Wired on Google’s Coming Antitrust Nightmare

by on July 21, 2009 · 21 comments

Great piece in Wired by Fred Vogelstein asking “Why Is Obama’s Top Antitrust Cop Gunning for Google?” It paints a pretty good picture of the coming antitrust ordeal that Google is likely to be subjected to by the Obama Administration. And, as usual, I couldn’t agree more with the skepticism that Eric Goldman of Santa Clara University Law School articulates when he notes: “The problem for antitrust in high tech is that the environment changes so rapidly. Someone who looks strong today won’t necessarily be strong tomorrow.”  More importantly, as Vogelstein’s article notes, we’ve been down this path before with less than stellar results when you look at the IBM investigation in the 70s and the Microsoft case from the 90s (a fiasco that is still going on today):

After the government initiated its case against IBM, the company spent two decades scrupulously avoiding even the appearance of impropriety. By the time the suit was dropped in the early 1980s, company lawyers were weighing in on practically every meeting and scrutinizing every innovation, guarding against anything that could be seen as anticompetitive behavior. A decade later, innovation at Big Blue had all but ceased, and it had no choice but to shrink its mainframe business. (It has since reinvented itself as a services company.)

Microsoft took the opposite approach. Gates and company were defiant, to the point of stonewalling regulators and refusing to take the charges seriously. “Once we accept even self-imposed regulation, the culture of the company will change in bad ways,” one former Microsoft executive told Wired at the time. “It would crush our competitive spirit.” Gates put it even more directly: “The minute we start worrying too much about antitrust, we become IBM.” Microsoft’s hostility to the very idea of regulation resulted in several avoidable missteps—including remarkably antagonistic deposition testimony from Gates—that ultimately helped the DOJ rally support for its ongoing antitrust suit against the company. Although Microsoft ultimately settled, the public beating appears to have taken a toll on the company, which has been unable to maintain its reputation for innovation and industry leadership.

Read the whole article for all the gory details.  This is going to be the biggest antitrust case of all-time once it is finally launched and I feel confident predicting that it will make many lawyers and consultants very, very rich while doing absolutely nothing to help consumer welfare.  But perhaps those DOJ lawyers can at least get Google to lower the prices for all those services they offer. Oh, wait, they’re all free.  But don’t worry, I’m sure Beltway bureaucrats will do a great job of running something as complex as search algorithms and online advertising markets.  Right.

  • Pingback: Google: Target for Destruction?- The SiliconANGLE

  • Pingback: Washington Planner » Afternoon roundup

  • MikeRT

    Microsoft, unlike Google, made two major mistakes:

    1) It integrated IE into Windows, a move that was transparently intended to stifle competition without technical benefit to the customer.

    2) It relied on very dangerously worded contracts with OEMs that prevented companies like Be Inc from ever having a chance to get their products installed. As I recall, Dell actually wanted to offer BeOS as an option on some of its systems, but the terms of Microsoft's contracts were so draconian that it would have imposed costs on them that would have rendered them non-competitive with HP and Compaq.

    Whatever one may feel about antitrust laws, it was clear that under Bill Gates, Microsoft behaved like a kid that would go up to the tiger's cage and poke the big kitty with a sharp stick.

  • http://enigmafoundry.wordpress.com eee_eff

    Although Microsoft ultimately settled, the public beating appears to have taken a toll on the company, which has been unable to maintain its reputation for innovation and industry leadership.

    Adam, that's bizarre to ascribe Microsoft's present reputation to the beating it took in anti-trust court.

    I'd be more likely to ascribe Microsoft's poor reputation to poor products (Vista, the Zune, every edition of Windows, the user interface in the new MS Office) or better products from it's competition (for example the wii, Apple's OS) or their anti-competitive behavior (eg. their licensing deals, such as those Mike RT mentions above) which shows the Microsoft is themselves aware of how inferior their product is. Not to mention such anti-freedom comments like the famous one re: linux being 'viral' or those contained in the Halloween memo. MS is fully capable of destroying their reputation without any help from the DOJ…

  • http://srynas.blogspot.com/ Steve R.

    Periodically, when at Best Buy, I ask if I can buy a computer without the the operating system, which (of course) is Windows. I am repeatably told NO. Seems to me that if we have true free market, one should be able to buy a computer less the cost of and without the pre-loaded operating system.

    PS: What is even more humerus, to get WindowsXP instead of VISTA you have to pay a “downgrade” fee. So we have to pay twice for one operating system!!!!

  • MikeRT

    Seems to me that if we have true free market, one should be able to buy a computer less the cost of and without the pre-loaded operating system.

    That's like saying that we don't have a free market because you cannot buy a hydrogen-powered car. A lack of choices at particular stores does not make the market itself controlled. As it currently stands, there are plenty of smaller vendors that will sell you a PC with no OS or another one that they know how to support.

  • http://srynas.blogspot.com/ Steve R.

    Not quite correct. A more appropriate counter analogy would be the ability to buy a car without an engine. Both the OS and the computers exist and are mass marketed. I don't know of any hydrogen car that is sold retail. My point is that these are two independent products that should not be “bolted” together.

    Yes, there are many small vendors that will sell a computer without the OS. That is exactly what we have done.

  • MikeRT

    My point is that these are two independent products that should not be “bolted” together.

    Just like car bodies and car engines. After all, Ford should just take it for granted that I might want to put a Honda VTec engine in a new Escort body.

  • http://enigmafoundry.wordpress.com eee_eff

    No–the difference is the anti-competitive behavior and contracts that Microsoft has illegally promulgated are in fact preventing OS-less computers from being sold. The FTC has been slow to respond, and MS has proved themselves more agile and better supplied with lawyers–but they have broken the law.

  • http://enigmafoundry.wordpress.com eee_eff

    No. bundling is more complicated than that. The browser and the OS for example is impermissible and illegal bundling.

    I am not sure the issue of computer and OS bundling has come before the courts in terms on the PC, but there was a case with IBM and their mainframe software…

  • http://enigmafoundry.wordpress.com eee_eff

    No–the difference is the anti-competitive behavior and contracts that Microsoft has illegally promulgated are in fact preventing OS-less computers from being sold. The FTC has been slow to respond, and MS has proved themselves more agile and better supplied with lawyers–but they have broken the law.

  • http://enigmafoundry.wordpress.com eee_eff

    No. bundling is more complicated than that. The browser and the OS for example is impermissible and illegal bundling.

    I am not sure the issue of computer and OS bundling has come before the courts in terms on the PC, but there was a case with IBM and their mainframe software…

  • http://enigmafoundry.wordpress.com eee_eff

    No–the difference is the anti-competitive behavior and contracts that Microsoft has illegally promulgated are in fact preventing OS-less computers from being sold. The FTC has been slow to respond, and MS has proved themselves more agile and better supplied with lawyers–but they have broken the law.

  • http://enigmafoundry.wordpress.com eee_eff

    No. bundling is more complicated than that. The browser and the OS for example is impermissible and illegal bundling.

    I am not sure the issue of computer and OS bundling has come before the courts in terms on the PC, but there was a case with IBM and their mainframe software…

  • Pingback: does no no hair removal complaints

  • Pingback: devenir rentier

  • Pingback: DDOS Protected Hosting

  • Pingback: Cigarette electronique

  • Pingback: twitter.com/NHCPS

  • Pingback: football game

  • Pingback: Dentist Camberley

Previous post:

Next post: