Quick viewing(Text Mode)

CQR Google's Dominance

CQR Google's Dominance

Res earc her Published by CQ Press, an Imprint of SAGE Publications, Inc. CQ www.cqresearcher.com ’s Dominance Is the online-search giant too powerful?

he meteoric rise of Google in just 13 years has revolutionized the Internet. But competitors are growing wary as the Silicon Valley icon, known for T its “Don’t Be Evil” motto, strengthens its dominance over online searching and advertising and rapidly expands into new areas. Up to 70 percent of online searches in the are conducted on Google, whose vast portfolio includes air - line ticketing, comparison shopping, social networking and mobile- phone software. In addition, Google has proposed a $12.5 billion

acquisition of , a major manufacturer of wireless A Google employee walks across the campus at the company’s Mountain View, Calif., headquarters. phones and other electronic devices. Critics portray Google as a Some 70 percent of Internet searches in the United States are conducted on Google, whose vast portfolio also includes airline ticketing, comparison shopping, monopoly that leverages its power in order to bully rivals. Google social networking and mobile-phone software. strongly denies the accusations and counters that alternatives are I one click away. , regulators in the United States and abroad N THIS REPORT are examining whether Google has run afoul of antitrust laws and S THE ISSUES ...... 955 should be reined in. I BACKGROUND ...... 962 D CHRONOLOGY ...... 963 E CURRENT SITUATION ...... 968 CQ Researcher • Nov. 11, 2011 • www.cqresearcher.com AT ISSUE ...... 969 Volume 21, Number 40 • Pages 953-976 OUTLOOK ...... 971 RECIPIENT OF SOCIETY OF PROFESSIONAL JOURNALISTS AWARD FOR BIBLIOGRAPHY ...... 974 EXCELLENCE N AMERICAN BAR ASSOCIATION SILVER GAVEL AWARD THE NEXT STEP ...... 975 GOOGLE ’S DOMINANCE CQ Re search er

Nov. 11, 2011 THE ISSUES OUTLOOK Volume 21, Number 40 • Does Google wield too What Next for Google? MANAGING EDITOR: Thomas J. Billitteri 955 much control over the 971 Ongoing investigations, legal [email protected] Internet? action and competition could ASSISTANT MANAGING EDITOR: Kathy Koch • Does Google violate reduce Google’s size. [email protected] antitrust law through anti - CONTRIBUTING EDITOR: Thomas J. Colin competitive behavior? SIDEBARS AND GRAPHICS [email protected] • Should the federal ASSOCIATE EDITOR: Kenneth Jost government break Google Google Umbrella STAFF WRITERS: Marcia Clemmitt, Peter Katel into separate companies? 956 Continues to Expand The company offers a CONTRIBUTING WRITERS: Sarah Glazer, BACKGROUND Alan Greenblatt, Barbara Mantel, vast array of services and Jennifer Weeks products. Breaking Standard Oil DESIGN /P RODUCTION EDITOR: Olu B. Davis 962 Google Rides Growth In 1911 the U.S. Supreme ASSISTANT EDITOR: Darrell Dela Rosa Court split the giant firm 960 Wave into 34 companies. Revenue nearly tripled be - FACT CHECKER: Michelle Harris tween 2006 and 2010. Gobbling Up Competition 962 Foreign Markets Boost Google snaps up promising 961 Google’s Growth Internet ventures. Half of Google’s $29 billion in revenue came from 965 Antitrust Action abroad in 2010. An Imprint of SAGE Publications, Inc. Washington has had VICE PRESIDENT AND EDITORIAL DIRECTOR, mixed success over the Chronology HIGHER EDUCATION GROUP: years in efforts to corral 963 Key events since 1890. Michele Sordi major communications DIRECTOR, ONLINE PUBLISHING: companies. Great Wall of Censorship 964 Surrounds Google in Todd Baldwin “No one in China ever sees Testing Antitrust an uncensored version of 967 Boundaries Copyright © 2011 CQ Press, an Imprint of SAGE Pub - results.” lications, Inc. SAGE reserves all copyright and other Google’s critics see parallels rights herein, unless pre vi ous ly spec i fied in writing. with the most recent probe 966 Google’s Privacy Policies No part of this publication may be reproduced of . Spark Intense Criticism electronically or otherwise, without prior written “What you do on the Internet permission. Un au tho rized re pro duc tion or trans mis- should be under your control.” sion of SAGE copy right ed material is a violation of CURRENT SITUATION federal law car ry ing civil fines of up to $100,000. 969 At Issue Growing Concern in Is Google too dominant? CQ Press is a registered trademark of Congressional 968 Washington Quarterly Inc. Concern about Google’s FOR FURTHER RESEARCH CQ Researcher (ISSN 1056-2036) is printed on acid- size is bipartisan. free paper. Pub lished weekly, except: (May wk. 4) For More Information (July wks. 1, 2) (Aug. wks. 2, 3) (Nov. wk. 4) and Ongoing Investigations 973 Organizations to contact. (Dec. wks. 4, 5). Published by SAGE Publications, Inc., 970 Several nations and states 2455 Teller Rd., Thousand Oaks, CA 91320. Annual are investigating Google’s Bibliography full-service subscriptions start at $803. For pricing, call business practices. 974 Selected sources used. 1-800-834-9020. To purchase a CQ Researcher report in print or electronic format (PDF), visit www.cqpress. Voluntary Options The Next Step com or call 866-427-7737. Single reports start at $15. 970 Some senators are open to 975 Additional articles . Bulk purchase discounts and electronic-rights li - unilateral action by Google to censing are also available. Periodicals postage paid at resolve concerns about its Citing CQ Researcher Thousand Oaks, , and at additional mailing market dominance. 975 Sample bibliography formats. offices . POST MAST ER: Send ad dress chang es to CQ Re search er , 2300 N St., N.W., Suite 800, Wash ing ton, Cover: Getty Images/Justin Sullivan DC 20037.

954 CQ Researcher Google’s Dominance BY DAVID HATCH

the federal pressure, Google THE ISSUES has hired a dozen lobbying firms to make its case in Wash - he meeting between ington. ( See Current Situation, and Google had p. 968. ) T the makings of a touch - Critics say Google has em - ing romance — a modern- ployed uncompetitive behav - day Internet version of Holly - ior to achieve its explosive wood’s “When Harry Met Sally.” growth. ( See graph, p. 960. ) A Cute, popular -review rising chorus of companies — site meets fabulously success - from industry stalwarts such as ful, but laid-back, Web goliath. Microsoft to newer ventures But, alas, not all Internet such as Nextag, a comparison- relationships work out. shopping site — is demand - After debuting in 2004, ing that the federal govern - Yelp quickly caught the eye ment take action. They want of Google, the world’s lead - regulators to protect them ing . Google from an Internet juggernaut saw the company as a way that they contend has become to build revenue from local too powerful and has ample

merchants, and in 2005 it t motivation to favor its own o g

agreed to have Yelp reviews r products in Google searches. a M

appear in Google pages high - But , Google’s n lighting local businesses. e executive chairman, insists that B / o

The trouble started two t his company plays fair with o

years later, when Google h competitors and risks losing P

began compiling its own P its customer base if it misbe - A restaurant reviews, prompt - Since Google’s founding 13 years ago in a Menlo Park, haves. “We live in great fear ing Yelp to sever the arrange - Calif., garage by Stanford University computer science every day that consumers will ment. They clashed again in graduate students , left, and , switch in extraordinary num - 2009, after Yelp rebuffed the company has mushroomed into a global powerhouse available in bers to other services,” he told Google’s offer to buy the com - 181 countries and 146 languages. the Senate subcommittee where pany. 1 Yelp claimed Google the Yelp episode was aired. 3 took its reviews without permission hensive probe into allegations of anti - In Nov. 4 written responses to ques - and then, when Yelp protested, laid competitive conduct by Google and tions posed by six members of the down an ultimatum: Google would Yelp aired its grievances at a legal con - subcommittee, Schmidt said Google’s cease the practice only by removing ference. Even so, Yelp’s troubles weren’t size does not impede competition. Yelp’s content from its search results. over. In September, Google purchased “Google does not believe that scale is That threat was the kiss of death, , the prestigious restaurant guide, a barrier to entry,” he wrote. “The In - Yelp feared. “As everyone in this room arming itself with content that directly ternet provides a level playing field knows, not being on Google is the competes with Yelp. for competition; Google’s size has not equivalent of not being on the Inter - The dustup over Yelp is part of a changed that fact. We believe we are net,” Yelp co-founder and CEO Jere - much bigger controversy over whether better not because we are bigger but my Stoppelman told a Sept. 21 Sen - Google, famous for its “Don’t Be Evil” because our technology is better.” ate hearing on Google’s business motto, leverages its size and scale to Schmidt acknowledged that Google practices. “When one company con - bully rivals, dictate unfair business terms used “snippets” of reviews from Yelp trols the market, it ultimately controls and give preferential treatment to its and other sites, but wrote that was consumer choice.” 2 own brands. In addition to the FTC permissible under the “fair use” doc - Google had already relented this probe, the European Union (EU), South trine, which permits the unauthorized summer, after the Federal Trade Com - Korea and at least five states are con - reproduction of copyrighted works mission (FTC) announced a compre - ducting similar inquiries. In response to under limited circumstances. “Although

www.cqresearcher.com Nov. 11, 2011 955 GOOGLE ’S DOMINANCE

Google tries to act responsibly in re - Google Umbrella Continues to Expand sponse to website concerns,” he wrote, a vast array of services and products, including online “ultimately Google builds our search advertising, social media, email, mapping and video sharing. A pend - results and search-related products for the benefit of users, not websites.” 4 ing acquisition of Motorola Mobility, under review by the Justice De- Looming large in the debate over partment, would increase Google’s reach in the wireless-phone industry. Google’s size and power is Microsoft, Google’s fiercest critic and rival. The Key Google acquisitions software giant, itself the focus of an YouTube — Free video-sharing site, acquired in 2006 for earlier federal antitrust probe, filed an $1.65 billion. antitrust complaint with the EU against DoubleClick — Internet-ad service, acquired in 2007 for Google in March. 5 Microsoft, which $3.1 billion. also is helping two small Internet com - — Mobile-advertising company, acquired in 2010 for $750 million. panies with antitrust suits against ITA Software — Travel-industry software company, acquired in Google, is a member and funder of April 2011 for $676 million. the FairSearch Coalition, an industry Zagat — Restaurant-survey company, acquired in 2011 for trade group that argues that Google $151 million. suffers from an inherent conflict of in - Clearwire — Provider of 4G wireless connectivity; 12 percent terest because it competes with sites share acquired in 2008 for $500 million. that rely on it to reach customers. 6 Yet Microsoft is letting smaller Pending acquisitions companies take the lead in criticiz - Motorola Mobility — Major manufacturer of wireless phones and other ing Google. The reason, analysts devices, including tablets and cable TV boxes; $12.5 billion purchase say: Microsoft is sensitive to the fact under review by Justice Department and European regulators for antitrust that it faced questions about its own compliance. dominance of the Web-browser mar - Admeld — Service that helps companies increase revenue from online ket less than a decade ago. As a re - advertising; $400 million purchase subject to Justice Department approval sult, some Google proponents accuse for antitrust compliance. Microsoft of orchestrating much of the Notable products and services criticism in an effort to stymie a for - midable competitor it has been un - AdSense — Program that integrates advertising with Google’s search able to halt in the marketplace. platform; accounts for more than one-fourth of Google revenue. Since Google’s founding 13 years Android — Mobile-phone and tablet operating software; has ago in a Menlo Park, Calif., garage by 40 percent of smartphone market. two Stanford University computer sci - — Smartphone marketed by Google and made ence graduate students — Larry Page by HTC; focus of Apple patent-infringement suit. and Sergey Brin — the company has Google TV — Online platform combining Internet and channel surfing. mushroomed into a global power - Google Wallet — Mobile-payment system allowing storage of credit-card house available in 181 countries and data. 146 languages. 7 Google+ — Social-networking platform created in response to . From vivid maps that offer street-level — Online global mapping, satellite-image and views to an online tool that translates geographical-information site. 63 languages, Google offers a panoply — Free, advertising-supported email service. of services that have changed how the Google — Service that searches full text of books that world does business and socializes. While Google has scanned and stored in its database. it still serves up links to other websites when someone needs “ratatouille recipes” Source: “Exhaustive Google Product List,” Google, 2011, spreadsheets.google.com/ or “Machu Picchu travel tips,” it is in - pub?key=ty_BGDs9hnuBMRvj3AFeB2g&output=html; Jessica Guynn, “Google, creasingly a destination for its own con - Under Fire, Again Boosts Spending on Lobbying,” , Oct. 21, tent and services. It now offers airline 2011, latimesblogs.latimes.com/technology/2011/10/google-under-fire-again- ticketing, comparison shopping, maps, boosts-spending-on-lobbying.html news aggregation, restaurant and hotel

