7 Reasons Google Looks Like a Monopoly -- AshleyMadison.com Is No. 1

Republicans -- one FTC commissioner and the Texas attorney general -- are asking whether Google (GOOG) is a monopoly. It probably isn't an illegal monopoly as a matter of law (there are other places you can go for search and advertising), but there is evidence that Google abuses its dominant market position to harm consumers and restrict competition. Here's the worst-case scenario an FTC probe of Google might come up with:

1. Google discriminates against certain businesses. The infidelity dating site AshleyMadison.com is banned from buying ads on YouTube or any part of Google's content network. Microsoft (MSFT) and Facebook have similar policies; Facebook even bans any message that contains the name "AshleyMadison.com." This looks like a de facto manipulation of the online dating market -- unless you believe that no one ever arranged an affair via Match.com -- to the detriment of named businesses, and there appears to be tacit collusion between Google, Facebook and Microsoft to do so.
2. Discriminating against certain businesses is wrong even if there is competition. The AshleyMadison situation is arguably akin to the facts presented in the 1985 Supreme Court case Aspen Skiing Co. v. Aspen Highlands. In the Aspen case, four ski resorts operated a joint-ticket system in which skiers could buy a single ticket for all four resorts, and the sales were divvied up later. But the owner of three of the resorts decided to carve out the fourth, by abandoning the joint ticket system in favor of a three-resort ticket. The court ruled that because the larger company had hurt consumers through a deliberate act that discriminated against the fourth resort a restraint of trade had occurred. Given that Google, Facebook and Microsoft are the only practical "resorts" in town for most online advertisers, the FTC could find that Google is unfairly manipulating the advertising market.
3. Consumers believe Google is a public right of way. Google has gone beyond the status of being a mere competitor on the web. Most people regard its services -- and the web in general -- as crucial to their lives, like roads or grocery stores. Imagine what would happen if Google decided to pull the "off" switch on itself: No search engine, no Gmail, no YouTube, no Android phones and apps, no Google Maps, no calendars, and no BlogSpot. Look what happened in Egypt when Hosni Mubarak decided to switch off the Internet. Consumers, and the advertisers who want to reach them, do not generally believe that Google has the right to behave like a segregated lunch counter in the 1950s, where it decides who uses its services and who doesn't.
4. Google does actually manipulate its search and advertising rankings. The Texas attorney general wants to know whether Google engages in "manual overriding or altering of" search result rankings. We already know Google does that from three recent cases: Google has acted to bias its results against JCPenney, BMW and DecorMyEyes, all of whom used "black hat" measures to goose their search results. Google's case is that it is merely trying to make sure its search results reflect the actual importance and relevance of a site, and not how many spam links a company has installed on other sites. But who is to judge what's spam and what is not? There is a case to be made that all three of those companies used perfectly legal tactics to generate links that improved their results, and that Google simply gamed its engine against them because they were too successful.
5. The market has already seen anticompetitive practices. Recently, Facebook announced it would not permit Google-developed apps into its system. Likewise, Facebook's mobile app runs on Google's Android phone system but carries no ads. No one believes that Google will allow Facebook to run its own ads inside its Android app unless Facebook pays some some sort of tribute.
6. The FTC's power to police "unfair or deceptive acts" is broad. The FTC Act gives the agency fairly broad powers to prevent anything that seems unfair. It's unusual to hear Republicans insisting that the FTC ought to flex its muscles more often, but that's exactly what GOP commissioner Thomas Rosch wants:
   

   "Section 5 is a huge aid to us in our law enforcement," Rosch said. "We ought to dust it off, think about how we can apply it sensibly." The FTC is likely to bring a case under that provision before Rosch's term ends in September 2012, he said.

7. The European Union is already investigating Google. A specialist search engine company has complained that Google does not allow them to advertise on its AdSense service.

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