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Barbarians at the Moat: Google's Struggle Against the Government

A lot of lawyers are about to get very rich.

Apr 5 2011, 1:05pm CDT | by

Barbarians at the Moat: Google's Struggle Against the Government
 
 
 

It's official. Google is no longer the adorable fresh-faced upstart we fell in love with last decade. They've matured into a big, fat multinational corporation. The US Government decided to mark that milestone by siccing the FTC on their butts. We could be mere months away from the largest antitrust suit of the new millennium.

Some History for Youngsters:

Way back in 1998, the Department of Justice and 20 U.S. states lawyered up and sunk their teeth into Microsoft's armored hide. United States vs. Microsoft alleged that the company's decision to bundle Internet Explorer with Windows was a non-competitive practice that harmed competition. The first trial ended with the decision that Microsoft had a monopoly in x86-based operating systems. They were ordered to break into two seperate businesses: one for software, and one for Windows.

Obviously, that break-up never happened. Microsoft appealed in 2000 and the D.C. Circuit Court of Appeals overturned the ruling. The DOJ ended up settling for the business equivalent of a slap-on-the-wrist.

The Wheel Keeps Turning:

Bill Gates described his antitrust battle as an "unfortunate distraction" and a "waste of resources". Now that they're no longer under the gun, Microsoft's attitude towards anti-trust suits has changed. The Initiative for Competitive Online Marketplace- funded partly by Microsoft- is supporting Foundem in its allegations against Google. Microsoft's antitrust attorneys are also representing MyTriggers and SourceTool in their fights against the search giant.

Antitrust Trendsetters:

Google currently faces antitrust allegations from three different states. Texas Attorney General Greg Abbott is in the middle of an anti-trust review of the company. Of specific interest are allegations that Google alters their search algorithm to harm competitors. Foundem, SourceTool/TradeComet and myTriggers have all accused Google of some form of discriminatory behavior.

In Wisconsin, authorities are investigating the purchase of ITA Software. They seem to believe Google's push into the airline / travel business may harm competition. Ohio's AG would only say that he is "evaluating the facts to determine if it's something we want to review".

It's worth noting that Texas has a history of getting in on the ground floor of tech industry trust-busting. They were also the state that sparked off the government's war on Microsoft.

Protecting the Castle:

As noted by Warren Buffett, Search is Google's moat. The core of their business, and the primary source of their profits. Everything else- Android and Chrome OS and Google Voice and Navigation- is just part of Google's defensive moat. They funnel traffic into Search and protect it from the vagaries of a cruel market.

But the FTC has the terrifying power to leap over Google's moat. They don't need to counter Android and Chrome or compete with the App Market to strike at search. If the courts find Google guilty of monopolistic behavior, the company will be split into separate business units. In one fell swoop the castle castle could lose its moat. You can bet the barbarians- Bing foremost among them- won't waste any time laying siege.

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<a href="/latest_stories/all/all/5" rel="author">Robert Evans</a>
The excitement about new smartphones, tablets and anything mobile drive Robert to unearth the latest rumors and developments in this fast moving space. He adopted 4G as soon as it become available and knows where the mobile market is going.
Robert can be contacted directly at robert@i4u.com.

 

 

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