956 CQ Researcher reviews, social media and more. Google even is contemplating entry into the cable-television business. 8 In 2010, Google generated more than $29 billion in annual revenue, 96 per - cent from online ads, helping to fuel its growth and expansion into other businesses. 9 In the United States, the company towers over Microsoft’s new Bing search engine, which is a distant second and hemorrhaging billions per year in operating losses. In third place is Yahoo!, a constant subject of takeover speculation. (In late October, reports suggested that Google might be in - terested in buying Yahoo!) Bing pow - ers Yahoo!’s search capabilities under a 2010 agreement. 10 Supporters cite Google’s rise as a quintessential American success story. “I’m proud of what they’re doing,” says Rep. Anna Eshoo, D-Calif., whose Sil - icon Valley district is home to the com - pany’s, 26-acre campus and 500,000- square-foot headquarters — the famed — where massage chairs, foosball and free meals for em - ployees are among the amenities. 11 employs more than 31,000 people worldwide. 12 That in - ) h cludes 9,000 in California alone, accord - t o b ing to Eshoo. (Google declines to pro - (

b vide U.S. employment figures.) And the e o L

company says its site generated $64 bil - l u a

lion in “economic activity” for hundreds S / s

of thousands of small businesses last e g year. 13 “They’re helping small busi - a m I

nesses, not just in the [San Francisco] y t t

Bay area but around the country and e G /

around the world,” Eshoo says. P F

Detractors, however, see a monop - A oly with the power and incentive to Keeping an Eye on Google stifle competition. As evidence, they note that at least 65 percent of all online Jeff Smith of Scoops2us, a group that tries to raise awareness of Goggle’s searches in the United States are con - business practices in partnership with the Consumer Watchdog Privacy Project, hands out ice cream sandwiches in Washington, D.C., on Sept. ducted on Google (the figure rises to 21, 2011, ahead of testimony by Google Executive Chairman Eric Schmidt about 70 percent if smaller search en - before the Senate Committee’s Subcommittee on Antitrust, gines that Google powers are added in), 14 Competition Policy and Consumer Rights (top). Schmidt, preparing to and 90 percent in some countries . testify (bottom), defended the company’s practices, saying that Google’s Google similarly dominates the lucrative philosophy is to “always put consumers first.” Referring to grievances online -advertising business, commanding aired by rivals, he said, “not every website can come out on top.” 79 percent of the U.S. share. 15

www.cqresearcher.com Nov. 11, 2011 957 GOOGLE ’S DOMINANCE

Critics also view some of the com - lead Google’s rankings “even when of promising Internet-related ventures, pany’s tactics as improper. For exam - they’re not the best match.” including the wildly popular video site ple, they allege that Google rigs its Google declined to make any ex - YouTube. It also has mimicked the busi - search algorithms to favor its own ser - ecutives available for comment for this ness models of other successful Inter - vices and content and mimics successful report. net ventures that it didn’t, or couldn’t, Internet ventures to squeeze them out As regulators, lawmakers and tech - buy. For instance, in September, Google of business. “For a growing percentage nologists debate Google’s future, completed its acquisition of Daily Deals, of users, Google is the Internet,” writes here’s a look at some of the key ques - a German-based provider of online dis - Scott Cleland, a business consultant, au - tions they are asking: count coupons that is similar to fast- thor of Search & Destroy: Why You growing , which Google un - Can’t Trust Google Inc. and one of Does Google wield too much con - successfully tried to buy last year. Google Google’s staunchest critics. 16 trol over the Internet? also is testing a new discount coupon But in his Nov. 4 written respons - Purchase a smartphone, * and chances service called “Google Offers.” 20 es to lawmakers, Schmidt rejected the are its default search engine is Google. Some Google-watchers worry that notion that Google is anti-competitive, If its operating system is Android, Google these acquisition practices are designed saying the question of whether Google owns that, too. Android software now to thwart potential competitors. favors its products and services “is commands 40 percent of the wireless John M. Simpson, director of the based on an inaccurate premise.” The marketplace. 18 Privacy Project for Consumer Watch - online search results in question are And that’s not all. More than 95 per - dog, a Los Angeles-based advocacy part of Google’s search service, he cent of mobile Internet searches in the group, notes that the popularity of wrote, and “not some separate ‘Google United States are conducted via AOL’s MapQuest service plummeted product or service’ that can be ‘fa - Google . 19 The company has an ex - after Google introduced its own on - vored.’ ” And rather than undermin - clusive deal with Apple to serve as line maps, which he claims receive ing other businesses, he wrote, “Google the default browser on its popular preferential treatment on its site. Google actually provides free promotion to mil - iPhone and similar arrangements with accomplished this, he says, by giving lions of innovative websites through other manufacturers. And Google’s pend - its maps top billing in searches, even our search results.” 17 ing $12.5 billion acquisition of Motorola when MapQuest was more popular. Yet Google’s reach worries critics. Mobility, a manufacturer of mobile “It’s potentially dangerous and “When they’re operating in that many phones, tablet computers and other elec - troubling to have one profit-making areas, and they have that much mar - tronic devices — announced in August company controlling search that is the ket share, you have some risk — some and under review by the Justice De - gateway to the Internet for most peo - potential — for anticompetitive be - partment — could make it a major play - ple,” he says. havior,” Sen. Mike Lee, R-Utah, a mem - er in the wireless-handset business. Jeffrey Katz, CEO of the online shop - ber of the Senate panel that held the Taken together, Google’s swift ex - ping site Nextag, argues that if Google hearing, told CQ Researcher. pansion into mobile phones is only Google’s power is left unchallenged, “It is beyond serious dispute that one example of how the company has, the company will crowd out smaller Google is dominant in search and paid- in the view of its critics, used its scale competitors — such as his. “We are search advertising” and that it is “ex - and influence to strengthen its grip over pleased to have helped [Google] grow panding into other areas and coming the Internet. But Google’s defenders their business, and we are apprecia - to dominate many of them,” says Tom argue that far from engaging in unfair tive they helped us grow ours,” he told Barnett, a lawyer who headed the Jus - competitive practices, the company is the Senate Judiciary panel in Septem - tice Department’s Antitrust Division dur - merely trying hard to succeed in a ber. “Now, however, they are not in - ing the Bush administration. He now crowded field of technology stalwarts novating, they are copying our busi - represents the online travel site Expe - and upstarts vying for a piece of the ness after we invested hundreds of dia, a Google competitor and mem - burgeoning Internet industry. millions of dollars to perfect it, and ber of the FairSearch Coalition. Since its founding by Page (now they are very politely, and deftly, mov - At the hearing, Schmidt emphasized CEO) and Brin (who directs special ing us aside.” that Google’s philosophy is to “always projects), Google has acquired dozens Katz also said Google increasingly put consumers first.” Referring to griev - answers queries directly, meaning users ances aired by rivals, he said, “not * A smartphone is a cellphone with advanced have no need to click on links to every website can come out on top” features, such as Internet connectivity, video other sites. Google is so central to e - and that some companies demand to recording and digital-music playback. commerce that failure to appear in its

958 CQ Researcher top 10 search results, or at least on its liance under which each company can while social networks and blogs ac - main page, can mark the death knell sell inventory for its partners. 24 count for nearly a fourth of the time for a company, says Stephen Kaufer, Meanwhile, Bing has moved into that Americans spend online. 25 president and CEO of TripAdvisor, a the No. 2 spot among U.S. search en - “You can sometimes draw too much site specializing in hotel reviews. “Their gines just two years after its launch. from sheer market-share numbers,” position in the marketplace obligates Stephen Houck, an antitrust lawyer says Houck. Complaints about Google’s them to play fair,” he says. in New York who represents Google, dominance are “somewhat ironic” be - Google frames the issue very differ - says rivals such as Microsoft engage cause the companies grumbling the ently, however. It sees competitive threats in many of the same competitive prac - most “are getting all this free traffic from a growing assortment of nimble tices as Google. Bing has cut exclu - from Google,” he says. players. In written testimony for the Sen - sive deals with Dell, HP and other ate hearing in September, Google’s computer manufacturers and Microsoft’s Does Google violate antitrust law Schmidt said he views popular sites Xbox gaming system to serve as the through anticompetitive behavior? such as , eBay, Facebook and default browser. It’s not illegal to be a monopoly. even Wal-Mart as forms of search en - Bing is also the exclusive search But it is illegal for a monopoly to run gines that compete directly with Google. provider for Facebook, which presents afoul of antitrust laws intended to pre - In the shopping vent powerful compa - category, “they have nies from leveraging their been extremely suc - size and dominance to cessful,” he empha - gain an unfair advantage. sized. “EBay handled When regulators deter - more than two bil - mine a violation of such lion U.S. searches in laws has occurred, they the third quarter of can force a company to 2010, and Amazon sell off divisions or stop t t a

saw 847 million l it from entering lines of P

searches during the r business where it already e c

same period, while n exerts too much control. e p

Google handled S Google says none of / s

only 226 million e its actions come close to g product searches dur - a meeting that legal thresh - m I

ing that quarter,” he y old. At the September t t

wrote. Put another e Senate hearing, Google’s G way, “Among these Yelp, an online restaurant-review site, tangled with Google after Schmidt said he was “not three companies, complaining the giant search-engine company was using Yelp’s reviews aware of any unneces - eBay had 65 percent without permission. In September, Google purchased Zagat, sary, or strange, boosts the prestigious restaurant guide, arming itself with of product searches content that directly competes with Yelp. or biases” that favor his for the period while company’s content and Google had just seven percent.” 21 a substantial competitive threat to products on its search engine. And he While Microsoft’s Bing and Yahoo! Google, he and other Google sup - insisted that Google already has made have struggled in recent years, they’ve porters point out. In March 2010, the changes in response to anticompeti - also shown signs of renewed vigor. On popular social-media site achieved a tive concerns. Last year alone, his Oct. 3, Yahoo! entered into an agree - milestone when its traffic surpassed company made more than 500 revi - ment with ABC News for an online - Google’s for the first time. Increasing - sions to its search algorithms in an ef - news alliance that will deliver content ly, many consumers are turning to Face - fort to improve results, he said. The to more than 100 million people in the , and other online desti - “ultimate correction” for any wrong - United States each month. 22 Days later, nations to search for recommendations doing “is how consumers behave,” he Yahoo!’s stock price jumped 10 per - from friends about , movies said, explaining that Internet users cent following reports that Microsoft and nightspots. According to Nielsen’s would go elsewhere if Google loses migh t bid for the company. 23 latest “Social Media” report, “Americans their trust. On. Nov. 8, Microsoft, AOL and spend more time on Facebook than But detractors claim to have solid Yahoo! entered into an advertising al - they do on any other U.S. website,” evidence of legal violations. Among

www.cqresearcher.com Nov. 11, 2011 959 GOOGLE ’S DOMINANCE

Kaufer says Google stopped using Google Rides Growth Wave TripAdvisor’s material without permis - Google’s revenue nearly tripled between 2006 and 2010, to more sion only after he complained to the than $29 billion, while net income rose from about $3 billion to Justice Department earlier this year as the agency reviewed Google’s acqui - more than $8.5 billion. Along with its search engine and advertising sition of ITA Software, a company that business, Google’s Android mobile software and its video-sharing specializes in airline-ticketing software. site YouTube have helped spur the company’s growth. Kaufer says he wonders how Google treats smaller firms, given that, in his Revenue and Net Income, 2006-2010 view, it was willing to play hardball (in $ billions) with a relatively sizable operation such $30 as TripAdvisor that can “make some 25 noise” in Washington. 20 But others dismiss charges that Google 15 has engaged in unfair business prac - 10 tices. “You can’t infer that there’s a prob - 5 lem from the fact that Google is large,” 0 says Geoffrey Manne, a professor at 2006 2007 2008 2009 2010 Lewis and Clark Law School, in Portland,

