Is Google Hurting Free Market Competition?

Senators Herb Kohl and Mike Lee have put together a letter calling for an FTC investigation of Google, with an emphasis on the company’s search results.

Do you think Google is anticompetitive? Let us know in the comments.

Here’s the letter in its entirety:

Google FTC Letter 12 19 11

Note that the letter refers to Bing as “a partnership of Microsoft and Yahoo”. And that this is the only competition Google has. I’m not sure this is an accurate portrayal of the search industry. Bing is not a partnership of Microsoft and Yahoo. It’s Microsoft’s search engine. They are separate. Sure, they do have a partnership, and Bing powers the back-end of Yahoo, but they are still two different search engines. Granted, they are sharing an advertising platform now. Furthermore, there are other search engines out there, though their market share isn’t nearly as great.

Newer kinds of search engines have popped up in recent memory. Blekko and DuckDuckGo spring immediately to mind. Just because people aren’t using them as much as Google, doesn’t mean they aren’t free to compete. They aren’t being used nearly as much as Bing either. Bing has proven that marketing a search engine and making strategic partnerships can go a long way in gaining market share in the search industry.

The reality of the Internet and the search industry is much broader than competition among search engines. The fact is that people are obtaining information in a lot more ways now. They’re relying on search less for some of that. They’re turning to social media and different apps. A lot of iPhone users may be turning to Siri now. That’s just an example. Smartphones and tablets have opened up the world to a whole new world of apps for consuming information online. That itself could be just as big of an obstacle for Bing as anything.

For that matter, it could be a benefit for Bing if they play their cards right. If people have to rely on the traditional search engine less for some types of information consumption, perhaps there are opportunities for Microsoft to innovate more in the app world. I do believe the direction they’re going with Xbox and Kinect can have some pretty big ramifications. I wonder what a Bing-infused Xbox mobile device could accomplish for their share of the search market. Getting Xbox Live features on mobile devices is a start, but what about something more like what Sony is doing with the Playstation Vita, only Xbox style, taking advantage of the new Xbox platform.

A representative for the FairSearch Coalition sent us these comments on the letter from Rick Rule, head of the Department of Justice’s Antitrust Division from 1985-1989, a partner at Cadwalader, Wickersham & Taft LLP, and outside counsel to Microsoft:

Senator Lee is right to call for careful scrutiny of Google, given the numerous allegations of antitrust violations by the company. The antitrust laws of this country prohibit companies like Google that dominate important parts of our economy from using their market power to destroy competition and to deny consumers of choice. Decisions from conservative courts make clear that the antitrust laws apply just as much to the new economy as to the old. If a company like Google is allowed to flout the rule of law, then free-market competition will suffer.

Senator Lee’s letter to the FTC shows that the Senator understands that promoting sound antitrust law enforcement is an important bulwark against the inevitable calls for regulation. Senator Lee’s letter is in line with the views of conservative judges and free-market heroes, like Judge Bork and Judge Posner.

I too am a conservative who believes in the supremacy of free markets. I worked for President Reagan as the head of the Justice Department’s antitrust division. We understood then, as Senator Lee understands today, that in order for free-market competition to work, consumers and producers must be able to respond to the market’s “invisible hand” free from artificial restraints imposed by government, by cartels, or by monopolists like Google. The troubling allegations that Google uses its market power to impose such restraints are too numerous to ignore. As Senator Lee’s letter demonstrates, conservative principles demand that Google be held accountable to the rule of law.

They also sent us these comments from Mark Corallo, former Press Secretary and then Public Affairs Director for the U.S. Department of Justice under Attorney General John Ashcroft (2002-2005). He’s currently a spokesman for FairSearch:

Senators Herb Kohl (D-WI) and Mike Lee (R-UT) sent a letter to Federal Trade Commission (FTC) Chairman Jonathan Leibowitz requesting that the FTC conduct an investigation into Google’s business practices. They should be applauded. The rule of law is non-partisan. And that is all they are requesting of the FTC – make sure that Google is following the law.

