I still think it will pass regulatory scrutiny in the US.

    Now, in Europe, I dunno. EU anti-trust regulators have been much more forceful than American ones in recent years.

  20. This candidate was at the Googleplex too but I guess it’s gauche to mention him any more.

  21. The way to serious money is to monopolize common and desired systems. However, the use of copyrights, trademarks, and corporations to monopolize all or pieces of a common system is not free market competition but the effort to own the market or oligopolistic competition.

    To have a free market, there must be common and democratic control over the market itself and all members and wannabee entries need to have equal opportunity to enter and play; otherwise the new system just makes successful pioneers oligarchs over that system (or key subsystems) and incredibly wealthy. The nature of the competition is that it will continue until all the players have gobbled each other up and established an ownership hierarchy.

    Remember slavery created a “free market” for slave owners but oppressed those who were the subject of the system or who were unable to participate fully. Our system is creating such disparities now.

    Allowing companies to buy, own or acquire other companies is helping them exercise financial power to accrete to an ever smaller minority. When Yahoo merges with Microsoft that gives Microsoft that much more power over Google. Google is right to be afraid and knows the game it is playing is monopolistic competition. Innovation can keep the game going, but only for so long. Sooner or later somebody is going to own boardwalk and everyone else will have to drop out or go Bankrupt.

    Game over.

  22. Google’s hands, and from competitors and regulators concerned about Google’s growing market power.

Please to post comments

Comments are closed.