In 1998, Microsoft was found guilty of monopolistic practices in the US. Ditto in the European Union in 2007.
Undeterred, the pot is now calling the kettle black.
Microsoft, through its attorney, is accusing Google of monopolizing the search market. It begs the government to come to the aid of this poor $60 plus billion dollar company.
On September 17, 2010, The Wall Street Journal ran what it styled a “debate” between Amit Singhail, a Google Fellow, and Charles F. Rule, an antitrust attorney representing Microsoft and others in antitrust litigation against Google.
A debate it wasn’t.
Singhail mostly explained how Google Search works, and its new “Google Instant” feature.
Mr. Rule, obviously a hired gun, was on the attack. He wants the government to intervene, reasoning thusly: “the Justice Department and Federal Trade Commission have concluded that search advertising is unique and constitutes a separate market. In the U.S., Google commands a share of search advertising well in excess of 70%—the consensus threshold for monopoly under the Sherman Act. Google’s share in most places around the world is even higher.”
How such a conclusion was reached and by whom is a mystery. Certainly it was not reached in any transparent forum.
So allow me to translate what he said into what he really meant:
“I was a government bureaucrat (head of the Antitrust Division during the Reagan era). I figured out that if I meddle in well-regarded companies and accuse them of monopoly practices (justifiably or not), I will get famous, and then be able to trade in my government salary for a really lucrative job.” He now is a partner and head of the antitrust practice at Cadwalader, Wickersham & Taft LLP, undoubtedly earning well into seven figures (Cadwalader employs an “eat what you kill” system of for compensating partners based on what is euphemistically called “their business-generating prowess”). Now, I’ve got a tiger by the tail. If I can make enough noise to generate an antitrust suite (despite the rhetoric, none has been filed), I’ll be set for life. ” “I can probably bill at least $100 million, and who cares what is the outcome? Eventually, this nonsense may become a big enough thorn in Google’s side, that Google will decide to placate the bureaucrats with a very watery ‘consent decree’ that will allow the government to claim victory. Depending on how I feel then, I can either find another victim to go after, or go off and sit on the beach. Maybe I can invest some of my millions in some exciting start-ups and turn them into billions, if I’m lucky.”
Buttressing Rule’s non-argument about Google’s supposed monopoly is an invidious comparison to Microsoft. “Like Microsoft, Google claims ‘competition is just a click away”, he writes.
Microsoft garners its revenue from its monopoly of the desktop and in-office servers (Windows and Office licenses accounted for most of Microsoft’s $4.5 billion of Net Income in its latest quarter, the three months ended June 30, 2010.
Mr. Rule tries to conflate migrating away from being locked into the Windows desktop and Microsoft Office, condemned to paying ongoing “taxes” to Microsoft to merely typing “bing.com” into your browser.
What a fallacious comparison.
Why does Mr. Rule argue that what couldn’t be more different is really the same?
Let’s see what he says. “Google is where the queries are and more than 70% of all ad-supported queries flow through Google’s search engine. Yahoo once provided a choice, and Bing is still hanging on. But there’s reason to believe that Google’s strategy has been to deprive any rival—big or small—of the queries and advertisers necessary to create real alternatives for users.”
So now Mr. Rule wants the folks that brought you record unemployment, Obamacare, TARP, and other disastrous examples of government meddling to interfere in the free market for search based on the imagined argument (because they are clueless) that if 70% of the public chooses of its own free will to go to Google for search, then “there’s reason to believe that Google’s strategy has been to deprive any rival—big or small—of the queries and advertisers necessary to create real alternatives for users,” (a McCarthy-era kind of statement), made without offering a scintilla of proof.
In case you have been hiding under a rock and haven’t been to Google’s website lately, let me briefly explain the basic facts of life there. There are two parts. You type in a query, and as you type it in, Google automatically and instantly starts to give you the most relevant results for you. By the way, this means it takes into account your own search history, and ranks higher results from those places that you personally like to visit. You and I may well get different results for exactly the same query. Then, on the right side, it selects, based on relevance and “ad sense” bids, in an open auction, who is willing to pay the most for their ad to appear alongside the results. All of this is done entirely free. Google only makes money when someone chooses, of their own free will to click on an ad. And naturally, those relevant potential ads willing to pay the most to appear alongside the specific query appear highest in the ad listings.
So can anyone please explain to me why there is anything wrong with this picture?
How do Google’s actions “deprive any rival—big or small—of the queries and advertisers necessary to create real alternatives for users?” (I assume in making this allegation, that by “alternatives” he refers to his own bill-paying clients, keeping him in the lap of luxury)?
And arguendo, even if Google’s popularity offers stiff competition to other search engines (such as the one Microsoft bought in 2004 when it decided there was easy money to be made competing with then small Google, then since Google built the business organically (they bought technology but never bought out a search competitor), what exactly is wrong with that? Asked by a student at a public meeting held in March, 2010 whether Microsoft is being reactive, Steve Ballmer, Microsoft’s CEO responded, “All companies have their mix of proactive and reactive muscle; I’m keen on increasing hit rate in terms of early and often. Yes, Microsoft is following Google in search, but [he said] Google itself wasn’t first to that market.”
So pay attention, Mr. Rule. Your primary client has admitted publicly that Microsoft was late to the search market, and that its future is in cloud computing.
Google got where it got by listening to its customers – search engine users, whom it serves better and better through relentless innovation, and its advertisers, who like its business model, and get results. They each vote in favor, one click at a time.
Mr. Rule has chosen to ignore the timeless and famous words of Hank Rearden, the hero in Atlas Shrugged, the great novel by Ayn Rand (1957), “I work for nothing but my own profit — which I make by selling a product they need to men who are willing and able to buy it.”
There is a reason Microsoft’s stock has barely budged in the last five years. Its monopolistic domination of the desktop only could take it so far. It was extremely late in recognizing the Internet, open source, search, and cloud computing (Amazon has already built the cloud into a billion dollar a year business). Overall, its bureaucratic internal approach stifles innovation, and repels the smartest, brightest, and most innovative potential recruits, who flock to Google or to start-ups. In short, its gotten to be middle-aged and has developed a paunch. Its lack of innovation is simply making them more and more irrelevant. Steve Ballmer, Microsoft’s CEO essentially admitted as much, declaring in March, 2010 that his software firm was “all in” on cloud computing,” saying, “70% of [Microsoft] employees are doing something cloud-based or cloud-inspired. That will go up to 90% in a year. “We’re all in,” he says. “This is the bet for our company.” I guess when your gross sales exceed $16 billion a quarter but you see the handwriting on the wall, you stop at nothing, not even trumped up charges pursued noisily by your shill to try and slow things down while you try and reinvent yourself, and hope the Cloud will save you.
Mr. Rule begs the government to come to Microsoft’s aid. Maybe next, he’ll ask for TARP funds to aid his beleaguered client who can’t even figure out how to spend all its profits, and has nothing more innovative to do with its money than increase its dividend and buyback its shares.
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