Google Learned From Microsoft's Antitrust Mistakes: Schmidt
Google (NASDAQ:GOOG) Executive Chairman Eric Schmidt staunchly defended Google's business practices during the Senate's antitrust hearing against the company, invoking Microsoft (NASDAQ:MSFT) as the company that helped it steer clear from anticompetitive practices since its inception 13 years ago.
Google stands accused of antitrust practices related to its search advertising business, which smaller rivals such as Yelp, Expedia and NexTag argue Google wields as a powerful weapon to keep them from succeeding.
The companies claim Google suppresses their Websites in its search results. Yelp also argued Google scrapes its content to profit from search ads on its Google Places local search service even as it competed with Yelp's own reviews.
Schmidt, who served as Google CEO for a decade before handing the reins to co-founder Larry Page in April, testified under oath in Washington, D.C., before the Senate subcommittee on Antitrust that Google learned valuable lessons from Microsoft on how to conduct consumer-friendly business.
"We get it. By that, I mean that we get the lessons of our corporate predecessors," Schmidt said in his oral testimony, without naming Microsoft, which was tried and convicted as monopolist. "What we ask is that you help us ensure that the Federal Trade Commission's inquiry remains a focused and fair process, so that we can continue creating jobs and building products that delight our users."
The last comment was a clear plea that the Senate subcommittee not try to complicate matters for the FTC, which is formally investigating Google for anticompetitive behavior in the search market. The European Commission is also investigating Google for antitrust concerns.
Technically, today's Congressional hearing is not supposed to influence those investigations, but the content that comes out of it could help tighten the focus of the FTC and the European Commission's investigations.
Google's harshest critic at today's hearing was Senator Mike Lee (R-Utah), a ranking member of the committee, who questioned whether Google's search results have become biased to favor its own Web services over that of Yelp, NexTag and others in its search results.
"Given its significant ability to steer e-commerce and the flow of online information, Google is in a position to help determine who will succeed and who will fail," Lee said.
Lee also tried to trip Schmidt up by showing him charts that revealed Google's Product Search ranked No. 3 in Google search results for 650 different product-related searches in April 2011.
When Lee asked why Google was always third, Schmidt said he needed to see technical details to provide an answer. Lee claimed "Google cooked up" the results to make sure Google is always third.
Schmidt, who said he was not aware of any boosts or biases that favor Google, replied: "I can assure you we've not cooked anything."
Senator Al Franken (D-Minn.) meanwhile expressed concern with Schmidt's answers to Lee's questions about why Google Product Search links constantly ranked third for product-related searches on Google. Noting that Lee asked if all of Google's search rankings reflect an unbiased algorithm.
"You said, I believe so. That seemed like a pretty fuzzy answer to me coming from the chairman," Franken asked. "If you don't know, who does? That really bothers me because that's the crux of this, isn't it? And you don't know. So we're trying to have a hearing here about whether you favor your own stuff, and you're asked that question and you admittedly don't know the answer."
What Schmidt was sure to say in his oral testimony is that Google puts consumers first by trying to give them information as quickly and accurately as possible. Part of this work involved executing more than 500 changes to improve search in 2010.
This means many Websites won't always enjoy their ranking on Google.com. "This results in some complaints from businesses who want to be first in the rankings, even when they're not the best match for a user's search," Schmidt said.
He also noted that Google doesn't lock users in and allows them to leave to Microsoft Bing, Yahoo or some other alternative with one click.
Schmidt answered tough questions for roughly 90 minutes before giving the floor to the second panel, which included Susan Creighton, a partner for Google's legal counsel Wilson, Goodrich, Sonsini & Rosati; Yelp CEO Jeremy Stoppelman; Thomas O. Barnett, partner at Covington & Burling; and Nextag CEO Jeffrey Katz.