Why US antitrust regulators should probe Google search
To boldly know where no one has known before
Comment The word is that the US Department of Justice may sue Google over its proposed $700m acquisition of flight data outfit ITA Software. And we can only hope that the feds have far more than flight data on the brain. As it investigates whether Google could use its web search monopoly to erect a second monopoly in the flight search market, the DoJ must also ask whether the company could do much the same thing in who knows how many other markets.
In its recent paper analyzing Google's ITA acquisition (pdf), the American Antitrust Institute explores the deal's potential effect on flight search, but it also looks beyond this particular merger. "One has to wonder about antitrust scrutiny for any future Google acquisitions – including vertical acquisitions that might otherwise appear benign in traditional commercial settings," writes the AAI, a thirteen-year-old independent antitrust watchdog intent on protecting the American consumer.
"Questions about the prospect that Google might leverage a broader search monopoly into dominance of distinct vertical search markets through acquisitions seem destined to crop up again."
According to Robert Lande – a director of the American Antitrust Institute, a professor at the University of Baltimore law school, and former antitrust prosecutor with the Federal Trade Commission – the institute's added concern is that as Google moves into new vertical markets, its search engine will only become more dominant, further separating itself from its last real competitor: Microsoft.
"Our big fear is that as Google gobbles up these related markets, including the travel search market, that will sound the death knell for Microsoft," he tells The Register. "What happens in a world with one search engine?"
At the moment, neither Google nor ITA offer a vertical search service directly to internet users. But when you consider the Google web search monopoly – which controls an estimated 85 per cent of the market, if not more – a combined operation would seem to have all existing flight search firms "surrounded", in the words of Lande and the AAI. This threat is compounded by the fact that ITA supplies flight data to many of those firms, including Kayak and Orbitz. But as the AAI indicates, even without this wrinkle, Google's web search engine is a potential threat to fair competition whenever the company expands into a new vertical search market.
"Questions will persist if Google’s suspected online search monopoly is or is becoming entrenched, as will questions about how fairness and neutrality in something as complex and subjective – and necessarily lacking in transparency – as search engine algorithms can ever be monitored and effectively regulated," the AAI says.
Randy Stutze, who authored the institute's paper, says these questions can't be answered without more insight into how Google actually works. "These are questions that internal analysis is probably going to have to reveal. It's hard for outsiders looking in to know," he tells us. "With [DoJ and FTC] and their subpoena power, being able to look at internal documents, they can form a real opinion."
Stutze believes that as it probes Google's ITA deal, the DoJ must indeed look at whether Google could use its search engine to unfairly dominate vertical markets beyond travel. "It seems wise, in this case, to take a broader view," he says.
In the European Union, investigators are already working to answer these questions. As part of its EU antitrust complaint against Google, UK-based vertical search outfit Foundem has accused Google of transforming its search engine into an "immensely powerful marketing channel" for its own services. With its so-called Universal search setup, Google inserts links from its own services – including YouTube, Google Maps, and Google Product Search – into prominent positions on its search results pages.
"[Universal Search] allows Google to leverage its search engine monopoly into virtually any field it chooses," Foundem says in a FCC filing that mirrors its EU complaint, which remains under seal. "Wherever it does so, competitors will be harmed, new entrants will be discouraged, and innovation will inevitably be suppressed."
Google Product Search is a direct competitor to Foundem. Both are price comparison services, although Foundem also offers travel search, jobs search, and property search. But as Product Search received prime placement on Google's primary search engine via Universal Search, Foundem was practically unreachable through Google. In 2006, when Mountain View introduced a new algorithm that targeted vertical search engines, Foundem vanished from Google's search engine. The site was also priced out of Google's AdWords search advertising system when the same algorithm reduced its landing page "quality score", sending its minimum ad bid sky-high.
The added twist is that some vertical search engines were not affected by the new algorithms. Apparently, they were whitelisted, though Google refused to acknowledge this publicly. In its complaint to the EU, Foundem argued that the combination of Universal Search and the secrets of Google's search engine penalties created an unfair competitive landscape.
"You have an overwhelmingly dominant search engine," Foundem CEO Shivaun Raff has told us, summing up the company's complaint. "If you add to that that search engine's ability to apply discriminatory penalties - they're discriminatory because some services are manually rendered immune through whitelists - and you add the ability of that search engine to preferentially insert its own services at or near the top of the search results, all of that adds up to an unparalleled and unassailable competitive advantage."
Next page: Google in black and white
The thing about Google's dominance is that it's ephemeral. The day there is something better, more reliable, faster, more current, we will use it and drop them like a hot rock. They know this, and spend immense resources continually making their services better.
This has been going on for some time, and their pool of knowledge in the field is vast. Their services are amazing. They have invested remarkable sums in building and got good value on nearly every buy.
Others like Bing and Yahoo face this high barrier to entry: they have to be as good as Google to gain viability in the long run. They cannot assume dominance and then shut down all opposition and progress and then halt their own efforts in preference to rent seeking. I'm sure to them this looks like unfair monopolistic behaviour - that Google is preventing their dream by engaging in continuous improvement; by being so good they cannot compete or even buy the market.
That is hard for them. But I'm OK with it.
"But when you consider the Google web search monopoly – which controls an estimated 85 per cent of the market"
You mean to tell me that there are Google employees going around forcing (presumably at gun point) people to use their search engine ?
Which bit of "people will chose to use the service they find delivers the easiest, most convenient and best, service they can find" is it that all these idiots don't understand ?
If you don't want Google to have 85% share of the search engine market, then make something better than Google, and hey presto they won't have anymore.
If you can't be arsed to do that, but instead think the best idea is to try and control and cripple the service Google do provide to make your own crappy offering look better, then you need to STFU and stop trying to make life harder for the people who constitute that 85% market share.
"The thing about Google's dominance is that it's ephemeral."
You could have said the same about MS' dominance of the desktop OS, but the reality is that:
(1) cost of entry is so high (how much to replicate even 1/10 of Google's world-wide hardware?) that unless you have the like's of MS cash/market, you can't begine to try.
(2) companies that get to the top usually do so by playing hard-ball, often beyond what is legal, let alone moral. Even when caught (like MS in the past) they have so much political and financial leverage that governments often do too little, too late.
Just read about MS' dirty tricks to 'break' DR-DOS and to prevent OEMs shipping blank or competitive OS machines to see how that worked in the past.
Now looking at what has been said here: that Google lied about their white/black lists and have appeared to deliberately sought to block/demote competitors (with the lists) and to buy up sites to become 'vertical', not to mention the on going case about a competitor's geolocation in Android, it seems that Google is becoming the new MS. Using similar practices as they become more money and lawyer-driven.
What they should have done with MS was to break it in to an OS-only company with fixed public OEM terms that do not penalise competition, and a separate company for Office, development tools, etc.
Fat chance :(