Source: Google Inc. Form 10-K, U.S. Securities and Exchange Revenue Ore., and co-author of academic papers Commission, December 2010, investor.google.com/documents/ Net Income and a book chapter defending Google 20101231_google_10K.html on antitrust issues. “ ‘Big is bad’ is not an acceptable antitrust analysis anymore,” their accusations: Google favors its own the site says. It emphasizes that most says Manne, who runs a think tank called offerings on its site, intimidates com - large advertisers run spots “in lots of the International Center for Law & Eco - petitors and manipulates search-en - different places” and that “Google is nomics that promotes regulations en - gine algorithms and advertising rates only responsible for about 3% of all couraging competition and innovation, to undermine rivals. ad revenue.” 26 and that receives funding from Google. Barnett of the FairSearch Coalition But Barnett says that at a minimum, Houck, the antitrust lawyer, who asserts that Google prominently fea - he wants regulators to block the com - served as the lead trial counsel for 20 tures links to proprietary content in pany from displaying “deceptive” links state plaintiffs in the federal govern - its search results that create a “false and from repurposing content from ment’s lawsuit against Microsoft, agrees. expectation” because the links are not other sites without permission. He also “Coming from my background on the labeled as sponsored ads. “That en - wants Google barred from what he Microsoft case, this is not the kind of ables Google to steer users to its other says is unfair manipulation of com - evidence that really leads one to be - products and services,” such as online petitors’ search results or ad rates. lieve that there’s a strong antitrust case maps, and Google Places, TripAdvisor CEO Kaufer contends out there,” he says. its pages promoting small businesses, that he has been the target of abusive Houck says antitrust law focuses on contends Barnett. behavior by Google. Similar to Yelp’s market power — particularly the dura - Barnett and the FairSearch Coali - complaint, he accuses the company of bility of a dominant company’s influ - tion also claim Google manipulates its using reviews from his site without au - ence. Google lacks market power, he advertising policies to force compet - thorization. When confronted, he says, argues, because it cannot insulate itself ing sites to pay rates higher than those Google officials said he could remove from competition and consumers can charged to comparable sites that don’t TripAdvisor from the search engine to easily switch to competitors. While ri - pose a threat. end the practice — an option he dis - vals may dislike some steps Google has Asked to comment, a Google misses as unfair. taken to improve its search engine, “it spokesman pointed to a company web - “I blew a gasket,” Kaufer recalls. “I don’t hasn’t done what it’s done to try to fore - site about the FTC investigation. “We view what they did to TripAdvisor as close competition,” he contends. rank search results to deliver the best a minor infraction. I view it as blatant Bert Foer, president of the American answers to users, and that is the only stealing — unauthorized use of some - Antitrust Institute, a think tank and ad - consideration — not political view - thing that took me a decade to cre - vocacy group, says Google should at - points, and not advertising dollars,” ate — in order to compete with me.” tract rigorous oversight from policy -

960 CQ Researcher makers. “Google is such a new and “I think there may be some fundamen - unique phenomenon that it definitely Foreign Markets Boost tal conflict of interest when you start to needs to be looked at and monitored,” Google’s Growth provide your own content and you run he says. But he thinks regulators and a search engine,” he argues. Google, he industry rivals face several hurdles in More than half of Google’s says, is “pretty hard to escape” these pursuing antitrust enforcement action $29 billion in revenue in 2010 days when people go online. against the company. For starters, he says, came from abroad. Increased The solution, Simpson says, would be any restriction on Google’s ability to dis - acceptance of the company’s to force Google to divest some holdings. play search results or other content advertising programs and “Smart regulations make for level mar - would raise First Amendment issues. development of localized versions kets, and level playing fields and can ac - And it won’t be easy for Google’s tually enhance a fair marketplace,” Simp - of its products have spurred the accusers to convince federal officials son argues. “If you don’t have regulation, that the company has violated antitrust company’s overseas expansion. things sometimes get completely out of law. “There’s a whole variety of pro - whack and you have monopolists emerg - cedural obstacles that have been em - Google Revenue by ing that wield monopoly power.” placed by the courts that make suc - Country, 2010 The concept is loosely modeled on cessful antitrust enforcement less the Justice Department’s historic deci - probable,” he observes. sion in 1982 to break up AT&T into For example, aggrieved parties separate Bell telephone companies after must demonstrate that the alleged abuse determining AT&T was too large and United Rest of is covered by antitrust law and that States world powerful in the phone business. their complaints merit attention be - But Google’s proponents dismiss the 41% cause their businesses were directly 48% idea outright. “Breaking them up along harmed. “I think they’re probably those lines would just be stupid,” ar - going to tread carefully,” Foer predicts 11% gues Manne, the Lewis and Clark pro - of antitrust enforcers. fessor. “There are efficiencies to large scale” such as lower operational costs Should the federal government that would be lost if Google were re - break Google into separate com - quired to sell some of its assets, he Source: Google Inc. Form 10-K, U.S. panies? Securities and Exchange Commission, contends. That could result in “addi - As Google continues to expand and December 2010, investor.google.com/ tional costs on Google [and] on con - evolve, chatter is increasing about the pos - documents/20101231_google_10K.html sumers, because we would be losing sibility of federal regulators forcing the the benefits of that efficiency.” company to divest some assets — if not line maps, comparison shopping, restau - Even if divestitures were required, immediately, then perhaps in coming years. rant reviews and so on — might be Google might still be able to offer vari - One of the strictest views is held by Con - spun off. Even YouTube, which mostly ations of the services or businesses it sumer Watchdog’s Simpson, who argues features user-generated content, could sells off by entering into contracts with that Google should be broken up into be subject to divestiture if Google suc - third parties, Manne says. “Anything separate content and distribution com - ceeds in its effort to purchase , a you can do by integration [of com - panies. He contends that is the only way destination for premium television shows panies] you can do by contract,” he to ensure that Google doesn’t favor its and films, Simpson adds. 27 says. “Therefore, forcing them to break own products on its search engine. But “Search, in some sense, is like a pub - up shouldn’t be presumed to cause others warn that splitting up Google lic utility,” Simpson says. “It is the way any improvement.” amounts to overreacting to worries about that everyone gets onto the Internet. [The Houck, the antitrust attorney, draws anticompetitive behavior and ultimately search industry] needs to be regulated a distinction between the sort of “ver - could cause more harm than good. and reviewed in the context of the pub - tical integration” that Google has en - If it were split apart, Google would lic utility that it has become.” gaged in — that is, its expansion into possibly revert back to its original mis - Simpson claims Google uses its prof - new lines of business beyond its main - sion of serving as a tool for online its from its core search and advertising stays of Internet search and advertising searches, while its vast portfolio of an - businesses to “subsidize” its entry into — and “horizontal integration,” which cillary services — Gmail, its new social- other enterprises that compete with firms involves the combination of similar com - media site Google+, airline ticketing, on - that rely on Google to reach customers. panies (say, if Google were to merge

www.cqresearcher.com Nov. 11, 2011 961 GOOGLE ’S DOMINANCE

with Bing). “Most antitrust authorities are prietary content, “the more opportu - Weinberg in Taking on the Trust. 31 worried about horizontal mergers” nities there are for manipulation and Struggling rivals became easy prey. rather than vertical ones, he says. for problems.” As a result, he says, Over the next two decades, Standard A breakup of Google would require forcing Google to make changes to Oil swallowed independent producers substantial regulatory action by the gov - its business practices “should not be and refiners across the country and by ernment — something that Google’s off the table if you find that there are 1900 controlled more than 90 percent defenders warn could have unintended serious violations.” of refined oil in the United States . 32 repercussions. “Ulti - Passage of the Sher - mately, regulation of man Antitrust Act in 1890, Internet search would the nation’s first antitrust result in a significant law, forced Standard Oil expenditure of gov - to alter some practices. ernment resources But the law was too vague and a decline of to halt the expansion of quality and innova - Rockefeller’s empire with - n a

tion in search,” v i out backing from the l l

Susan Creighton, a u

S courts. Moreover, Con -

n

former senior FTC i

t gress set aside only a small s

official who testified u J amount of funding for Jus - / s

at the Senate hear - e tice Department enforce - g ing on behalf of a ment of the act, Wein - m I

33

Google, predicted in y berg noted . t 28 t written testimony. e Standard Oil’s reign G She represented Mi - Stanford computer science graduate students Larry Page and Sergey Brin eventually ended. On May crosoft rival Netscape rented this garage in Menlo Park, Calif., for $1,700 a month in 1998 to 15, 1911, the U.S. Supreme during the historic set up Google, which they said would “organize the world’s information Court ruled that the giant and make it universally accessible and useful.” The company, which antitrust case against firm had overstepped the 29 moved out of the garage five months later, purchased the 1,900-square- the software giant . foot house in 2006 to preserve a symbol of Silicon Valley antitrust law and broke it Adam Thierer, se - entrepreneurship. The house is used to accommodate company guests. into 34 companies. The nior research fellow historic decision resulted at George Mason University’s Technol - in the creation of brand names that still ogy Policy Program, concurred. Dis - BACKGROUND exist, including Amoco, Chevron, Exxon cussing the prospect of government reg - and Mobil. It also ushered in a new era ulation of Google+, Facebook, LinkedIn of antitrust enforcement. 34 and Twitter, he wrote that “treating these digital services like the equivalent of a Breaking Standard Oil local sewage company would be a dis - Gobbling Up Competition aster for consumers” because “public ebates over corporate domi - utility regulation is the arch-enemy of D nance have deep historical roots. hen founders Page and Brin first innovation and competition.” 30 In the 19th century, concern arose W began tinkering with their Inter - Even some of Google’s fiercest crit - about monopolies eager to abuse their net search engine in 1996, they called ics caution that talk of breaking up marketplace power. By the 1870s, it BackRub. A year later, they decided the company may be premature. “I Standard Oil was rapidly evolving into the site needed a new name . 35 don’t think anything should be off the a corporate monolith as its chairman, “After some brainstorming, they go table,” says Barnett of the FairSearch the legendary tycoon John D. Rocke - with Google — a play on the word Coalition, “but I think it is too early feller, leveraged his company’s size ‘googol,’ a mathematical term for the to make a judgment.” and influence to his advantage. number represented by the numeral 1 Foer of the American Antitrust In - Rockefeller pressured the railroad in - followed by 100 zeros,” the company stitute says an AT&T-style breakup is dustry into lowering shipping rates and says in its online history. “The use of a long shot — at least now. But he threatened to send competitors into “fi - the term reflects their mission to or - cautions that as Google continues to nancial ruin” if they refused to sell to ganize a seemingly infinite amount of acquire companies and add more pro - Standard Oil, wrote journalist Steve Continued on p. 964

