AntiTrusting

I really like playing Monopoly, but only when I have a couple of monopolies — otherwise it just isn’t fun to slowly go bankrupt. I suspect that’s why so many people despise the game. When I started to learn about what a ‘real’ monopoly was I began to think how sweet it must be to be someone like Bill Gates — who clearly had a Monopoly at Microsoft in the late 90s. I watched and read with great interest as the European Union tried to smack around Microsoft on anti-competitive practices and other fancy words that only mean: ‘unfair’. I know monopolies are not good for consumers or for innovation, but I can’t help but to look at them in awe — to build a monopoly is no easy thing, to stay a monopoly is easy.

Short of breaking up a company, the most regulators can do are to force companies to change small bits (e.g. not installing only Internet Explorer by default or Windows Media Player) or fine you. When you are a monopoly fines mean nothing — you have the money to cover it — and breaking apart a company usually only makes the ‘real’ owners of the company even more money. Antitrust laws, and the enforcement of them, is a pretty tricky matter and not always effective.

For example Verizon and AT&T originally came from the same company and now, decades later, stand to soon be the only two wireless carriers in the U.S. that matter. 1

Back to this Google thing though — Microsoft running and telling mommy and daddy on Google. Steve Lohr for the New York Times reports:

Microsoft plans to file a formal antitrust complaint on Thursday in Brussels against Google, its first against another company. Microsoft hopes that the action may prod officials in Europe to take action and that the evidence gathered may also lead officials in the United States to do the same.

You see they are starting in Europe because they stand a better chance at winning (anything) there, which could in turn spur the U.S. Department of Justice (DOJ) to launch a similar investigation.

The entire complaint seems to come down to one issue Microsoft has with Google, Lohr again:

But a central theme, Microsoft says, is that Google unfairly hinders the ability of search competitors — and Microsoft’s Bing is almost the only one left — from examining and indexing information that Google controls, like its big video service YouTube.

Basically, Bing can’t search YouTube in the same way that Google can and since Google owns YouTube, Microsoft is claiming that this is anti-competitive behavior — which, if true, it is. The question though is if that constitutes an antitrust violation. Europe has different laws than the U.S., and I won’t pretend to know them, but here in the U.S. it is generally understood that antitrust violations are defined as:

consisting of laws to protect trade and commerce from unlawful restraints and monopolies or unfair business practices

OK so that doesn’t help — which is exactly why antitrust regulation is so hit and miss. On the surface it would seem that Google does indeed have a monopoly in search and text ads, I think even Google would be hard pressed to argue that. So far though they don’t seem to be acting in a manner that would be unfair and thus stop Bing from succeeding in any of those areas — except with how they can index YouTube, which is why that is the point of attack for Microsoft.

Microsoft in this case is hoping that the overwhelming popularity and the scent of unfair practices with YouTube indexing will be enough to cause the EU to take some form of action against Google. People know Google is massively popular and Microsoft is hoping that they can make people stop saying ‘popular’ and start saying ‘monopoly’. But should they?

I think not and I think Microsoft jumped the gun a bit here.

Let me frame this another way.

If a new search startup came about (let’s call them Brick) and Brick was able to index YouTube and the rest of the web better than anyone else — would this constitute anti-competitive behavior? Hardly. So the real problem is not that Google may have better algorithms that Microsoft’s Bing, but that they must — because they own YouTube — be doing something that is anti-competitive to get better YouTube search results.

Which is exactly what Brad Smith, SVP and General Counsel for Microsoft, is saying:

First, in 2006 Google acquired YouTube—and since then it has put in place a growing number of technical measures to restrict competing search engines from properly accessing it for their search results. Without proper access to YouTube, Bing and other search engines cannot stand with Google on an equal footing in returning search results with links to YouTube videos and that, of course, drives more users away from competitors and to Google.

Second, in 2010 and again more recently, Google blocked Microsoft’s new Windows Phones from operating properly with YouTube. Google has enabled its own Android phones to access YouTube so that users can search for video categories, find favorites, see ratings, and so forth in the rich user interfaces offered by those phones. It’s done the same thing for the iPhones offered by Apple, which doesn’t offer a competing search service.

Interesting, but how do you prove it? Seems to me that all Google needs to show to regulators is that they simply came up with a better search tool than Microsoft did and that they are not actively doing anything to block Microsoft.

If I was Google I would say to regulators that YouTube searching only makes up X percent of overall web searches and thus Google clearly does not have a monopoly on YouTube searches, they just have an advantage in it. I would essentially argue the market is too small to have an overall effect on Bing’s competition with Google. How many people really pick their search engines based on how well they search YouTube?

To the second point that Smith brings up you have to wonder what he is smoking. He is trying to show that because YouTube and Google are one in the same they have a better integration with the service and because Apple doesn’t offer a search engine — Apple too has better integration with YouTube. The way I read this though is that Google and Microsoft couldn’t come to terms with a YouTube integration agreement and now Microsoft is whining about it.

What I can’t help but wonder though is what Microsoft really hopes to gain from this.

Do they want Google fined? That would do very little to hamper Google. Do they want them broken up? I doubt that would do anything to help slow Google down — I mean they may just have to spin Android and YouTube back into separate companies — plus I don’t think the EU can make that call, I think it would have to be the US DOJ. So they must want to force a change in these practices right? What would that achieve though? Sure their YouTube search results would be better, as would the Windows Phone 7 YouTube app — but that isn’t the reason people aren’t using Bing, or buying Windows Phone 7 devices.

It would seem Microsoft doesn’t stand to gain much here. This just seems rather desperate.

Jumping the Gun

I honestly think Microsoft jumped the gun here and potentially screwed users in the long run. Had Google been left alone for another couple of years (so they could really become a monopoly) I would bet there would be a far better case to be made against them — here in the U.S. That case would likely be able to pull in Google’s ISP dreams, Android, Chrome, Ads, and YouTube. It would lead to far more damaging rulings against Google than just bitching about YouTube access.

It’s not like Microsoft is grasping at straws to stay alive, yet they are acting like they are.

Apple

What really blows me away though is that HP/Palm, Google, and Microsoft has yet to go after Apple for a monopoly with the iTunes Store and iPods. I mean you could claim that because they own that market and won’t allow other devices to sync with iTunes, that indeed the iPod/iOS has a monopoly with the iTunes Store and thus something needs to be done to allow Android/WebOS/Windows Phone 18/Others to sync with iTunes.

Just a thought…

  1. Sorry Sprint, but you know it’s true.
Originally posted for members on: April 1, 2011
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