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.