Considering the grilling they gave Google CEO Eric Schmidt at Senate hearing back in September, the news is not that these two Senators have concerns relating to Google’s leveraging its market dominance in anti-competitive and potentially illegal ways. The news is that the Chairman and Ranking Member of the Antitrust Subcommittee put it in writing and asked for action. When two senators not only agree on an issue but are willing to do something about it, the seismic tremors can be felt from the halls of the FTC right on up to Google’s executive suites. And that’s nothing compared to the shockwave that Google’s multimillion dollar lobbying team is feeling from all sides – after all, they’re paid to cut off these types of legitimate inquiries.

Citing testimony from their September 21 hearing, Senator Kohl and Senator Lee rightly raised several issues of concern that merit investigation. Among those concerns are:

Erik Schmidt’s admission that Google has a dominant position in the search market: “I would agree, Senator, we’re in that area”;

The dramatic changes in Google’s business model from delivering search results based on popularity to steering users to its ever increasing Google-owned Internet properties;

The suppression of natural search results in favor of Google links; and

The damage to competition and innovation that is the lifeblood of the internet economy and inevitably the American economy.

The Senators ended the letter rging the FTC to take a closer look:

“We believe these allegations rgarding Google’s search engine practices raise important competition issues. W are committed to ensuring that consumers benefit from robust competition in oline search and that the Internet remains the source of much free-market
innovation. We therefore urge the FTC to investigate the issues raised at our sbcommittee hearing to determine whether Google’s actions violate antitrust law or substantially harm consumers or competition in this vital industry.”

My translation for the layman: “How can we trust Google?

FairSearch’s official statement is as follows:

FairSearch.org applauds Senators Kohl and Lee for urging the Federal Trade Commission to conduct “a thorough investigation” of allegations that Google’s business practices leverage the company’s monopoly power in ways that are contrary to antitrust law. This bipartisan letter validates the many concerns held by the members of FairSearch.org and thousands of other companies about the impact Google’s anticompetitive behavior has on innovation and consumer choice. We agree with the Senate Antitrust Subcommitee leadership’s conclusion that, given the inconsistent testimony of Eric Schmidt and the concerns raised by witnesses like Yelp and Nextag, Google can no longer simply be trusted to not abuse its dominant position in online search. We continue to encourage the FTC, along with state Attorneys General and the European Commission, to respond to the Senators’ call to investigate, as antitrust scrutiny is vital to ensuring consumers reap the benefits of robust competition and innovation in online search.

In October, FairSearch released a 44-page paper about Google’s “anticompetitive conduct”.

In June, Google put out a blog post discussing five principles that “will stand up” to scrutiny related to competition:

1. Do what’s best for the user. We make hundreds of changes to our algorithms every year to improve your search experience. Not every website can come out at the top of the page, or even appear on the first page of our search results.

2. Provide the most relevant answers as quickly as possible. Today, when you type “weather in Chicago” or “how many feet in a mile” into our search box, you get the answers directly—often before you hit “enter”. And we’re always trying to figure out new ways to answer even more complicated questions just as clearly and quickly. Advertisements offer useful information, too, which is why we also work hard to ensure that our ads are relevant to you.

3. Label advertisements clearly. Google always distinguishes advertisements from our organic search results. As we experiment with new ad formats and new types of content, we will continue to be transparent about what is an ad and what isn’t.

4. Be transparent. We share more information about how our rankings work than any other search engine, through our Webmaster Central site, blog, diagnostic tools,support forum, and YouTube. We also give advertisers detailed information about the ad auction and tips to improve their ad quality scores. We’ve recently introduced even more transparency tools, announcing a major change to our algorithm, providing morenotice when a website is demoted due to spam violations, and giving advertisers new information about ads that break our rules.

5. Loyalty, not lock-in. We firmly believe you control your data, so we have a team of engineers whose only goal is to help you take your information with you. We want you to stay with us because we’re innovating and making our products better—not because you’re locked in.

And of course, Google always like to play the “competition is only a click away” card.

That’s a valid point though, is it not? Tell us what you think.

Is Google Hurting Free Market Competition?

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