Online search-engine giant Google has come under antitrust investigation by the U.S. Senate, the Federal Trade Commission, and the Department of Justice. At question is whether the company’s business practices present unfair barriers to entry for competitors.
“The Power of Google: Serving Consumers or Threatening Competition?” was conducted by the Senate Subcommittee on Antitrust, Competition Policy, and Consumer Rights on September 21. Senators questioned Google Executive Chairman Eric Schmidt about the company’s strategies for maintaining 65 percent of the Internet search market. The subcommittee investigated accusations the Internet company engages in uncompetitive market behavior and has committed antitrust violations.
Steven Titch, telecom and information technology policy analyst for the Los Angeles-based Reason Foundation, says legislators and government regulators don’t really understand Google can be successful without harming other businesses or consumers.
“If there was any doubt as to Congress’s lack of understanding about Google, search engines, and online advertising, the Senate’s September antitrust hearing dispelled it,” Titch said. “Despite all the rumblings on Capitol Hill about the threat of Google, no one has been able to articulate how Google’s dominance of search is harming the consumer.”
$64 Billion in Economic Activity
In his opening remarks, Senate Judiciary Chair Patrick Leahy (D-VT) asked whether Google’s market power in online search and search advertising creates certain obligations under current competition laws. Leahy also asked whether Google leverages the company’s market power to harm its competitors.
In his opening statement, Schmidt said Google Search and the company’s advertising products helped build $64 billion in economic activity for hundreds of thousands of small businesses throughout the United States.
“At Google, we’ve always focused on putting consumers—our users—first,” Schmidt said. “For example, we aim to provide relevant answers as quickly as possible, and our product innovation and engineering talent deliver results that we believe users like, in a world where the competition is only one click away.”
Other witnesses included Jeff Katz, CEO of Nextag, and Jeremy Stoppelman, cofounder and CEO of Yelp, both of whom spoke about the difficulty of entering the Internet search market and expressed their perceptions of Google’s dominance in the search market. “It has to be broken up by the government,” said Consumer Watchdog spokesman Jamie Court in an interview with American Public Media. “Google is bigger than Ma Bell. It’s gotten too big.
‘Complex and Evolving’
Among the complaints expressed by Google’s competitors is that the company unfairly directs search traffic to its own sites, such as Google Maps, Google Finance, and Google Places. For example, an Internet user who conducts a Google search of “nightclubs in Chicago” may encounter a full page of results from Google Places before finding entries from a competing site. Because advertisers pay Web sites based on the number of customer visits to their sites, competitors claim Google’s market share grants it an unfair advantage.
“Studies show what most of us know from experience: that the first few Google search results attract nearly 90 percent of all user clicks,” said Ranking Subcommittee Member Sen. Mike Lee (R-UT) in his opening statement. “Google’s search ranking therefore has enormous power over the information users find, which websites receive traffic, and the amount businesses must pay to be found on the Internet.
“The antitrust laws do not exist to punish success,” said Leahy. “What we try to do through these laws is ensure that business on the Internet remains dynamic and that new entrants with new business models that will create jobs and improve our economy are not stifled. Although the Internet economy is complex and evolving, the antitrust laws are as necessary online as in any other area of our economy.”
Titch points out that while the government may view Google as an “illegal monopoly” because Google holds the largest market share among search engines, it isn’t the only search engine out there. He notes search engines have come and gone in the past, such as Altavista, Lycos, and Dogpile, and consumers freely choose to use Google and can switch to another search engine at no cost.
‘Healthy, Dynamic, and Thriving’
“Google has no way to force consumers to use its product, or force advertisers to buy from it, or prevent competitors from gaining access to the market. Google’s market share is wholly dependent on the willingness of consumers to use its search engine. Users keep coming back because they like the utility Google provides—and [because it] never stops innovating,” Titch said.
Sen. Lee released a statement after the Google antitrust hearing: “As a strong supporter of free markets, competition, and innovation, I was disappointed by the testimony of Google Chairman Eric Schmidt,” he said. “I had hoped to hear the company acknowledge the responsibilities that accompany its preeminent position in the Internet search market and address concerns many have raised about Google’s possible anti-competitive activities.”
Lee continued: “Unfortunately, I fear that some of the testimony in today’s hearing may only encourage those who are calling for legal enforcement or government regulation,” he said, referring in part to an exchange between Lee and Schmidt wherein the senator accused Google of “cooking” its search algorithms to favor Google sites. Schmidt responded to Lee: “Senator, I can assure you we have not cooked anything.”
Titch disagrees with the government’s blame-Google movement. “Congress, along with the DoJ and the FTC, should keep their hands off the online advertising ecosystem. It is healthy, dynamic, and thriving. Strip away the rhetoric and you get down to the government’s perverse argument for prosecuting Google: It’s too good at what it does,” he said.
Alyssa Carducci ([email protected]) writes from Tampa, Florida.