962 CQ Researcher Chronology

into allegations IBM maintains an after Justice Department raises 1890-1970s illegal monopoly over mainframe antitrust concerns. . . . Google in - New laws usher in era of anti- computers. vests $500 million in Clearwire, a trust enforcement. provider of super-fast, 4G wireless • voice and Internet service. 1890 Congress enacts the Sherman Antitrust 2009 Act, the nation’s first sweeping 1990s-2002 Microsoft introduces the search en - antitrust law. Microsoft faces investigations gine Bing as a competitor to Google. as Internet blossoms. 1911 • U.S. Supreme Court forces the 1994 breakup of Standard Oil in first Justice Department settles antitrust significant victory for trust busters suit with Microsoft. 2010-Present over powerful monopolies. Google continues its expansion 1998 despite pressure from Washing - 1914 Google founded by Stanford Uni - ton, European Union. The Clayton Act clarifies restricted versity computer science graduate behavior under the Sherman Act students Larry Page and Sergey 2010 and bars transactions that could Brin in California garage. Google launches Google TV, which lessen competition. . . . Congress melds Web and channel surfing. . . . creates the Federal Trade Commis - 2001 European Union begins formal anti- sion, charged with monitoring busi - Justice Department settles a second trust investigation of Google. nesses and protecting consumers. antitrust lawsuit against Microsoft. 2011 1945 • FTC settlement with Google re - Aluminum Company of America quires company to offer improved found in violation of antitrust law privacy protections. . . . Federal by U.S. Appeals Court but avoids 2005-2009 judge bars Google from selling divestiture. Google rises from obscure start- digital copies of millions of books up to global Internet superpower. it has scanned. . . . Justice Depart - 1976 ment approves Google’s $676 mil - Hart-Scott-Rodino Antitrust Improve - 2005 lion acquisition of ITA Software, ments Act establishes merger-review Google purchases tech start-up an airline-ticketing company, with guidelines for the FTC, Justice De - Android, a designer of software conditions. . . . FTC begins com - partment. for mobile devices. prehensive antitrust investigation of Google’s business practices. . . . • 2006 Google introduces Google+, a new Google purchases video-sharing social-media site. . . . Google an - site YouTube for $1.65 billion. nounces $12.5 billion acquisition 1980s Communica - of Motorola Mobility, a major man - tions, computer giants face 2007 ufacturer of wireless handsets and antitrust scrutiny. Google acquires DoubleClick for other electronic devices. . . . Google $3.1 billion; the purchase solidifies pays $500 million Justice Depart - 1982 Google’s dominance over Internet ment fine for permitting Canadian. In a historic settlement, the Justice advertising. pharmacies to advertise to U.S. con - Department forces AT&T to divest sumers via its site. . . . Google adds its local phone companies. 2008 Zagat, the popular restaurant-review Yahoo! rebuffs Microsoft’s purchase guide, to its portfolio. . . . Senate 1982 bid. . . . Google backs out of deal Judiciary antitrust subcommittee Justice Department drops probe that would have let Yahoo! harness holds high-profile hearing on spanning more than two decades Google’s ad-placement technology Google’s business practices.

www.cqresearcher.com Nov. 11, 2011 963 GOOGLE ’S DOMINANCE

Great Wall of Censorship Surrounds Google in China “No one in China ever sees an uncensored version of Google search results.”

he world’s most populous nation represents a vast, un - Google discovered scams and malware * designed to tapped marketplace for Google. But China also sym - infiltrate the accounts of Gmail users in the United States, Eu - T bolizes an enormous challenge for Google: exporting a rope and China sympathetic to Chinese dissidents. search engine founded on Western principles of openness to “These attacks and the surveillance they have uncovered — a regime that routinely censors free expression and dissent. combined with the attempts over the past year to further limit Google launched a Chinese-language version of its site in free speech on the Web — have led us to conclude that we 2002 and added in 2004. But as the site’s pop - should review the feasibility of our business operations in China,” ularity grew, Chinese officials increasingly demanded that Google David Drummond, Google senior vice president and chief legal censor material they said would inflame anti-government officer, said in a blog post. “We have decided we are no longer sentiment. 1 willing to continue censoring our results on Google.cn.” 4 “Senior Google executives believed they had to make a choice For Google, the hacking signified that the company’s “China between denying Chinese citizens some political searches and problem” — as author Steven Levy describes it — could no denying them all searches,” journalist Ken Auletta recounted in longer be contained. “After weeks of struggling with the issue, Googled, the End of the World as We Know It. In response, the Google’s Executive Committee” — including Executive Chairman company in 2006 set up a separate website, www.google.cn, that Eric Schmidt and Google co-founders Larry Page and Sergey Brin offered “politically sanitized searches in China,” Auletta wrote. 2 — “finally agreed on the most significant and embarrassing re - Topics such as independence for and the 1989 treat in the company’s history,” Levy writes in his book, In the Tiananmen Square massacre were off-limits, while a search for . “On Jan. 12, 2010, they changed course in the country with the outlawed spiritual movement led Web users the world’s biggest Internet user base, announcing an effective to content condemning the group. 3 pullout of their search engine from .” 5 In January 2010, Google revealed that its servers had been Google now tries to circumvent communist Chinese censors hacked from China in a sophisticated operation and that the Google Gmail accounts of Chinese human-rights activists were targeted — with at least two such accounts accessed. The hack - * Phishing is a form of email fraud in which a scammer tricks some - ers reportedly also breached the servers of at least 20 other one into revealing confidential information. Malware is malicious soft - large U.S. companies. In the course of investigating the attacks, ware that can infect a computer and steal sensitive data.

Continued from p. 962 and Page had a very different approach surements to see what it hit,” he writes. information on the Web.” In 1998, Sun to their Internet business compared with “And sometimes it did try ideas that Microsystems co-founder Andy Bech - other technology entrepreneurs. “They seemed ill-suited or just plain old.” 39 tolsheim gave the budding Internet en - rejected the conventional wisdom em - Levy recounts a discussion he had trepreneurs $100,000 as seed money braced by AOL and Yahoo and Mi - with , vice president of for their planned start-up venture. 36 crosoft’s MSN to create portals and try Local, Maps and Location Services at Google quickly created buzz in tech - to keep users in their walled gardens Google, about the premium that the nology circles. Page and Brin set as its with an array of content,” he writes. company’s founders place on noncon - core mission “to organize the world’s “They believed the right approach was formist thinking. “ ‘It’s really ingrained information and make it universally ac - to get users out of Google and to their in their personalities to ask their own cessible and useful.” Just months after search destinations quickly.” Another questions, do their own things. To dis - its launch, PC Magazine reported that distinguishing feature was that Google respect authority,’ she said. ‘Do some - Google “has an uncanny knack for re - kept its site uncluttered, especially with thing because it makes sense, not be - turning extremely relevant results.” 37 It the pop-up and banner ads that were cause some authority figure told you wasn’t long before the new search en - prevalent on other sites. 38 to do it.’ ” 40 gine with the funny name started to Also different about Google, author Another key to Google’s success has squeeze out less nimble competitors Steven Levy emphasizes in his book, been its aggressive approach to snap - such as AOL and AltaVista. In the Plex , is that the company sees ping up promising Internet ventures. In his book Googled, the End of the value in pursuing risky ideas. “Google Last year, the company completed 48 World as We Know It , journalist Ken spun out projects like buckshot, blast - acquisitions. 41 So far this year it has Auletta writes that from the start, Brin ing a spray and using tools and mea - completed 57. 42 And in its latest an -

964 CQ Researcher by automatically rerouting But he also emphasizes that n i J

users of Google.cn to Google. the arrangement has not ended u i

com/hk, a site in , L the censorship. “The Chinese / s

a Chinese territory that op - e government itself censors and g

erates with significant au - a often blocks access to the Hong m I

tonomy. “This redirect, which Kong-based y t offers unfiltered search in t version of Google,” he writes. e G

simplified Chinese, has been / “So no one in China ever sees P

working well for our users F an uncensored version of Google A 8 and for Google,” Drum - A Chinese flag flies outside the headquarters search results.” mond wrote in a June 2010 in on Jan. 14, 2010. Shortly before, Google, which follow-up blog post. But he faced censorship demands from Chinese authorities, — David Hatch also cautioned that Chinese announced it would shift its Chinese-language website to officials “find the redirect Hong Kong, a Chinese territory that operates 1 Ken Auletta, Googled, The End of unacceptable” and might with significant autonomy. the World as We Know It (2010), p. 134. refuse to renew the compa - 2 Ibid. 6 ny’s license. 3 For background, see “Google Censors Itself for China,” BBC News, Jan. 25 , In a sign that Beijing is accepting Google’s “workaround” 2006, http://news.bbc.co.uk/2/hi/technology/4645596.stm. solution, mainland officials renewed Google’s Internet license 4 David Drummond, “A New Approach to China,” Google blog, Jan. 12, 2010, for a year days after Drummond’s post, and this September http://googleblog .blogspot.com/2010/01/new-approach-to-china.html 5 Steven Levy, In the Plex (2011), pp. 267-268. they did so again. 7 6 David Drummond, “An Update on China,” Google blog, June 28, 2010, Siva Vaidhyanatahn, a media-studies and law professor at the http://googleblog.blogspot.com/2010/06/update-on-china.html. University of Virginia, contends in his book, The of 7 Loretta Chao, “Chinese Regulators Renew Key License For Google,” The Everything , that Google’s retreat from China gave the government Wall Street Journal , Sept. 7, 2011, http://online.wsj.com/article/SB1000142405 3111904836104576556203077777200.html. there exactly what it wanted: “to be rid of a troublesome com - 8 Siva Vaidhyanatahn, The Googlization of Everything (And Why We Should pany that was never comfortable operating under .” Worry) (2011), pp. 117-121.

nual filing with the Securities and Ex - Google’s perch as the leader in on - The proposed Motorola Mobility deal change Commission, Google said the line advertising. 46 is under review by the Justice Depart - buying spree would continue. 43 In April, the Justice Department ap - ment’s Antitrust Division. “Emerging start-ups may be able to proved another major Google acquisi - innovate and provide products and ser - tion: its $676 million purchase of ITA vices faster than we can,” Google said. Software, which specializes in online Antitrust Action “If our competitors are more success - airline ticketing, over the opposition of ful than we are in developing com - established online travel websites, such he Sherman Act, named for its main pelling products or in attracting and as Expedia and Travelocity. 47 Justice T author, Republican Sen. John Sher - retaining users, advertisers, and con - officials imposed several conditions in man of Ohio, could play a central role tent providers, our revenues and growth an effort to assuage the concerns of in shaping Google’s fate. “As the U.S. rates could decline.” 44 competitors. and global markets have grown tremen - The company’s $1.65 billion pur - Google’s August announcement that dously since their inception, the Sher - chase in 2006 of YouTube has dri - it plans to acquire Motorola Mobility, a man Act is ever more relevant and crit - ven considerable traffic to Google, major player in the wireless handset ical in our daily life,” the Justice which is partnering with several media business, drew attention to its growing Department said last year in a blog post companies to offer roughly 100 free, emphasis on mobile communications . 48 commemorating the 120th anniversary ad-supported “channels” over the Google already has a major presence of the act. video-sharing site . 45 Acquisition of on smartphones through its Android “That means when we pay phone DoubleClick and AdMob in 2007 and software and its stake in Clearwire, a bills, buy flat screen TVs or frozen 2010, respectively, helped solidify provider of high-speed wireless service. packaged goods, the Sherman Act plays

www.cqresearcher.com Nov. 11, 2011 965 GOOGLE ’S DOMINANCE

Google’s Privacy Policies Spark Intense Criticism “What you do on the Internet should be under your control.”

