article

06.23.11

Google Faces Antitrust Subpoena

The FTC has subpoenaed Google in an antitrust case—the kind of probe that turned Microsoft from king of tech to an also-ran. Will the same thing happen to Google? Dan Lyons reports.

For years people have been saying that Google has become the new Microsoft—the big bully that has attained an unassailable monopoly and uses its power to push around smaller rivals and gain advantage in new markets. 


Now it looks as if the government agrees. The Wall Street Journal reported Thursday that FTC investigators are going to serve Google with subpoenas and launch an antitrust probe.  


This is huge news that will affect everyone in tech, especially companies that compete with Google, like Facebook, Apple, Yahoo, and Microsoft. Those companies might not gloat publicly, but behind closed doors there must be champagne corks popping all over Silicon Valley and up in Redmond, Wash., where Microsoft is headquartered.

If history is a guide, the probe may represent the beginning of the end of Google’s dominance. That’s what happened to Microsoft. The software maker was never the same after going through a three-year antitrust trial brought against it by the Department of Justice. The trial ran from 1998 to 2001 and ended up with Microsoft agreeing to relatively minor settlement terms.

But the settlement wasn’t what hurt Microsoft. The trial itself was such a distraction that Microsoft lost focus. Afterward, the company became timid and slow, almost afraid to compete for fear of arousing more scrutiny.  

In the decade since the trial ended, Microsoft has utterly lost its way, missing out on almost every big trend in tech—Internet search, digital music and movies, social networking, Internet advertising, tablet computers. Its stock has done nothing, and today stands at almost exactly the same price as when the DOJ case was settled.


Ironically, Microsoft may have had a lot to do with the current investigation into Google. Microsoft has tried and mostly failed to compete with Google in search, advertising, and mobile phones, and as a result has been calling on the government to go after Google.  


Google’s monopoly is not as extreme as Microsoft’s was, but it is still significant. The company controls two thirds of all Internet searches. The question is whether Google has been abusing that position to gain unfair advantage in other areas. In the past few years Google has been making big pushes into new areas, especially mobile phones, where its Android operating system has become very popular.  


If history is a guide, the probe may represent the beginning of the end for Google.

Google shares dropped 2 percent on the news, to $477. 


Google has put a lot of energy into building strong relationships in Washington, D.C., and has been accused of being too cozy with the Obama administration—but all that apparently has not been enough to stave off antitrust investigators, who reportedly are launching a probe into the search giant’s operations. Google chairman Eric Schmidt was an adviser to the Obama campaign in 2008, and has been mentioned as a possible candidate for commerce secretary.  


All that schmoozing and lobbying apparently were not enough to keep the government off Google’s back. Whether the subpoenas lead to a trial, and whether the trial ends up hurting Google, remains to be seen. But make no mistake—this is not good news for Google.

Google is now fighting battles on multiple fronts, with investigations underway by the EU, the U.S. government, and the state of Texas.

The company had "no comment" when contacted by The Daily Beast.