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Google’s Dominance Sparks Fear, Draws Antitrust Concerns

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Mon, Nov 5, 2012 at 3:36 pm

    Google’s Dominance Sparks Fear, Draws Antitrust Concerns

    A weekend New York Times article puts a clear focus on the issues that are drawing antitrust regulators to focus on the Internet giant’s anticompetitive practices.

    Written by Steve Lohr and Clair Cain Miller the article, Google Casts a Big Shadow on Smaller Web Sites, explains what’s going on:

    Regulators in the United States and Europe are conducting sweeping inquiries of Google, the dominant Internet search and advertising company. Google rose by technological innovation and business acumen; in the United States, it has 67 percent of the search market and collects 75 percent of search ad dollars. Being big is no crime, but if a powerful company uses market muscle to stifle competition, that is an antitrust violation.

    So the government is focusing on life in Google’s world for the sprawling economic ecosystem of Web sites that depend on their ranking in search results. What is it like to live this way, in a giant’s shadow? The experience of its inhabitants is nuanced and complex, a blend of admiration and fear.

    The Federal Trade Commission staff has recommended bringing an antitrust action against Google. The Times calls the government’s antitrust “scrutiny of Google the most exhaustive investigation of a major corporation since the pursuit of Microsoft in the late 1990s.”

    The Times points out that Google has drawn antitrust investigations as it has moved aggressively beyond search and advertising into areas like online commerce and local reviews. The problem is that Google uses its search engine to promote its own products and services, hurting competition and, more important in antitrust law, harming consumers.

    Our 2010 study, Traffic Report: How Google is Squeezing out Competitors and Muscling Into New Markets, demonstrated how with the launch of Universal Search Google favored its own properties and services in search results to the detriment of its competitors. One stark example was the dramatic drop-off in traffic that occurred on Mapquest’s site after Google placed its Google Maps at the top of Universal Search.

    The Times article outlines what happened to the shopping service Nextag

    when Google manipulated its algorithm. Traffic referred from Google, where 60 percent had originated dropped by half. Nextag responded by doubling its paid search advertising on Google.

    The Times article also relates the story of Vote-USA.org and how it was banished to the hinterlands of search results. The Times talked to Ron Kahlow, who runs the organization and reported:

    Last year, Mr. Kahlow said, F.T.C. investigators asked him if he thought his site was a target of discrimination. No, he replied. But since then, he has watched Google promote its tools for finding where to vote and sample ballots, just like his site offers.

    “At that time, I didn’t believe it was intentional, but I’m having second thoughts,” he says. “I’m sure they’re aware of the amount of money that’s being spent in politics and I’m sure they’d like to get their fingers in the pie.”

    In another example of the Internet giant’s power the Times relates how two local news sites CaryCitizen and Berkeleyside were dropped from Google News with no explanation. The changes came as Google was building up its Google Plus Local service.

    Google executives maintain that the changes to the “secret sauce” are all about serving the user and offering him or her what they want.

    They’re making that argument because a benefit to the consumer can, under antitrust law, offset the damage done to a competitor. But we can’t let Google executives get away with that dodge; it’s not true.

    Users of Google services are not customers — not consumers in the usual sense. We are Google’s product. Our activities across its services are tracked and the digital dossiers that have been amassed about us are used to sell advertising.

    And now that Google is moving in to becoming a shopping site — see what happens when you type patio furniture into the search box, for example — the Internet giant is squeezing other comparison sites of the results page. It means Google can get a bigger cut and prices will be higher because of a lack of competition.

    This is real harm to consumers; Google has crossed the “red line” that will inevitably draw the antitrust regulator’s ire.

    ,

    This post was written by:

    John M. Simpson

    - who has written 414 posts on Inside Google.


    Contact the author

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