hen Google Chairman Eric Schmidt arrived on Capitol Lawmakers from both major parties were particularly incensed Hill in late September to testify before a Senate panel in February after news outlets reported that Google collected W examining Google’s market dominance, mimes dressed the Social Security numbers of children participating in its an - in track suits were on hand to “track” his movements. Dispatched nual doodling contest, in which youngsters compete to redesign by the anti-Google group Consumer Watchdog, the mimes fol - Google’s homepage logo. The Internet giant quickly abandoned lowed Schmidt around the Capitol to call attention to what they the data-collection practice following public outrage. 6 claim is Google’s policy of tracking the keystrokes, clicks and That episode, along with Google’s agreement with the FTC other online activities of Google’s billion users worldwide. 1 over Buzz, suggest to some that the company is willing to bend, Google has faced a steady stream of criticism for privacy but John M. Simpson, director of Consumer Watchdog’s Privacy policies that some experts call short-sighted and invasive. Helping Project, remains skeptical. “ ‘Don’t ask permission, you can al - to galvanize the critics are Schmidt’s own words, uttered in 2010, ways ask forgiveness,’ ” seems to be Google’s guiding principle when he said Google’s policy is to “get right up to the creepy on privacy, he says. “What you do on the Internet — where you line, and not cross it.” 2 go, and that sort of thing — that information should be under Google drew flak last year when it introduced the social- your control so that if you don’t want it shared, it shouldn’t be.” media site Buzz as an enhancement to its Gmail service and ran Many other websites also monitor online behavior by using into blistering criticism that it was collecting and disseminating so-called tracking “cookies” and by targeting ads to Web users personal information about its users. The Federal Trade Com - based on their Internet activity. But Consumer Watchdog fo - mission charged that many Gmail users were unable to decline cuses on Google in part because of its market dominance. “If to join Buzz, or to leave it. What’s more, the FTC said, for those they can be persuaded to adopt some better privacy standards, who joined, “the controls for limiting the sharing of their per - there is a good chance that they will set standards for the rest sonal information were confusing and difficult to find.” In re - of the Internet companies,” Simpson says. sponse, Google signed a consent decree with the FTC in March In The Googlization of Everything , author Siva Vaidhyanathan, that bars it from making “future privacy misrepresentations,” re - a media-studies and law professor at the University of Virginia, quires it to maintain a comprehensive privacy program and sub - wrote that the fine print of the company’s privacy policy makes jects it to independent privacy audits for the next 20 years. 3 it clear “that Google retains the right to make significant deci - The storm over Buzz was one of a number of controver - sions about our data without regard for our interests.” While sies facing Google over its privacy policies. The company ad - Google states that it will not share information with other com - mitted last year that its fleet of camera-equipped vehicles gath - panies without a user’s consent, “it asserts the right to provide ering images for its online maps mistakenly collected unsecure such information to law enforcement or government agencies data from wireless networks, including e-mail addresses and fi - as it sees fit,” Vaidhyanathan wrote. 7 nancial information. 4 Google’s Street View technology, mean - But Google has defended its practices while also acknowledg - while, sometimes inadvertently captures sensitive images, such ing their sensitive nature. “In all cases it’s a trade-off . . . , where as a Miami woman standing naked outside her front door. 5 you will give up some of your privacy in order to gain some a role in preventing companies from Another law, the Hart-Scott-Rodino company’s local phone subsidiaries, illegally monopolizing and colluding Antitrust Improvements Act of 1976, known as the Baby Bells, so AT&T and artificially setting prices,” the de - empowered both the FTC and the Jus - could focus on long distance. But as partment said. 49 tice Department, which share jurisdic - the competitive landscape changed, Two related laws, both enacted in tion over antitrust matters, to apply AT&T largely reconstituted itself, com - 1914, fortified antitrust protections. antitrust laws to mergers requiring bining with SBC Communications in The Clayton Act helped clarify the types government approval. 2005 and BellSouth in 2006. It now of anti-competitive practices prohibit - Still, Washington, has had mixed hopes to acquire T-Mobile, the na - ed under the Sherman Act and barred success over the years in efforts to tion’s fourth-largest wireless telecom mergers and acquisitions that could corral major communications compa - carrier, in a deal under review by Jus - lessen competition, while the Federal nies. Prompted by concerns that AT&T tice officials. Trade Commission Act established the was too dominant in the phone ser - But the antitrust action that casts consumer protection agency to guard vice business, the Justice Department the longest shadow over Google is the against unfair business practices. 50 in 1982 forced the divestiture of the protracted probe of Microsoft that

966 CQ Researcher functionality, and so we real - which automatically built a pub - ly need to make those trade- lic social network using Gmail offs really clear to people, users’ formerly private contact d n

what information we are o lists, Google has designed a so - m

using and what’s the benefit l cial network with privacy as its e H

to them, and then ultimately building block,” Forbes wrote in e

leave it to user choice,” Google n July of the company’s new Face - n 10 Vice President Marissa Mayer A book competitor, Google+. told PBS host Charlie Rose Siva Vaidhyanathan, a media-studies and law professor at in 2009. 8 the University of Virginia, wrote that the fine print of — David Hatch Google’s privacy policy makes it clear that the company Responding to pressure “retains the right to make significant decisions” about 1 from U.S. and foreign con - users’ data without regard for their interests. Amir Efrati, “Google Notches One sumer groups and policy - Billion Unique Visitors Per Month,” The Wall Street Journal , June 21, 2011 makers, Google has taken steps to strengthen its privacy safe - http://blogs.wsj.com/digits/2011/06/21/google-notches-one-billion-unique- guards in recent years. In 2009 it instituted a Privacy Dashboard visitors-per-month/. that allows for personalized settings, such as deletion of users’ 2 Derek Thompson, “Google’s CEO: ‘The Laws Are Written by Lobbyists,’ ” The Atlantic , Oct. 1, 2010, www.theatlantic.com/technology/archive/2010/10/ Web history and management of their “online reputation,” along -ceo-the-laws-are-written-by-lobbyists/63908/#. with the ability to opt out of ads targeted to users’ online be - 3 “FTC Charges Deceptive Privacy Practices in Google’s Rollout of Its Buzz So - havior. Google also is among Internet companies embracing cial Network,” press release, March 30, 2011, www.ftc.gov/opa/2011/03/google.shtm. the concept of so-called privacy-by-design, in which privacy 4 Steven Levy, In the Plex: How Google Thinks, Works and Shapes Our Lives (2011), pp. 342-343. safeguards are conceived for new products from the start rather 5 “ Camera Captures Naked Miami Woman On Her Front than added late in the process as an afterthought. That ensures Doorstep,” Sept. 9, 2011, The Smoking Gun , www.thesmokinggun.com/ that privacy protections are central to the design of a new buster/google/google-street-view-naked-woman-094672. product or application. 9 6 “Markey, Barton Respond to News about Doodle 4 Google,” press release, Feb. 24, 2011, http://markey.house.gov/index.php?option=com_content& “While we’ve made some mistakes, if you look at our over - task=view&id=4236&Itemid=141. all track record it’s good,” Google spokesman Chris Gaither 7 Siva Vaidhyanathan The Googlization of Everything (And Why We Should contends. He says the company is redoubling its efforts “to Worry) (2011), p. 85. build privacy and security controls” into products and tries to 8 Quoted in ibid. , p. 87. be “as transparent as possible” about data collection. Last Oc - 9 For background on privacy by design, see FTC Chairman Jon Leibowitz’s speech, “Online and Overexposed: Consumer Privacy, the FTC, and the Rise tober, longtime Google engineer Alma Whitten was appointed of the Cyberazzi,” Oct. 11, 2011, www.ftc.gov/speeches/leibowitz/111011press director of privacy for product management and engineering. clubremarks.pdf. As a result, some industry watchers are taking notice — and 10 Kashmir Hill, “Why ‘Privacy By Design’ Is The New Corporate Hotness,” Forbes , July 28, 2011, www.forbes.com/sites/kashmirhill/2011/07/28/why-privacy - applauding the changes. “After flunking Privacy 101 with Buzz, by-design-is-the-new-corporate-hotness/. ended with a 2002 settlement with the ments designed to undercut compe - tice Department that imposed extensive Justice Department. tition. 51 restrictions on its business practices. 53 In the late 1990s, Justice officials began Critics of Google see striking par - a second antitrust review that was prompt - allels with the most recent probe of Testing Antitrust ed in part by concerns that Microsoft Microsoft. Microsoft used its market Boundaries was trying to prevent a rival, Netscape, power with the Windows operating from offering a competing Web brows - system to block competition to its In - icrosoft has been the target of er. The Justice Department collected ternet browser and other services, Bar - M two antitrust investigations more than 3 million documents for its nett of the FairSearch Coalition says. over the past two decades. In 1994, case against Microsoft, and in 2000 a “Google, in an analogous way, has got the Justice Department reached a con - federal judge ordered the company’s a dominant position in search and sent decree with the software com - breakup. 52 Microsoft ultimately was search advertising and is being ac - pany that barred it from engaging in spared that fate in a 2001 consent de - cused of using that dominance im - unfair contracts and license agree - cree (finalized a year later) with the Jus - properly to expand into other areas,”

www.cqresearcher.com Nov. 11, 2011 967 GOOGLE ’S DOMINANCE

he says. “They are identifying poten - “I love Google,” Sen. Al Franken, D- tial threats to that dominance and tak - Minn., the former “Saturday Night Live” ing them out one by one,” as Microsoft CURRENT comic, declared before launching into did, he says. an extended critique of the company. But supporters of Google insist that SITUATION “As you get bigger and bigger and big - it has not acted improperly and that ger, I worry about what that means for its expansion into new business areas the next Larry Page or Sergey Brin who is necessary for the company to stay Growing Concern in are struggling to build the next innov - competitive. And they point to what Washington ative product in a garage.” He added, they see as key differences between “I am admittedly skeptical of big com - the Google and Microsoft cases. irst, some good news for Google: panies that simultaneously control both Houck, the lawyer who represent - F The one-time darling of Silicon information and the distribution chan - ed state plaintiffs against Microsoft, says Valley still has plenty of powerful friends nels of that information.” Google is less of a threat to its com - in Washington. The bad news: Its sup - Democratic Sen. Richard Blumenthal petitors than was Microsoft. “Google’s port in political circles is steadily erod - of Connecticut also had strong words. market share, for the most part, is not ing, particularly among Democrats, the “Google is really a behemoth in the nearly as high as Microsoft’s and has - party with which Google has made search market these days,” he observed, n’t endured like Microsoft’s has for the most inroads. noting that competitor Bing is losing decades,” he says. For Google, the sudden consterna - $2 billion a year. It’s “the engine that The main question for antitrust tion from Washington threatens to un - can’t be stopped.” lawyers in the Google case is whether ravel the goodwill it has forged with Sen. Herb Kohl, D-Wis., chairman the company is “insulated from com - President Obama and his administration. of the Subcommittee on Antitrust, Com - petition,” says Houck, who later acted During the 2008 presidential race, Obama petition Policy and Consumer Rights, as enforcement counsel ensuring that included the Googleplex among his cam - which convened the hearing, was equal - Microsoft satisfied the requirements paign stops. Schmidt stumped for Obama ly worried about Google’s size. “Google under its consent decree. “Microsoft and served as an informal economic ad - has grown ever more dominant and largely was,” he says, explaining that viser to his campaign and is now a powerful, and it appears its mission the company tied its browser to its member of the president’s Council of may have changed,” he said in open - Windows operating software so that Advisers on Science and Technology. 54 ing remarks. consumers could not switch browsers A handful of Google executives left the Several Republicans also weighed or access alternatives. Microsoft also company for the White House, includ - in with concerns, including Utah’s Lee, threatened to retaliate against some ing Sonal Shah, a global development who cited data suggesting that Google large companies, including Apple and specialist who worked on Obama’s tran - may be manipulating its search results IBM, if they offered competing browsers sition team and now heads the White to favor one of its newer offerings, to customers, he says. “I just haven’t House Office of Social Innovation and comparison-shopping selections — an seen anything tantamount to that Civic Participation. 55 assertion that Google’s Schmidt strong - [which] Google’s done,” he says. “Most Google employees and the com - ly denied. “There’s a difference be - of what people are complaining about pany’s political action committee gave tween sites that do product compari - are things that Google has done to try generously to the Obama campaign son and sites that offer products to improve their product.” and have a track record of favoring themselves,” he said at the hearing. In his September Senate testimony, Democrats over Republicans in political “Google product search is about get - CEO Schmidt said Google has learned donations, often by wide margins. 56 ting you to a product.” He suggested from Microsoft’s experience. “We get The close ties prompted headlines such there may be a “conflation” of these it,” he said. “We get the lessons of our as this one in Fortune two years ago: distinct types of sites in the data Lee corporate predecessors.” “Obama & Google (a love story).” 57 was referencing. Whether history is poised to repeat Now , both the administration and promi - Reflecting the conflicted feelings that itself with the Obama administration’s nent Democratic lawmakers are signal - many lawmakers now have about probe of Google remains to be seen. ing that their friendship has limits. Google, Sen. Charles Grassley, R-Iowa, What is certain is that Google has now The trend was evident during the said he’d heard both “good and bad” joined an elite class of American cor - September Senate hearing when sev - about the company from his con - porate icons in testing the boundaries eral prominent Democrats were blunt stituents. of U.S. antitrust law. in their criticism of the tech icon. Continued on p. 970

968 CQ Researcher At Issue:

Is Gyes oogle too dominant?

