Google: Anti-trustworthy?

In July 2009, the Justice Department’s new antitrust chief Christine Varney announced that the Obama administration will direct a penetrating gaze on the tech industry—starting with search behemoth Google.  The pronouncement was not unexpected; Varney, an ex-Hogan and Hartson partner who represented Netscape and lobbied for antitrust sanctions against Microsoft, had long made her unease with Google public.

 

Touchy-feely good guy Google, a best practices leader across a host of categories, being recast as something less than heroic is novel.  Google of the bouncy ball chairs, “Don’t Be Evil” ethos, and “Hey, let’s give it away for free!” business model?  

 

In the last fifty years, it is the technology industry that has provided antitrust regulators their most fertile testing ground.  Pushback against Google comes on the heels of the DOJ’s swatdown of Microsoft in the 1990s, a sweaty battle that resulted in Microsoft being heavily fined for shoehorning its Explorer browser into its Windows operating systems.  The Microsoft matter itself followed the DOJ’s dogged pursuit of IBM throughout the 1970s, as the feds challenged IBM’s hold on the business computer market. (Law geek note:  it was Cravath’s representation of IBM—conducted under IBM’s “spare no expense and leave no stone unturned” directive—that set many current (or very recent) BigLaw norms: the endless doc review, armies of associates, etc.

 

Will Google be the case that modernizes antitrust law, brings it up-to-date with an internet age?  Or does antitrust law have little place in the technological sphere?

 

Landmark antitrust legislation and case law, from the 19th Century Sherman Act to the break up Ma Bell in the early 1980s, both reflects and propagates the evolution of American economic and societal values.  Antitrust issues are tricky, in that so much is open to interpretation and that enforcement is colored by the biases of a given political climate.  Adjudicating what practices hinder competition, why and how, and how consumers and future markets suffer, is a highly subjective endeavor.

 

In the case of Google, the Obama Administration’s beef has more to do with what Google could become, than what it presently is.  Though Google now holds some 65 percent of the search engine market, the DOJ’s fear is less a lack of meaningful competition among search providers, but a strangling of competition across the ever-widening, cloud computing sphere.  The growing utilization of internet-based services and resources—in which Google is the leading provider—makes this an increasing possibility.  The company’s consistent innovation, from GoogleMaps to online spreadsheets to document and photo storage, ensures that Google is already dominating the cloud computing landscape.   Troubling to DOJ regulators is that such a vast headstart may allow for few, if any, future competitors.   The power of the Google search engine, combined with Google’s ability to manipulate search results in favor of its own offerings, could equate to salting the fields for future comers to those realms where Google operates.   

 

Whatever its plans for future litigation, the DOJ has already begun to make life a bit more difficult for Google, nixing its acquisition of Doubleclick, heavily scrutinizing its massive book scanning project, and assessing the legality of Google CEO Eric Schmidt and board member Arthur Levinson holding seats on Apple’s board. 

 

Google insists that the government’s fears are utterly misplaced, on several counts—not the least of which is that, in relation to the tech industry, antitrust laws are antiquated.  By the time the feds roll up their sleeves and “evaluate” a swiftly moving technological market, that market has already altered.  Thus, Google supporters argue, antitrust laws have no place in industries of perpetual innovation.  The technology industry is simply too dynamic to require such meddling and oversight.   The very process of creative destruction—the supremacy of innovation over status quo—eventually dethrones even those who wield monopoly power. With one innovation, upstart Davids can tumble Goliaths.  Critics point to Microsoft as best evidence of this truth.  When the Feds went after Microsoft, the company seemed impenetrable.   Along came a scrappy little ant, chirping an inclusive idealism about as opposite to Microsoft strategy as could be.  Within a few years, Google had Microsoft scrambling.  

 

If the Obama administration has its way, Google will be but one of many targets for a newly activist Justice Department.  The Obama camp is clearly gearing up for battle, examining airline and railroad giants, phone and cable companies, large-scale agricultural processors, pharmaceutical companies, financial services and wireless phone industries.  The proactive stance is a sharp turnaround from the policies of the Bush administration, which was less zealous in prosecuting cases of potentially anticompetitive behavior.

 

Still, the antitrust crackdown underscores the ideological dichotomy within the administration itself. While Varney has the support of most senior leaders, some Dems fret that business should only be encouraged in these dark economic times. Others espouse the Bush administration’s worldview: larger companies and industry alliances are more efficient, and efficiency leads to consumer benefit. The DOJ may also find its authority curtailed by other expert agencies, e.g., Transportation, which insist they are better qualified to evaluate their own spheres.  However the competition policy of the Obama administration unfolds, it is clear that antitrust lawyers live in very interesting times.