Inc. (GOOG), according to some critics, is the "new
Microsoft". Indeed, like Microsoft Corp. (MSFT) of the 1990s, Google is growing dominant positions
in new markets (smartphones, in Google's case) even as it enjoys a monopoly in
a lucrative international market (search/online advertising, in Google's case).
And despite it's "don't be evil" motto, there are growing
reports that Google -- like Microsoft -- may be leveraging its dominant
position to crush rival products, while growing its own
The U.S. Federal Trade Commission is currently executing a broad antitrust probe with regards to
Google's behavior in many markets, which brings to mind memories of the
landmark DOJ case against Microsoft in the 1990s, which ultimately forced
changes at the OS maker, though failing to break it up (an outcome some had
On the other hand, Google's supporters -- and of course Google -- argue that
its being singled out unfairly in an age of greater antitrust scrutiny, and
that the analogy is not as strong as one might think. That's the case
former chief executive officer and current executive chairman Eric Schmidt will
make this week when he goes to bat before the U.S. Senate.
Mr. Schmidt will this week have a lengthy chat with the Senate Judiciary
Committee's antitrust panel.
Mr. Schmidt has long argued that Google's search results -- which some say
favor Google and its allies over rivals -- are utilitarian, rather than
authoritarian. He argues that "Page Rank" Google's patented
search algorithm, gives users the most relevant results -- which just so
happens sometimes to come in the form of a Google or partner service.
In the eyes of Mr. Schmidt, the issue as not one of Google favoritism, but of
companies hurting users by "gaming" Page Rank. Page Rank works
in part by tracking "hot" keywords. Some sites have leveraged
this by including blocks of hot keywords in their code to trick Page Rank into bumping
them to the top of the search results pile. The net result can be page
views and advertising dollars. Thus Mr. Schmidt is likely to steer the
conversation to this practice, which is known as "scraping".
Google's goal in trying to steer the hearing towards scraping is two folding.
First, Google may test the waters to see if the Senate would be receptive
to partially banning or limiting scraping -- a problem plaguing all search
providers. Second, even if the Senate isn't interested in that, Google
will likely trying to make sure that it's not subject to antitrust punishments
for retaliating against scrapers. Google recently
penalized Overstock.com Inc (OSTK) and J.C. Penney Comp. Inc. (JCP) after it caught them
Many view the hearing as a high-risk proposition for Google. Some fear
that despite his years of defending Google's business model in Washington,
D.C., Mr. Schmidt could slip under the spotlight and say something that upsets
States Colin Gillis, an analyst at BGC Financial in New York in a Reuters interview, "It's never a positive to have to testify
on antitrust on the Hill. The best-case scenario is that things continue as
they are. [Schmidt's] opening his mouth and he's speaking and there's always
the possibility that something will come out of it that he thinks is logical
and that the committee may not like. It's not likely to happen, but it's always
III. Both Parties Are Concerned About Google's Dominance
Google faces bipartisan scrutiny. Senator Herb Kohl (D-Wisc.) has at
times questioned Google's business tactics and is expected to be among those
The same goes for Senator Richard Blumenthal (D-Conn.) who calls
Google "a great Americans success story", but complains,
"Concerns have been raised by both regulators and competitors over whether
Google has used its dominance of the online and smartphone search markets to
impose extra costs on consumers, unfairly preference its own products, or
disadvantage competitors through a variety of means, including its search and
And on the other side of the aisle Senator
Mike Lee (R-Utah) has expressed concern about Google's purchase of
travel software firm ITA, which rivals like Expedia, Inc. (EXPE) fear due to their belief that Google's dominant search position could allow it to
monopolize travel business.
Overstock.com (who was recently punished by Google for scraping) is
headquartered in Cottonwood Heights, Utah, Sen. Lee's home state.
Overstock donated $7.7K USD of the $1.975M USD Sen. Lee raised, while
Microsoft -- a search rival of Google -- gave Sen. Lee $10K USD.
Together these contributions total less than 1 percent of Sen. Lee's
campaign costs, but nonetheless they may be relevant to his views towards
In addition to Expedia's executives, representatives for Yelp! Inc. will testify
after Mr. Schmidt, likely to complain about Google copying content from their
reviews, without thoroughly identify the source of that content.
Google faces similar probes and inquiries overseas in the European Union and in South Korea.