JOHN M. SIMPSON ERIC SCHMIDT DIRECTOR , P RIVACY PROJECT , EXECUTIVE CHAIRMAN , G OOGLE INC . CONSUMER WATCHDOG FROM TESTIMONY BEFORE THE SENATE COMMITTEE WRITTEN FOR CQ RESEARCHER , NOVEMBER 2011 ON THE JUDICIARY SUBCOMMITTEE ON ANTITRUST, COMPETITION POLICY, AND CONSUMER RIGHTS, SEPT. 21, 2011 oogle is so pervasive that consumers cannot escape its reach even if they do not use its services. Google’s ne of the main drivers of Google’s constant innovation g ad network puts down tracking cookies and records is the fact that we face an extremely competitive land - consumers’ activities as they surf the Internet. It is o scape in which consumers have a multitude of options Google’s immense database of consumer information, intentions to access information. If we want consumers to keep coming and desires that gives the Internet giant its power. Google ex - back to Google, we have to give them the best possible experi - erts monopoly power over Internet searches, controlling about ence. And that pushes us to keep putting consumers first. 70 percent of the U.S. market. For most Americans — indeed, Google faces competition from numerous sources including for most people in the world — Google is the gateway to the other general search engines (such as Microsoft’s Bing, Yahoo! and Internet. In the mobile market Google’s monopoly power is Blekko); specialized search sites, including travel sites (like Expe - even greater: It controls more than 95 percent of mobile search - dia and Travelocity), restaurant reviews (like Yelp) and shopping es. Android, Google’s smartphone operating system, dominates sites (like Amazon and eBay); social media sites (like Facebook); the mobile sector with 38 percent of the market. Apple’s iPhone and mobile applications beyond count, just to name a few. has 27 percent. For example, let’s say you’re looking for a local restaurant. Google’s dyominance of esearch forces advertisers to use You might searnch on Google for o “local restaurant,” but increas - Google’s advertising products — those that do not will not ingly people are going on to Facebook and Twitter to ask reach their customers. How Google tweaks its proprietary their friends for restaurant recommendations. . . . Consumers search algorithms can ensure a business’s success or doom it have a truly vast array of options — some search and some to failure. Google’s practices determine much of the Internet not — from which to access information. experience for most consumers by determining what they Well-known shopping sites like Amazon, Wal-Mart and eBay view. Google demands openness of others, but when it comes are essentially search engines that focus on product search to its own activities it is a closed black box. and provide customers with an opportunity to buy a good at Other companies find it difficult, if not impossible, to compete the end of their search. . . . The same holds true for popular with Google in offering the products Google provides for “free” travel search sites like Kayak, Priceline and Expedia. Students with the subsidies generated from its monopolistic search revenues. looking for encyclopedia-like entries on different topics often You may think of Google as a technology company. In ac - go directly to sites like Wikipedia and About.com. News seekers tuality Google is an advertising business. Consumers make a can visit the websites of major publications. . . . Faustian bargain, often unknowingly, to provide personal infor - Among major search engines, Microsoft’s Bing has continued mation about their habits, desires and behaviors in return for to gain in popularity, perhaps because it comes pre-installed Google’s services. Google mines these massive digital dossiers as the search default on over 70 percent of new computers and uses the information to sell ads, a lucrative business that sold. Microsoft’s Bing is the exclusive search provider for accounts for 96 percent of its $29 billion annual revenue. Yahoo! and Facebook. . . . In addition to Internet Explorer, People who use Google aren’t its customers. We are the Microsoft has integrated Bing into its popular gaming console, Internet giant’s product. The immense database about us, the . . . . Microsoft’s Bing launched in June 2009 and largely gathered without our informed consent, is used to has grown so rapidly that some commentators have speculated target ads and bring Google billions in advertising profits. that it could overtake Google as early as 2012. The Internet is too important to allow an unregulated And there’s the most popular website on the Internet, by monopolist to dominate it. To ensure that no online company an enormous margin: Facebook. Facebook and similar sites can exercise monopoly power with our data, we must have have extensive search and information functions. . . . And the right to control how data about our online activities is because of its exclusive search arrangement with Microsoft’s used or if it is even gathered. Bing, Facebook and Bing can harness the power of search Strict application of antitrust law will thwart Google’s most fla - algorithms and a customer’s social graph to answer a query. grant anticompetitive practices. Do Not Track Me regulations will This is a tremendous competitive advantage. loosen Google’s powerful grasp on the Internet and give con - Most importantly, all of these options for obtaining informa - sumersn o the true control over their online activity that they deserve. tion can be accessed without ever using Google. www.cqresearcher.com Nov. 11, 2011 969 GOOGLE ’S DOMINANCE

Continued from p. 968 decide whether the company can de - scape on the Internet, document how velop and launch new enterprises with - Google’s role has evolved and recom - Ongoing Investigations out unduly harming competition. mend further action by the agency or Meanwhile, the agency might have Congress. “Some of their reports have rom Washington to Brussels to difficulty defining what constitutes im - had important impacts over the years F Seoul, Google’s business practices proper behavior and enforcing any on legislation that was later passed,” are under investiga - Foer says, noting that the tion by regulators. FTC might choose that At least five states path if unsure whether — California, New to bring a case against York, Ohio, Texas Google or how the courts and Mississippi — are might respond. conducting their Schmidt, in opening a l own inquiries, and a l remarks at the Septem - i v sixth, Oklahoma, is e ber hearing, acknowl - d weighing a probe. 58 o edged the government’s m o

Meanwhile, the Jus - S interest in examining

p tice Department is i

h Google’s corporate prac - C

reviewing Google’s /

s tices. It’s “natural” for e planned acquisition g regulators “to have ques - a m of Admeld, an on - I tions about our busi -

y t line advertising com - t ness — and that’s cer - e pany. In addition, G tainly fine,” he said. Sens. Amy Klobuchar and Al Franken, both D-Minn., listen to testimony antitrust scrutiny of from Google Executive Chairman Eric Schmidt during a hearing of the “What we ask is that you Google’s planned Senate Judiciary Committee’s Antitrust, Competition Policy and help us ensure that the purchase of Motoro - Consumer Rights Subcommittee on Sept. 21, 2011. Schmidt denied Federal Trade Commis - la Mobility is forth - allegations that his company uses its market dominance to sion’s inquiry means a coming. squeeze out competitors. But Franken said he was “skeptical of big focused and fair companies that simultaneously control both information Foer, the antitrust and the distribution channels of that information.” process.” expert, says regula - tors in the United States and other coun - restrictions it imposes, he explains. tries already are communicating with “When Google has all the inside knowl - Voluntary Options each other about their respective inves - edge” about how it operates its site, tigations and that a “coordinated strate - “it’s very hard for a government agency egislation aimed at curtailing gy” could emerge from the discussions. to second-guess it,” he says. “You al - L Google’s business practices appears The FTC can pursue several paths most need to create a bureaucracy for to be off the table for now as lawmak - for its investigation, from declining to enforcement.” ers give regulatory agencies a chance to take action against Google if it thinks If the commission thinks it has a conduct their reviews. But some sena - the allegations against it are weak to strong case against Google but the com - tors are amenable to another option: a entering into a settlement with the pany refuses to agree to a settlement, voluntary effort by Google to resolve company that would impose condi - it could sue Google, alleging violation concerns about its market dominance. tions in an effort to address anticom - of antitrust laws that prohibit unfair The September hearing raised the pos - petitive concerns. methods of competition. Since the agency sibility of unilateral steps by Google de - If the allegations prove to be true, also has jurisdiction over consumer pro - signed to assuage critics and potentially conditions could range from requiring tection, the potential exists for a law - avoid antitrust action that could be risky Google to divest certain assets or bar - suit built on antitrust and consumer for the government. ring it from pursuing specific lines of grounds, Foer says. The downside to Blumenthal argued that enforcement businesses or content to restricting how that approach is that the courts have actions are “costly, time-consuming, cum - it uses its search algorithms. But all these not been particularly sympathetic in re - bersome, blunt and inexact” methods ideas are wrought with complexities, cent years to antitrust claims, he says. of promoting competition. “Far better to Foer says, because even if Google is The FTC also could issue a report have voluntary actions that can avoid confined in this manner, the FTC must that would assess the competitive land - even the appearance, or complaints

970 CQ Researcher about, antitrust violations,” he said. Echo - ternet videos promoting its benefits to tion of AOL and Time Warner.” Auletta ing those views, Franken said he sees small businesses and television ads pro - recounts a conversation with Clayton “merit in Google taking the initiative.” moting its search capabilities. Christensen, a Harvard business profes - He recommended a “technical com - But critics who argue that Google is sor and author of The Innovator’s Dilem - mittee” that would review whether the undermining competition want more ma , who said of Google: “There is noth - company is meeting its obligations to than voluntary action. “Whatever fix is ing about their business model that advertisers and consumers. put into place, whether Google initiates makes them invulnerable.” 63 Christensen Utah’s Sen. Lee, in his interview with it voluntarily or not, needs to be backed pointed to other major corporations that CQ Researcher , said he agrees with the up with a judicially enforceable order,” once appeared invincible, only to stum - approach em braced by his Democratic Barnett of the FairSearch Coalition con - ble as a result of swift marketplace counterparts. “My No. 1 concern in all tends. He further warns that if policy - changes that caught them off-guard. of this re mains not having the gov ern - makers are too lenient with Google, Duke University engineering pro - ment” meddle in “what has to this point they could unwittingly create a “per - fessor Vivek Wadhwa also thinks been a more or less self-regulated, verse incentive” for companies to “cross Google’s unbridled success should not government-free zone, which is the the line, wait until [their behavior] gets be taken for granted. “The technology Internet,” the Republican senator said. noticed and back off” after regulators sector moves so quickly that when a “When government gets involved, a begin an investigation. “Without the company becomes obsessed with de - lot of the time government ends up power of an enforceable order, it would fending and abusing its dominant mar - making the problem worse.” very difficult to ensure that Google would ket position, countervailing forces cause While saying he recognizes that some - live up to a voluntary fix,” he maintains. it to get left behind,” he observed this times a need arises for antitrust en - Simpson of Consumer Watchdog also summer in The Washington Post. forcement, Lee said he firmly believes is skeptical about a voluntary approach. Wadhwa explained that during the “that businesses are going to be able “I’ve seen nothing watching company course of years-long federal probes into to make their own decisions better than behavior over the years to lead me to allegations of anti-competitive practices government regulators.” Lee said he believe that voluntary things ever real - by IBM and Microsoft, “their monopo - wants Google to provide stronger as - ly mean very much unless there’s at lies became irrelevant because both surances that its products never receive least the possible threat of some kind companies could not keep pace with preferential treatment in its search re - of regulation or legal action.” rapid changes in technology” that their sults. “A lot of that can be tested em - competitors embraced. 64 pirically by a third party,” he said. But according to an opposing view, Google denies that it has operated Google is on track to grow even more in an uncompetitive manner and de - OUTLOOK dominant on the Internet if regulators fends its record of openness. “We have decide either not to step in or impose taken a number of steps over the past remedies too weak to curb its influence. few years to increase transparency for The result could be an “unaccountable consumers and websites, and we’re al - What Next for Google? Internet in which Google’s power is off ways open to ideas for how we can the charts and trust is by necessity improve,” Google spokesman Adam hile Google is now at or near blind,” Cleland, the Google critic, wrote. Kovacevich said. 59 He pointed to a W the top of its industry, the tech “Google becomes the exclusive and om - Google website that reveals details sector is littered with reminders of niscient editor, observer, distributor, rev - about how the company formulates how quickly new competitors can enue collector and decision maker. There search algorithms and features tools emerge and promising ventures — from are no checks and balances.” 65 for optimizing search rankings. 60 the tiniest startup to the mightiest site Google’s fate may very well rest in The company has fought back against — can fall. MySpace and Friendster, her - the hands of regulators, whose near- tighter federal regulation by strengthen - alded just a few years ago as cutting - term decisions could shape its future. ing its lobbying in Washington. In July, edge, quickly faded in popularity, while Experts say that if the FTC and other Google announced that it had hired 12 Facebook and Twitter are now house - regulatory bodies are lenient, they risk lobbying firms to bolster its message. 61 hold words after debuting in 2004 and undermining the already fragile state During the first three quarters of 2011, 2006, respectively. of competition on the Internet. And if Google spent $5.4 million on lobbying “Today, Google appears impregnable,” they lean too hard, they could squelch — more than in 2010, and more than author Auletta wrote. “But a decade ago, the company’s appetite for innovation, Microsoft. 62 Google also is running In - so did AOL, and so did the combina - a key ingredient of its success.

