Friday, September 23, 2011

Google anti-trust case

Carter Lusher, Ovum Chief Analyst

AUSTRALIA: The bipartisan grilling of Google Chairman Eric Schmidt by members of the Senate Judiciary Subcommittee on Anti-trust, Competition Policy and Consumer Rights was just the latest skirmish between Google and governments. It won’t be the last by any means. In many respects the scrutiny on Google is starting to resemble the actions directed at IBM starting in 1950s (and continuing today) and Microsoft in the 1990s.

Google is coming under increasing scrutiny by a variety of governments such as the European Union, Korea, US Federal anti-trust authorities, and US states attorneys general for a variety of reasons, all of which are typical and predictable. First, it has become the dominate player for a vital part of the Internet and ecommerce. Not just the largest player, but a truly dominate one whose activities can dramatically impact the fortunes of other companies.

Second, Google is hugely profitable and cash rich which means it has the resources to do acquisitions and invest in initiatives that put competitors at a disadvantage and scares those competitors. Third, Google’s dominance and financial strength is causing competitors – both individually and in loose cooperation – to use high powered law firms to lobby regulators and attorneys general to open investigations into its activities. Fourth, there is an element of political philosophy at play as Democratic presidential administrations are more likely to initiate anti-trust investigations than Republicans.

However, some of the senators at Wednesday’s Senate hearings and state attorneys generals are Republicans. Fifth and finally, Google is perceived as being very arrogant and has demonstrated a tin ear when it comes to understanding how its moves will be perceived by the public, regulators, politicians, competitors, and the legal system. Adding all these points together means that it is guaranteed that Google will be scrutinized by anti-trust regulators now and in the future not only in the US, but also in Europe, China and other jurisdictions.

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