Google on Monday framed its proposed acquisition of Motorola Mobility as an attempt to protect the Android operating system, but the $12.5 billion transaction is likely to fuel concerns about the search giant extending its dominance into other online services.
Unlike rival Apple, which has expanded from producing computers into digital music sales and wireless phones in recent years, Google's recent acquisitions have drawn scrutiny from lawmakers due to the firm's control of two-thirds of the search market. Google's position appears close to Microsoft, which faced intense pressure from federal regulators in the 1990s as it expanded into gaming, hardware and other areas while dominating the market for desktop operating systems.
The Federal Trade Commission opened a broad antitrust probe into the allegations in June, prompting Google to hire a dozen new lobbying firms and ramp up its outreach efforts, as first reported by The Hill. Google executive chairman Eric Schmidt is expected to face harsh questioning about the firm's forays into new markets during a Sept. 21 hearing before the Senate Judiciary Antitrust subcommittee.
Google has also drawn heat over allegations it pressures Android phone makers from working with other mobile operating systems, which could factor into any potential review of the Motorola transaction. Google has said the deal is focused on mobile computing, and purchasing Motorola will allow its engineers to work in close coordination with handset makers to unleash further innovation.
The current plan is to operate Motorola as a separate business unit with no special preference as compared to other Android phone makers. The other firms that currently manufacture Android phones, including HTC, Samsung and Sony, have all expressed support for the deal. Since Android is an open-source platform, it doesn't generate any direct revenue for Google, which relies on advertising and search to monetize the mobile platform. But the move would bring Google into the hardware game and put it in direct competition with Apple in both the wireless handset and cable set-top box markets.
The Motorola announcement brings some clarity to a recent spat over patents between Google and other tech firms including Microsoft, Apple and Oracle. Google recently accused the firms of bidding on old portfolios of patents solely for the purpose of using them to file lawsuits designed to hamper Android, which has become the leading smartphone platform. Google said Motorola's large patent portfolio will be crucial to allowing it to prevent such lawsuits going forward. Microsoft in particular has denied the accusations, noting it invited Google to jointly bid on at least one of the patent portfolios.
Apart from the antitrust scrutiny, Google has been the target of lawmakers on a number of issues in recent months over everything from privacy concerns to Android applications that allow users to avoid DUI checkpoints. Reports earlier this year that the Android and other smartphones store and transmit user location data were greeted with an uproar and prompted a bill from Sen. Al Franken (D-Minn.) to protect users from tracking without their consent.
The search giant settled a complaint with the FTC in March over its rollout of the Buzz social network last year. The settlement requires the firm to implement a comprehensive privacy program and undergo outside audits every two years. The complaint alleged Google enrolled some Gmail users in aspects of Buzz without their consent, an early indication of the type of blurring of lines between online services that the firm will have to avoid if it doesn't want regulators to find fault with its latest major acquisition.