By Gautham Nagesh - 09/21/11 09:45 AM EDT
Don’t be evil.
Google’s corporate slogan has long been emblematic of the firm’s attempts to control its image as a benevolent force on the Web even as the search giant has extended its reach into new markets. But on Wednesday it will double as practical advice for Executive Chairman Eric Schmidt, who will likely face harsh questioning at an afternoon hearing in front of the Senate Judiciary subcommittee on Antitrust, Competition Policy and Consumer Rights.
Ranking member Mike Lee (R-Utah) called for the hearing and has voiced concerns about Google’s influence in the past that are echoed by competitors claiming Google unfairly boosts its offerings in the search rankings. Google, which holds 66 percent of the search market, claims it strives to give consumers the best possible search results and points out that consumers are free to choose other search engines, such as Microsoft’s Bing.
“The concerns expressed by federal regulators and competitors have to do with the power Google has in the marketplace and how they’ve used that power,” Sen. Richard Blumenthal (D-Conn.) told The Hill on Tuesday.
Blumenthal said he hasn’t pre-judged whether Google has abused its power but said determining whether the firm is a monopoly will be a crucial part of the hearing. Typically the government has considered a firm a monopoly and subject to special restrictions when it controls 70 percent of a given market. Likewise, Sen. Charles Schumer (D-N.Y.) said he hasn’t come to any judgments and will listen with an open mind.
Working against Google is the perception that the firm has begun to resemble Microsoft, which famously clashed with federal regulators during a lengthy antitrust suit in the 1990s. Blumenthal admitted the Google probe is somewhat reminiscent of the Microsoft case because both are tech firms but noted the government pursues many other antitrust cases.
Still, in many ways Google’s position mirrors Microsoft’s in the 1990s, as the software giant used its position as maker of the leading operating system to expand into new markets, only to become bogged down by the government’s antitrust case. Likewise, Google has seen its side projects such as Google Maps and YouTube take increasingly large roles in the company’s plans for the future, particularly as consumers come to rely on social media rather than search to find content on the Web.
Microsoft founder Bill Gates’s dismal performance at a March 1998 antitrust hearing was widely credited with contributing to the perception of the firm as arrogant and abusive of its market power, prompting a lawsuit from the Justice Department soon after. Google has taken great pains to avoid a redux of that infamous hearing, hiring a dozen new lobbying firms this summer to spread its message on Capitol Hill and reportedly demanding that Schmidt be allowed to appear in his own hearing rather than with critics such as Yelp CEO Jeremy Stoppelman.
Schmidt has a history of making outspoken comments when saying less might have been prudent, such as his statement that Google’s policy on many things “is to get right up to the creepy line and not cross it” or his suggestion that in the future people might have to change their names when they reach adulthood to escape their youthful indiscretions on the Web. This past weekend he referred to calls for additional spending cuts instead of more stimulus as “ludicrous” and blamed political infighting in Washington for the lack of confidence in the economy.
Also working against Google could be the perception that the firm is sympathetic to Democrats and the Obama administration, something the firm has tried to address through personnel additions and outreach to Republican lawmakers and campaigns. Sen. John Cornyn (R-Texas) said Google’s recent overtures to the GOP are evidence that the firm realizes it needs to build relationships on both sides of the aisle. Cornyn wouldn’t say whether Google is a monopoly or not, but he did mention that he uses Yahoo and Bing for search, in addition to Google.
While Internet search should be the focus of the hearing, Google has drawn congressional scrutiny on a number of fronts, some of which relate directly to the government’s probe. Privacy concerns surrounding the Android smartphone platform and a $500 million settlement related to displaying ads for illegal online pharmacies were among the many issues that kept Google in the headlines, along with a slew of acquisitions that have drawn their own antitrust scrutiny.
One of the deals in particular, concerning travel search provider ITA Software, resulted in outrage from the online travel industry, which formed a coalition to block the deal. The Justice Department eventually approved the deal with some conditions designed to protect competition, but those terms failed to appease competitors. Nevertheless, Google has plowed forward, announcing deals to acquire restaurant guide Zagat and Motorola’s wireless unit, in the firm’s biggest move into the hardware business.
Those deals have only served to stoke Google’s critics, which, ironically, include Microsoft. The firms have traded jabs over a number of issues; Microsoft was among the firms calling for the European Union to open an antitrust probe into Google thanks to the firm’s control of 95 percent of the European search market. That Microsoft felt the need to request government intervention is an indication of just what the consequences could be if the hearing goes less than smoothly.