www.cqresearcher.com Nov. 11, 2011 971 GOOGLE ’S DOMINANCE

“You can get into a danger zone 6 Thomas Catan, “Google Scores Victory in Press_Events/Press_Releases/2011/5/Google_ [with regulation] where you cripple the Ohio Antitrust Case,” The Wall Street Journal , Sites_Accounts_for_9_of_10_Searches_Conduc innovation,” warns Eshoo, the Califor - Sept. 1, 2011, http://online.wsj.com/article/SB ted_in_Latin_America . 15 nia House member and top Democrat 10001424053111904583204576544683721148122. Efficient Frontier, “Q1 2011 Global Digital on the subcommittee that oversees the html . Marketing Performance Report,” p. 4, www. 7 efrontier.com/sites/default/files/EF_1Q11Global communications sector. “I hope Con - Facts About Google and Competition, www. google.com/competition/howgooglesearch Report.pdf . gress does not get so much in the works.html . 16 Scott Cleland, Search & Destroy: Why You way that they’ll kill the goose that con - 8 Sam Schechner and Amir Efrati, “Google Pon - Can’t Trust Google Inc. (2011), p. 97. tinues to lay the golden egg.” ders Pay-TV Business,” The Wall Street Journal , 17 Response of Schmidt to questions for the Nov. 4, 2011, http://online.wsj.com/article_ record from Sen. Herb Kohl, p. 6. email/SB10001424052970204621904577016352 18 Don Kellogg, “40 Percent of U.S. Mobile Notes 676478994-lMyQjAxMTAxMDAwNDEwNDQy - Users Own Smartphones; 40 Percent are An - Wj.html?mod=wsj_share_email . droid,” NielsenWire, Sept. 1, 2011, http://blog. 9 nielsen.com/nielsenwire/online_mobile/40- 1 Claire Cain Miller, “Google Said to Be Near a Securities and Exchange Commission, Google percent-of-u-s-mobile-users-own-smartphones- Yelp Deal,” , Dec. 18, 2009, Form 10-K for fiscal year ending Dec. 31, 40-percent-are-android /. www.nytimes.com/2009/12/19/technology/com 2010, pp. 9, 29, http://investor.google.com/ 19 StatCounter, “Global Stats for Top Five Mo - panies/19yelp.html?_r=1&hp . documents/20101231_google_10K.html . 10 bile Searches in the U.S. for Sept. 2010 to 2 For background, see written testimony of Amir Efrati, “Google, Private-Equity Firms Sept. 2011,” http://gs.statcounter.com/#mobile_ Jeremy Stoppelman before the Senate Judi - Mull Bid For Yahoo,” The Wall Street Jour - search_engine-US-monthly-201009-201109 . ciary Committee, Subcommittee on Antitrust, nal , Oct. 23, 2011, http://online.wsj.com/ 20 Securities and Exchange Commission, Google Competition Policy and Consumer Rights, article/SB10001424052970204485304576646232 Form 10-Q, op. cit. , p. 17; and Miguel Helft, Sept. 21, 2011, http://judiciary.senate.gov/pdf/ 054116582.html?mod=technology_newsreel . 11 “Google vs. Groupon,” The New York Times , 11-9-21StoppelmanTestimony.pdf . Lance Ulanoff, “Everything You’ve Heard June 1, 2011, http://bits.blogs.nytimes.com/2011/ 3 For background, see written testimony of About Google is True,” PC Magazine , March 06/01/google-vs-groupon /. Eric Schmidt before the Senate Judiciary 28, 2009, www.pcmag.com/article2/0,2817, 21 Written testimony before the Senate Judi - Committee, http://judiciary.senate.gov/hearings/ 2344010,00.asp#fbid=MVwIW3wfWE0 . See ciary Committee, op. cit. , pp. 2-3. testimony.cfm?id=3d9031b47812de2592c3bae b also, “The Google Culture,” www.google.com/ 22 “ABC News, Yahoo! News Announce On - a64d93cb&wit_id=3d9031b47812de2592c3baeb about/corporate/company/culture.html . 12 line Alliance,” Yahoo! News, Oct. 3, 2011, http:// a64d93cb-3-1 . Securities and Exchange Commission, Google news.yahoo.com/abc-news--yahoo--news-an 4 Response of Google Chairman Eric Schmidt Form 10-Q for quarter ending Sept. 30, 2011, nounce-online-alliance.html . to questions for the record from Sen. Al Franken, p. 26, www.sec.gov/Archives/edgar/data/128 23 Michael Liedtke, “Yahoo shares soar on Senate Judiciary Committee, Subcommittee on 8776/000119312511282235/d228523d10q.htm. 13 new Microsoft takeover hopes,” The Associ - Antitrust, Competition Policy and Consumer Schmidt written testimony, op. cit. 14 ated Press, Oct. 5, 2011, http://apnews. Rights, pp. 3-4. ComScore, “ComScore Releases August 2011 myway.com/article/20111005/D9Q6DNF01.html . 5 James Kanter, “Google Plays Down Microsoft’s U.S. Search Engine Rankings, press release, 24 “Microsoft, AOL, Yahoo, strike ad alliance,” Antitrust Complaint in Europe,” The New York Sept. 13, 2011, www.comscore.com/Press_Ev , Nov. 8, 2011, www.reuters.com/article/ Times , March 31, 2011, www.nytimes.com/ ents/Press_Releases/2011/9/comScore_Releases_ 2011/11/08/microsoft--yahoo-idUSN1E7A7 2011/04/01/technology/01google.html?_r=1 . August_2011_U.S._Search_Engine_Rankings; 24520111108 . For background, see Kenneth Jost, “Antitrust ComScore, “ Accounts for 9 of 10 25 “State of the Media: The Social Media Re - Policy,” CQ Researcher , June 12, 1998, pp. 505- Searches Conducted in Latin America,” press port, Q3, 2011,” Nielsen, http://blog.nielsen.com/ 528. release, May 17, 2011, www.comscore.com/ nielsenwire/social /. 26 “Facts About Google and Competition,” op. cit. About the Author 27 Peter Kafka, “Google Goes Big With its David Hatch is a veteran technology journalist based in Hulu Bid,” AllThingsD , Sept. 6, 2011, http:// Arlington, Va., who previously served as a staff writer with allthingsd.com/20110906/google-goes-big-with - the National Journal Group and Crain Communications in its-hulu-bid /. 28 Written testimony of Susan A. Creighton be - Washington, DC. His publishing credits include The Daily , fore the Senate Judiciary Committee, Sub - Dallas Morning News , Advertising Age , Crain’s New York committee on Antitrust, Competition Pol icy and Business and the Boston Herald. Hatch’s previous CQ Re - Consumer Rights, Sept. 21, 2011, http:// judi searcher reports are “Drug Company Ethics,” “Media Own - ciary.senate.gov/pdf/11-9-21CreightonTestimo ership” and “Worker Safety.” He holds a B.A. in English from ny.pdf . the University of Massachusetts at Amherst. 29 Biography of Susan A. Creighton, Wilson Sonsini Goodrich and Rosati, www.wsgr.com/

972 CQ Researcher wsgr/DBIndex.aspx?SectionName=attorneys/ BIOS/505.htm . 30 Adam Thierer, “Op Ed: The Danger Of Mak - FOR MORE INFORMATION ing Facebook, LinkedIn, Google And Twitter , 2919 Ellicott St., N.W., Washington, DC 20008 ; Public Utilities,” Forbes , July 24, 2011, www. American Antitrust Institute 202-276-6002 ; www.antitrustinstitute.org . Think tank that promotes economic forbes.com/sites/adamthierer/2011/07/24/the- competition and challenges concentrated economic power. danger-of-making-facebook-linkedin-google- and-twitter-public-utilities /. Consumer Watchdog , 1750 Ocean Park Blvd., Suite 200, Santa Monica, CA 90405 ; 31 Steve Weinberg, Taking on the Trust: The Epic 310-392-0522 ; www.consumerwatchdog.org . Advocacy group focusing on consumer Battle of Ida Tarbell and John D. Rockefeller and taxpayer issues. (2008), pp. 73, 76. 32 Department of Justice , Antitrust Division, 950 Pennsylvania Ave., N.W., Washington, “Millennium issue: Antitrust,” The Economist , DC 20530 ; 202-514-2000 ; www.justice.gov/atr/index.html . Promotes economic compe - Dec. 23, 1999, www.economist.com/node/ tition through enforcement and guidance on antitrust laws and principles. 347251 . 33 Weinberg, op. cit. , p. 201. European Commission , Directorate General for Competition, Rue Joseph II, 1000 34 The Economist , op. cit. Brussels, ; 800-67-89-10-11 ; ec.europa.eu/competition . Oversees commercial 35 For a timeline of Google’s history, see, www. competition and enforcement of antitrust laws within the European Union. google.com/about/corporate/company/history. FairSearch.org ; www.fairsearch.org . Coalition representing Microsoft and other html . online companies that accuse Google of anti-competitive behavior. 36 Ibid. 37 Ibid. Federal Trade Commission , 600 Pennsylvania Ave., N.W., Washington, DC 20580 ; 38 Ken Auletta, Googled, the End of the World 202-326-2222 ; www.ftc.gov . Federal agency that promotes consumer protection and as We Know It (2010), p. 52. works to prevent anti-competitive business practices. 39 Steven Levy, In the Plex: How Google Thinks, Google Inc. , 1600 Amphitheatre Parkway, Mountain View, CA 94043 ; 650-253-0000 ; Works, and Shapes Our Lives (2011), p. 121. www.google.com . Multinational corporation that provides services in Internet 40 Ibid. , p. 122. search, cloud computing, online advertising and mobile communications. 41 Google Form 10-K, op. cit. , p. 69. 42 Evelyn M. Rusli, “For Google, a New High Senate Judiciary Committee , 224 Dirksen Senate Office Building, Washington, in Dealmaking,” The New York Times , Oct. 27, DC 20510 ; 202-224-7703 ; judiciary.senate.gov . Conducts hearings and oversight on antitrust law and Internet privacy, among other legal matters. 2011, http://dealbook.nytimes.com/2011/10/27/ google-hits-new-ma-record /. 43 Google Form 10-K, op. cit. , p. 11. 51 “Microsoft Agrees to End Unfair Monopo - Forden , “Oklahoma Attorney General Says 44 Ibid. , p. 9. listic Practices,” press release, U.S. Department He’s Weighing Google Probe,” Bloomberg, 45 Schechner and Efrati, op. cit. of Justice, July 16, 1994, www.justice.gov/opa/ May 19, 2011, www.businessweek.com/news/ 46 For background, see “Federal Trade Com - pr/Pre_96/July94/94387.txt.html . 2011-05-19/oklahoma-attorney-general-says- mission Closes Google/DoubleClick Investiga - 52 Ken Auletta, World War 3.0 (2001), p. 389. he-s-weighing-google-probe.html ; and Securities tion,” press release, Federal Trade Commission , 53 “Justice Dept.’s U.S. v Microsoft, Current and Exchange Commission, Google Form 10-Q, Dec. 20, 2007, www.ftc.gov/opa/2007/12/google Case,” U.S. Department of Justice, www.justice. op. cit. , p. 19. dc.shtm ; and “FTC Closes its Investigation of gov/atr/cases/ms_index.htm . 59 Quoted in David Hatch, “Senators ‘Prod’ Google AdMob Deal,” press release, Federal 54 Jia Lynn Yang and Nina Easton, “Obama Google for Voluntary Compliance,” FTC Watch, Trade Commission, May 21, 2010, www.ftc. and Google (a love story),” Fortune , Oct. 26, Sept. 30, 2011, p. 6. gov/opa/2010/05/ggladmob.shtm . 2009, http://money.cnn.com/2009/10/21/tech 60 See “Facts About Google and Competition: 47 For background, see “Justice Dept. ap - nology/obama_google.fortune /. Transparency,” www.google.com/competition/ proval of Google-ITA deal with conditions,” 55 Office of Social Innovation and Civic Par - transparency.html#section1 . press release, U.S. Department of Justice, ticipation, biography of Sonal Shah, www. white 61 Womack, op. cit. April 8, 2011, www.justice.gov/opa/pr/2011/ house.gov/adminis tration/eop/sicp/staff/ shah . 62 Rob Levine, “Google Exerts Influence April/11-at-445.html . 56 For background on Google’s political dona - Through Others,” Bloomberg Businessweek, 48 See “Google to Acquire Motorola Mobility,” tions, see, Communications/Electronics, Top Con - Oct. 31, 2011, www.sfgate.com/cgi-bin/article. Google Investor Relations, Aug. 15, 2011, http:// tributors to Federal Candidates, Parties and Out - cgi?f=/c/a/2011/10/31/BUM01LNAQ4.DTL&type investor.google.com/releases/2011/0815.html . side Groups, Open Secrets.org, www.opensecrets. =tech . 49 “Cheers to Competition: 120 Years of the org/industries/contrib.php?ind=B&cycle=2012 . 63 Auletta, Googled , op. cit. , p. 370. Sherman Act,” U.S. Department of Justice 57 Yang and Easton, Fortune, op. cit. 64 Vivek Wadhwa, “Uncle Sam’s choke-hold on blog, http://blogs.usdoj.gov/blog/archives/692 . 58 Brian Womack, “Google Hires 12 Lobby - innovation,” The Washington Post , July 6, 2011, 50 “FTC Fact Sheet — Antitrust Laws, a Brief ing Firms Amid FTC’s Review of Business,” www.washingtonpost.com/national/on-innova History,” Federal Trade Commission, www.ftc. Bloomberg, July 2, 2011, www.bloomberg. tions/uncle-sams-choke-hold-on-innovation/ 2011/ gov/bcp/edu/microsites/youarehere/pages/pdf/ com/ news/2011-07-02/google-hires-12-lobbying- 07/06/gIQARcgk2H_print.html . FTC-Competition_Antitrust-Laws.pdf . firms -amid-ftc-s-review-of-business.html ; Sara 65 Cleland, op. cit. , p. 227.

