Google, Intel, Others Face Resurgence in Antitrust Interest, Actions

(MoneyWatch)  No one likes to be a target of government investigation. But given the Obama administration's stated interests, and the modus operandi of the high tech industry, there could be a clash that will have corporations and executives hiring lawyers for antitrust defense.

The Department of Justice yesterday issued a notice that it was withdrawing a previous policy of dealing, or not dealing, with antitrust issues. According to the press release, the DoJ was repudiating a September 2008 report that "raised too many hurdles to government antitrust enforcement and favored extreme caution and the development of safe harbors for certain conduct within reach of Section 2 [of the Sherman Antitrust Act].":

[Assistant Attorney General Christine Varney] said that while there is no question that Section 2 cases present unique challenges, the report advocated hesitancy in the face of potential abuses by monopoly firms. She said that implicit in this overly cautious approach is the notion that most unilateral conduct is driven by efficiency and that monopoly markets are generally self-correcting. "The recent developments in the marketplace should make it clear that we can no longer rely upon the marketplace alone to ensure that competition and consumers will be protected," Varney added.

Every tech company should pay attention closely to this, because it signals a resurgence of antitrust activity under the Obama administration, and technology companies often make themselves enticing targets.

High technology has been the subject of some of the most significant antitrust activities, whether suits or threatened actions over the years, including AT&T, IBM, Microsoft, and Intel. There are a few obvious reasons why technology firms present such tempting targets for regulators:

• The industry moves fast, and a company can move from newcomer to dominant player in a short amount of time, snapping up market share at a rate that alarms regulators.
• The interest of corporations to use "standard" technology can drive effective market consolidation, concentrating the influence one company can have.
• Tech firms also consolidate at a fast clip, reducing the number of competitors.
• Because many tech companies are relatively young, they have reduced institutional knowledge of and respect for antitrust considerations.

The last point often translates into what regulators can see as an arrogance of operation that has the same effect as waving a red cape in front of an irritable bull.

The reaction of regulators is only supported by the nervousness of companies that think they are being marginalized in an "unfair" way, and that can translate into action against companies that could be portrayed as "antitrustworthy." Look at Google. As many have noted before, it has been scaring companies and regulators for a while. Google has begun to pay some attention to antitrust issues, but nowhere near quickly nor thoroughly enough. The Google Book settlement has raise Justice Department antitrust interests. The Federal Trade Commission is looking into ties between the boards of Google and Apple.

As Google's gadfly, Consumer Watchdog has noted that the company developed a presentation trying to argue that antitrust concerns are unreasonable and unwarranted. Unfortunately for Google, there are times that PR can do wonders, and times when it can't. One time it can't is when the PR campaign is full of holes, including the following:

• Pointing to a criticism about the Google acquisition of DoubleClick and a potential increase in online display ad rates and saying that ad rates have fallen fails to note that the current economic crisis was the driving force in lowering all ad costs. Trying to counter concerns about privacy by quoting two organizations either funded by digital media and communications companies is hardly compelling or whose mission is "to help interactive marketers do their jobs better" is simply getting a vote of confidence for an industry by the industry.
• Trying to argue that its total annual revenue is small compared to that of Microsoft, AT&T, Verizon, or IBM is specious. Virtually all of Google's money comes from online advertising revenue. Why not make a more realistic comparison to Yahoo? Because that would illustrate how large Google really appears.
• Talking about an interest in technical "openness" has no bearing at all on how dominant the company is in its market.
• Saying that Yahoo queries "doubled over normal levels during Google search error" is so non-pertinent as to be laughable.

All such programs will do is serve to antagonize Congress, the DoJ, the FTC, and any other body that wants to prove how pro-consumer it is.

Antitrust issues aren't coming up only in the US. Europe has been reasserting its interests in controlling perceived monopolistic behavior. Tomorrow, the EU is expected to levy one of the heaviest penalties in Europeagainst Intel for anticompetitive behavior:

It will be the climax of a near-decade-long investigation into the group's marketing practices. Lawyers say the fine could top those heaped on Microsoft, which, combined, exceeded ?1bn ($1.36bn).

The attitude that large tech companies often take is to do first, ask permission after. But the newcomers might do well to look at the financial giants and ask why they tend to be wary. One might hope there would be a more effective way to learn a lesson than a decade or two of government attention.

Related Posts Is Google Burning Its Brand? Google Stepping Up Public Policy PR Google Book Deal in DOJ Sights Monopoly image via stock.xchng user jpsdg, standard site license. --

MoneyWatch Poll: How Has the Financial Crisis Affected You?