Should Antitrust Laws Be Amended to Consider Google's Use of Free?

By Clint Boulton  |  Posted 2009-07-12 Print this article Print

The Google and free issue is really heating up. Friday I posted what I thought was a pretty innocuous analysis for about what Google is doing to its brand with its free Web services and what the coming of Chrome OS will mean.

"What Would You Do If Google Web Services Stopped Being Free?" drew some passionate responses. The people have spoken: No one will be willing to pay for Google Web services, such as Gmail, Docs and Talk. Why would we?

Many of us grew up on the Internet with free Web services from Yahoo, Microsoft and Google, among others, so it seems unnatural to consider a world where Web services aren't free.

The issue merits more discussion after Google's Senior Competition Counsel Dana Wagner combed through a July 8 piece in CNN written by Wired Editor in Chief Chris Anderson, who noted that Obama's new "antitrust cop" Christine Varney would have to weigh Google's use of free to dominate the Internet advertising market.

For those of you who haven't heard, Google offers free search and Web services markets, such as e-mail, word processing and mapping applications, and makes 97 percent of its $20 billion a year in advertising served on the Web pages where those Web services are served.

Anderson is something of an expert on free. He's written "Free: The Future of a Radical Price" and is now being invited to Google talks and other forums to talk about free with the some soberness we'd associate with talking about perpetual software licenses versus utility-based subscription models.

Anderson's piece begged for a response from Wagner, whose raison d'être is making sure Google's data-hoarding, ad-dollar chomping machine doesn't hoard too much data or chomp too many ad dollars to warrant scrutiny as a Microsoft-like monopolist.

Anderson wonders whether it is fair for Google to make a lot of money from search advertising to support its Google Apps enterprise and other services that aren't exactly raking in the big bucks. "Is that fair, when so many of its competitors don't have a similar golden goose at the core of their operations?" Anderson wonders.

Wagner notes that cross-subsidization is common in many companies, with certain products subsidizing others. "No matter how successful or profitable the subsidizing product is, the fact remains that cross-subsidization itself has never been viewed as an antitrust problem."

Fair enough, but Google is so powerful and holds so much sway on the Internet (not by force, but by user choice, mind you) as to warrant consideration as a precedent-making giant. That's my belief. Free has changed market dynamics, leading others in Google's long tail to offer free Web services.

Anderson also asks: "Could Free be OK for little companies, but not really big ones? How much market share would you have to have in one market to disallow you from using Free in another?"

Harvey delivers Google's stock we-haven't-broken-any-antitrust-laws answer, taking a shot at Microsoft in the process:

It is true that if a company has a dominant product, it may run afoul of antitrust laws if it "ties" that product to another--for instance, by requiring customers who buy that product to buy another product as well. When a company provides products for free on a stand-alone basis, however, it's not requiring anyone to buy anything. It may take business away from other companies trying to charge users for similar products, but that's hardly an antitrust issue.

Harvey is, of course, alluding to Microsoft's tethering of its Windows Media Player to its Windows desktop operating system, an issue hashed out by the U.S. almost a decade ago and still under consideration by the European Union.

I take no issue with Harvey's defense and do not accuse Google of breaking antitrust laws. But in this world of perception being nine-tenths of reality, many people see Google as a monopolist because of its massive share of the worldwide Web search market.

Make no mistake; Google doesn't force us to use its search engine. We just do and get comfortable with it (and other services like Gmail), but we can go to Microsoft Bing and other services if we want.

But people, myself included, aren't considering the legal definition when we put "Google" and "monopolist" in the same sentence. Even though customers choose Google over Microsoft, Yahoo, et al., we are looking at Google as a monopolist because so many people use it.

Why has Google become a fortress of indomitable fortitude in search? Because it's so darn good at helping us find what we need online. Sorry, Google, but that's the rub.

Google is the classic victim of its own success, and it doesn't help the perception that it is a monopolist in its quest to hoard the world's data by marching laterally across the entire landscape of Internet services.

Are we using the monopolist claim loosely? Sure, in the same way we generalize in the subjective when we say so and so is the greatest actor in the world, or that such and such food is the best ever. Are they really? Come on now.

Anderson is right to wonder whether Varney will put the screws to Google. Harvey is right in his defense. I believe the next question should be: Should antitrust law be modified to consider Google's revolutionary model of free search and Web services in the Digital Age?

That's the question I put to you. |

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