Microsoft Says It Told DOJ, EC How Google Holds Search Hostage

A lawyer for Microsoft confirmed that the software giant told the U.S. Department of Justice and the European Commission how Google's business practices may be harming publishers, advertisers and competition in search and online advertising.

Dave Heiner, vice president and deputy general counsel at Microsoft, wrote in a blog post Feb. 26 that in meeting with government agencies to discuss its recently approved search deal with Yahoo, Microsoft officials explained how Google has tilted the mechanics of the search advertising business in its favor.

"As you might expect, the competition officials asked us a lot of questions about competition with Google—since that is the focus of the partnership," Heiner wrote. "We told them what we know about how Google is doing business. A lot of that entails explaining the search advertising business, which is complex. Some of that inevitably gets into Google practices that may be harming publishers, advertisers and competition in search and online advertising."

Microsoft struck its deal with Yahoo last July to power Yahoo's search engine with Bing, an effort for Microsoft to gain the crucial scale it requires to compete with Google in search. Microsoft and Yahoo's combined share of the U.S. search market is 28.3 percent, compared with 65.4 percent for Google.

In a classic meeting of the pot and kettle, Heiner noted that Google has created a network effect in search akin to Microsoft's own PC operating system dynasty, making it hard for Bing to gain search volume even with Yahoo's search presence:

"Google's algorithms learn less common search terms better than others because many more people are conducting searches on these terms on Google. These and other network effects make it hard for competing search engines to catch up. Microsoft's well-received Bing search engine is addressing this challenge by offering innovations in areas that are less dependent on volume. But Bing needs to gain volume too, in order to increase the relevance of search results for less common search terms."

Microsoft is also concerned about Google business practices that "lock in publishers and advertiser," making it harder to gain search volume, Heiner said.

Heiner's post comes days after product search engine Foundem, a member of an organization called ICOMP funded partly by Microsoft to lobby against Google in Europe, the Microsoft-owned product shopping site Ciao and French legal search engine ejustice.fr complained to the European Commission that Google was demoting their search results, among other issues. The EC confirmed it is looking into the complaints but has not opened a formal investigation.

Providing a window into how these complaints evolve, Heiner said that companies large and small have secretly sought Microsoft's advice about how to deal with Google's aggressive business stances, secrecy or even anti-competitive practices.

"When their antitrust concerns appear to be substantial, we suggest that firms talk to the competition law agencies," Heiner admitted.

These companies then meet in secret with competition law agencies because they fear retribution from Google that could harm their businesses.

Heiner was refreshingly unapologetic about ratting Google out to the feds and chided Google for complaining that the software giant is to blame for the antitrust accusations levied against the leading search engine. Heiner knows of what he writes, having weathered the DOJ's infamous conviction of Microsoft for antitrust violations:

"Complaints in competition law cases usually come from competitors. (Believe me, I know: I've been chief competition counsel at Microsoft since 1994, so I've seen plenty of competitor complaints. Novell, when current Google CEO Eric Schmidt was at the helm, was never hesitant about complaining to regulators about Microsoft. Google hasn't been shy about raising antitrust concerns about Microsoft in the last few years, either.)

"This is the way that competition law agencies function: They look to competitors in the first instance to understand how particular markets operate, the practices of dominant firms and the competitive significance of those practices."  

Google, which is also struggling to consummate its controversial Google Book Search deal and secure the FTC's blessing of its bid to buy AdMob, did not respond to eWEEK's request for comment.