www.cqresearcher.com Nov. 11, 2011 973 Bibliography Selected Sources

Books Wasserman, Elizabeth, “Tech War: Google vs. Microsoft,” Politico , Feb. 9, 2011, http://dyn.politico.com/printstory. Auletta, Ken, Googled, The End of the World as We Know cfm?uuid=07523B85-9CAE-AB30-BF22BDA23A033652 . It , Penguin Books , 2010. A journalist provides a behind-the-scenes look at the battle A journalist recounts the rise of Google from obscure start- in Washington between Microsoft and Google. up to Internet powerhouse and covers the challenges ahead for the tech icon and others. Womack, Brian, Aaron Ricadela and Karen Gullo, “Oracle, Google in court over Java patents,” San Francisco Chron - Brinkley, Joel, and Steve Lohr, U.S. v. Microsoft, The In - icle /Bloomberg News, Sept. 19, 2011, www.sfgate.com/cgi- side Story of the Landmark Case , McGraw-Hill , 2000. bin/article.cgi?f=/c/a/2011/09/18/BUOL1L5Q8I.DTL . Two journalists provide a detailed account of the historic Oracle and Google are locked in a patent dispute over trial that pitted the Justice Department against Microsoft and Google’s Android software for mobile phones. its founder, Bill Gates, in an antitrust case that casts a long shadow over the present-day federal investigation of Google. Reports

Cleland, Scott, with Ira Brodsky, Search & Destroy: Why “Google’s Transformation from Gateway to Gatekeeper: You Can’t Trust Google , Telescope Books , 2011. How Google’s Exclusionary and Anticompetitive Con - Cleland, a business consultant and one of the company’s duct Restricts Innovation and Deceives Consumers,” Fair staunchest critics, asserts that it has grown too large and Search Coalition , 2011, www..org/wp-content/ powerful and can’t be trusted to respect the privacy of its uploads/2011/10/Googles-Transformation-from-Gateway- users and the rights of its competitors. to-Gatekeeper.pdf . An industry trade group concerned about Google’s domi - Levy, Steven, In the Plex: How Google Thinks, Works, nance details its allegations of anticompetitive conduct against and Shapes Our Lives , Simon and Schuster , 2011. its members. This “inside story” on Google’s success is based on un - precedented access the author was granted to the compa - “Traffic Report: How Google is Squeezing Out Com - ny’s founders and a behind-the-scenes view based on three petitors and Muscling into New Markets,” Consumer years of research. Watchdog , 2010, www.consumerwatchdog.org/resources/ TrafficStudy-Google.pdf . Vaidhyanathan , Siva , The Googlization of Everything The Los Angeles-based consumer advocacy group, which (And Why We Should Worry) , University of California pushed for a federal antitrust probe of Google, argues that Press , 2011 . the Internet company is a monopoly that abuses its power. A media-studies and law professor at the University of Vir - ginia explores how people interact with Google, the effect Manne, Geoffrey A., and Joshua D. Wright, “Google and it has on their lives and growing concerns in the United the Limits of Antitrust: The Case Against the Antitrust Case States and abroad about some of its practices. Against Google,” 2010, http://papers.ssrn.com/sol3/papers. cfm?abstract_id=1577556 . Articles Professors at Lewis and Clark Law School and George Mason University School of Law, respectively, warn of the perils of ap - Lohr, Steve, “Antitrust Cry, From Microsoft,” The New plying antitrust law to “innovative companies in dynamic markets.” York Times , March 31, 2011, www.nytimes.com/2011/03/ 31/technology/companies/31google.html?ref=technology . Online Resources Microsoft, on the defensive not long ago from antitrust reg - ulators in the United States and abroad, an antitrust “Facts about Google and Competition,” Google , 2011, www. complaint in Europe against Google. google.com/competition/qa.html . common questions about its policies and Wadhwa, Vivek, “Uncle Sam’s Chokehold on Innovation,” practices. The Washington Post , July 7, 2011, www.washingtonpost. com/national/on-innovations/uncle-sams-choke-hold-on- “Key Resources,” FairSearch Coalition , 2011, www.fair innovation/2011/07/06/gIQARcgk2H_print.html . search.org/key-resources /. A Duke University professor argues that government inter - The online industry group posts extensive material about vention involving Google is misguided. its concerns with Google.

974 CQ Researcher The Next Step: Additional Articles from Current Periodicals

Antitrust Laws ways Google is paying a steep price for its success, ac - cording to a former member of Congress. Miller , Claire Cain , “U.S. Lets Google Buy Travel Firm,” The New York Times , April 9, 2011 , p. B1 , www.nytimes. Cleland , Scott , “E-totalitarianism at Google,” The Washington com/2011/04/09/technology/09google.html . Times , May 10, 2011 , p. B1 , www.washingtontimes.com/ The Justice Department has approved Google’s acquisition news/2011/may/9/e-totalitarianism-at-google /. of a flight-search software maker but imposed conditions on Google’s handling of privacy and property rights could how Google can use the company’s technology. threaten the company’s market domination, a critic says.

Puzzanghera , Jim , “Google’s Control Spurs Microsoft Pfanner , Eric , “Google Faces French Fine for Breach of Pri - Complaint,” Orlando Sentinel , April 1, 2011 , p. B7 . vacy,” The New York Times , March 22, 2011 , www.nytimes. Microsoft has said it will file an antitrust complaint in Eu - com/2011/03/22/technology/22privacy.html . rope against Google, alleging the Internet giant is limiting French regulators who fined Google for violating data-protection access to some of its data from YouTube and other services. laws accused it of continuing to flout privacy rules.

Van Sack , Jessica , “U.S. Moves vs. Search Giant May Aid Products Hub’s Skyhook,” Boston Herald , July 4, 2011 , p. 17 , www. bostonherald.com/business/technology/general/view.bg? O’Brien , Chris , “Welcome to the New Browser Wars,” articleid=1349503 . Buffalo (N.Y.) News , Aug. 15, 2011 , p. C4 . Skyhook Wireless, the first company to map the world’s Google’s Chrome browser is set to become the world’s sec - Wi-Fi signals, is suing Google for alleged patent infringement ond most popular browser behind Internet Explorer. and antitrust violations. Sarno , David , and Shan Li , “Google to Kill 2 Birds With China 1 Deal,” Los Angeles Times , Aug. 16, 2011 , p. A1 , articles. latimes.com/2011/aug/16/business/la-fi-google-motorola- Brustein , Joshua , “Chinese View of Google’s Issues,” The deal-20110816 . New York Times , Nov. 22, 2010 , p. B4 , query.nytimes.com/ Google’s deal to buy Motorola Mobility would position it gst/fullpage.html?res=980DE7DD153BF931A15752C1A9 to expand beyond its search engine and Web services. 669D8B63 . Google failed in China because it didn’t understand the Swift , Mike , “Google’s Android Ambitions Go Beyond country’s Internet market, according to the CEO of China’s Mobile,” San Jose (Calif.) Mercury News , June 13, 2011 . most popular search engine. Android has become the top smartphone operating system in the United States, but Google’s ambitions for it go be - Lee , Mark , “Microsoft, China Expand Ties,” Houston Chron - yond tablet computers and handheld devices. icle , July 5, 2011 , p. B7 , www.chron.com/business/article/ Microsoft-beefs-up-ties-with--to-tackle-2080045.php . CITING CQ RESEARCHER Microsoft and search engine Baidu agreed to bolster their Sample formats for citing these reports in a bibliography partnership in China in hopes of luring away Google’s users in the world’s largest Internet market. include the ones listed below. Preferred styles and formats vary, so please check with your instructor or professor. Nakashima , Ellen , “Chinese Leaders Ordered Google Hack, U.S. Was Told,” The Washington Post , Dec. 5, 2010 , MLA STYLE p. A16 , www.washingtonpost.com/wp-dyn/content/article/ Jost, Kenneth. “Remembering 9/11,” CQ Researcher 2 Sept. 2010/12/04/AR2010120403323.html . 2011: 701-732. A Wikileaks cable reveals that the Chinese government or - dered a series of intrusions into Google’s computer networks. APA S TYLE Privacy Jost, K. (2011, September 2). Remembering 9/11. CQ Re - searcher, 9 , 701-732. Barr , Bob , “Google’s Privacy Growing Pains,” Atlanta CHICAGO STYLE Journal-Constitution , Nov. 15, 2010 , p. A14 , blogs.ajc. com/bob-barr-blog/2010/11/15/google’s-not-so-private- Jost, Kenneth. “Remembering 9/11.” CQ Researcher , September growing-pains /. 2, 2011, 701-732. Addressing continuous privacy concerns is one of the many

www.cqresearcher.com Nov. 11, 2011 975 In-depth Reports on Issues in the News

Are you writing a paper? Need backup for a debate? Want to become an expert on an issue? For more than 80 years, students have ?turned to CQ Researcher for in-depth reporting on issues in the news. Reports on a full range of political and social issues are now available. Following is a selection of recent reports:

Civil Liberties Education Health/Safety Remembering 9/11, 9/11 Student Debt, 10/11 Military Suicides, 9/11 Government Secrecy, 2/11 School Reform, 4/11 Teen Drug Use, 6/11 Cybersecurity, 2/10 Crime on Campus, 2/11 Organ Donations, 4/11 Press Freedom, 2/10 Career Colleges, 1/11 Genes and Health, 1/11 Value of a College Education, 11/09 Food Safety, 12/10 Crime/Law Preventing Bullying, 12/10 Eyewitness Testimony, 10/11 Environment/Society Legal-Aid Crisis, 10/11 Managing Public Lands, 11/11 Politics/Economy Computer Hacking, 9/11 Prolonging Life, 9/11 Reviving Manufacturing, 7/11 Class Action Lawsuits, 5/11 Extreme Weather, 9/11 Foreign Aid and National Security, 6/11 Cameras in the Courtroom, 1/11 Aging Population, 7/11 Public-Employee Unions, 4/11 Death Penalty Debates, 11/10 Nuclear Power, 6/11 Lies and Politics, 2/11 Upcoming Reports College Football, 11/18/11 Computers and Education, 12/2/11 Natural Gas, 12/9/11

ACCESS CQ Researcher is available in print and online. For access, visit your library or www.cqresearcher.com. STAY CURRENT For notice of upcoming CQ Researcher reports or to learn more about CQ Researcher products, subscribe to the free e-mail newsletters, CQ Re - searcher Alert! and CQ Researcher News : http://cqpress.com/newsletters. PURCHASE To purchase a CQ Researcher report in print or electronic format (PDF), visit www.cqpress.com or call 866-427-7737. Single reports start at $15. Bulk purchase discounts and electronic-rights licensing are also available. SUBSCRIBE Annual full-service CQ Researcher subscriptions—including 44 reports a year, monthly index updates, and a bound volume—start at $803. Add $25 for domestic postage.

CQ Researcher Online offers a backfile from 1991 and a number of tools to simplify research. For pricing information, call 800-834-9020, or e-mail [email protected].

Top View