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Google is blowing money fast on antitrust offenses...  (Source: Flickr)

Google is facing inquiries in the European Union and the State of Texas. The U.S. Department of Justice is expected to soon jump in the fray with an investigation of its own.  (Source: ZDNet UK)
Do no evil?

Google Inc. (GOOG), like Microsoft Corp. (MSFT), was born out of a rebellious enterprising attitude.  Unsatisfied with the status quo, the company proceeded to rewrite the way people experience the internet.  But, much like Microsoft, as the company has aged and matured its behavior has been increasingly called into question.

I. A Huge Fine Incoming?

According to a filing with the U.S. Securities and Exchange Commission, Google is setting aside a whopping $500M USD to cover antitrust settlements stemming from a pending U.S. federal antitrust inquiry.  The U.S. Department of Justice is reportedly in the preliminary stages of launching an investigation into whether Google abused its dominant competition to crush smaller competitors in the fields of search and online advertising.

That's not catastrophic, but it's no small chunk of change for the internet giant, who earned $2.3B USD in profit in calendar Q1 2011.

This week was supposed to be a happy one for Google.  The company is currently holding its I/O Conference for developers, announcing partnerships with appliance manufacturers, a joint venture with Ford to improve fuel economy, an upcoming version of the company's mobile device Android operating system, a new cloud storage service -- Google Music -- and more.

II. To the Cloud -- the Antitrust Cloud, That is...

But it's hard to ignore the anti-trust cloud that has blown over Google.

Aside from the pending DOJ probe, there's an ongoing probe into Google's internet activities by the European Union, whom previously levied billion dollar fines against Microsoft and Intel Corp (INTC) for antitrust violations.  

And in the U.S. some states have also launched their own inquiries, compelled by complaints from local businesses.  Greg Abbott, Texas's attorney general, has launched an investigation into the giant's behavior.  The inquiry would be worrisome enough for Google were it coming from a pro-antitrust liberal, but Mr. Abbott, a conservative official who is in the process of challenge the Obama administration's National Health Care plan, is generally seen as a business-friendly official.

The Department of Justice was among the first to latch on to Google as a possible antitrust target.  The DOJ struck down a court settlement that would give Google exclusive rights to publish out of print books.  It also only approved Google's recent acquisition of online travel software giant ITA after tacking on strict terms requiring Google to continue to offer competitors equivalent service.

III. A Unique Position -- Tempting Abuse?

Google is in a unique position, given that it controls over 80 percent of the world's search traffic.  Some accuse it of leveraging that position illegally to preferentially direct customers to its services, such as email and online office software.  Others say Google is gaming its ad system to artificially raise prices.  Ads are Google's primary source of revenue -- it made $8.3B USD off them in Q1 2011 alone.

Concerns are also growing about Google's increasingly dominant position in the smart phone industry.  A location-tracking software service provider, Skyhook Inc. recently sued Google in Massachusetts federal court, claiming that the company threatened hardware partners Samsung Electronics Co., Ltd. (005930) and Motorola Mobility Solutions, Inc. (MMI), getting them to drop Skyhook's service for Google's own offering.

However all of these private and governmental court disputes pan out, there seems a great potential for damage to Google's bottom line and reputation.

Investors have hammered Google stock in recent weeks, fearing that the investigations will hurt its ability to compete with small challengers and surging young powers like Facebook.  Facebook recently passed Google to become the most used site on the internet.  The social networking site is increasingly looking to rely on its own internal advertising and services platform, a threat to Google's internet dominance. 

Google refused comment concerning the detail in its filing with the SEC.



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It's not the same
By wordsworm on 5/12/2011 6:06:31 AM , Rating: 2
I would argue that there is a profound difference between the MS and Intel abuses. That is to say, any company may offer a search engine. The Internet does not depend on Google. It chooses Google. MS, on the other hand, was essentially required in order to run a computer. Putting up road blocks to developers made it so that the software wouldn't work at all, or was crippled. How is this the same as what Google has done?

In the Yellow Pages, companies can pay for preferential placement. Well, why shouldn't Google be able to do the same? I really did not agree with their approach to literature, I am not always a fan. However, fining them does not seem to be just.




RE: It's not the same
By Lazarus Dark on 5/12/2011 8:24:17 AM , Rating: 2
Well, by definition, the DoJ has to look into any large seemingly dominant company, it's their job. But I certainly hope nothing comes of it. Google needs that capitol to reinvest in more services for me, large fines will only hurt Googles customers and it wont help their competition. But I think Facebook if anything should show that Google is not all powerful. Google has a good line of services at good prices, but in the democratized internet world, a competitor (like Facebook) can come out of left field with a product and rise above quickly. I wish Google had done a better job on Buzz, I would have liked to drop Facebook. Based on Googles history, I have good reason to trust them. But based on Facebooks history, I have every reason not to trust them.

If anything Facebook should get the most scrutiny before Google, heck even before Apple.


RE: It's not the same
By zxern on 5/12/2011 5:30:33 PM , Rating: 2
Really? MS required to run a computer seriously?


RE: It's not the same
By Aussiewebmaster on 6/3/2011 12:32:32 AM , Rating: 2
Dos was the basis of early systems with Windows added on... practices were pretty hinky

Google has bought in to industries and killed competition by giving things away - they had the ad revenue and clamoring publishers

If people are screaming about the Amazon Tax what would we hear if all Adsense publishers were dropped and Adwords were not offered?

Is Google a monopoly? Yes but one too many are profiting from to close.


"Can anyone tell me what MobileMe is supposed to do?... So why the f*** doesn't it do that?" -- Steve Jobs














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