Adeep look into Google, Inc.’s pending $3.1 billion acquisition ofonline ad company DoubleClick, Inc. went even deeper this week, as the EuropeanCommission extended its inquiry into the deal until November 13. But evenif the deal goes through, many are predicting that Google’s dominance of theonline search business could make Google the next big antitrust target.
Becoming a target of antitrust regulators can make life miserable for board members. Larger acquisitions move off the table and every deal gets second guessed on its ability to clear regulatory hurdles. Long-term strategy can be difficult to set when boards are forced to be careful leveraging strength in one market to enter another. And worst of all, boards are sometimes forced to rein in their all-out competitive instincts to dominate the competition.
“Google is huge,and a company with a dominant share of a market sometimes will use its monopolypower to exclude new competition or leverage itself into another market.Microsoft was convicted of doing both of these, but I have not seen evidence ofanything like this by Google.” –Robert Lande, University of Baltimore
Tosay that Google leads the search engine business is like saying that TigerWoods is good at golf. And its dominance only continues to increase. Accordingto research site comScore.com, which released a ranking of
Ofall companies, Microsoft, among others, has voiced criticism towards Google,and its potential abuse of monopoly power by causing friction in competition ofthe market. Being accused of being a monopoly is something that Microsoft knowsa thing or two about, of course. More than that, Microsoft experiencedfirsthand, how it can limit a good competitor. For over a decade it’s been fighting, and losing, an antitrust battleover allegations of abusing its monopoly in the operating system market todominate web browser sales and other businesses.
Itcould be that Google’s size does not square with the open and non-corporatespirit that was prevalent during the beginnings of the growth of the Internet.Many say that it doesn’t deserve the antitrust scrutiny. “So far, I have notseen the kind of exclusionary conduct by Google that I have seen by Microsoft,”says Robert Lande, an antitrust law professor at the
TheEU’s extension will allow more time for Google to prove that it would not abuseits power. (Google,though, defended the acquisition last month at a Senate hearing in the
“There are a lot of resources being gathered in the fightfor this merger,” says Dennis Oswell, managing partner at the Brussels-based lawfirm Oswell & Vahida, who says he more than expects the deal to receive a goodamount of attention from anti-trust regulators. “It’s really being scrutinized. You can be sure that people are quite interested in having their say, noquestion about it.”
Oftenscrutiny of a merger is the first step that could lead to wider antitrustactions. If Google is in fact next, it would be forced down a path oflike-events that have played out over the better part of the century.
In1911,Rockefeller’s Standard Oil withered away after itwas found to have dominated the refining industry due to abuse of the controlof pipelines, railroad discriminations, and unfair methods of competition.After AT&Twas dismantled by the FTC in 1984 it was back in front of the commission lastyear when it drew anti-trust attention over plans to acquired BellSouth, a deal which consolidated ownership of Cingular Wireless and Yellowpages.com. That deal was eventually approved. IBM became an antitrusttarget in the late 1970s, but the government never mad much headway, anddismissed its case in 1982. A near miss that can be seen in Big Blues continuedvigor.
Additionally,Microsoft’s nine-year antitrust battle with the EU fizzled yesterday, as thecompany surrendered and agreed to allow competitors access to information andtechnology that could create innovation in the market. The long-lastingaffect of the battle are yet to be seen, but the early results aren’t good.
Alsounder the agreement, royalties payable for the information will be reduced to anominal one-off payment of 10,000 euros (roughly $14,163.54), and royalties fora worldwide license including patents will be reduced from 5.95 percent to 0.4percent. But Lande, for one, isn’t holding his breath.
“Iremain highly skeptical,” Lande says. “The declaration of victory seemshighly premature, given Microsoft’s track record. Has the leopardactually changed its spots? After all, the same people are still runningMicrosoft. Will they do what they said they will in good faith, or willthey passively resist, as they have done repeatedly in the past? I remainhighly suspicious. Ask me again in a year if the leopard actually changedits spots.”
And while the investigation behind the Google deal may bedifferent than that of Microsoft’s, the acquisition may potentiallymove into phase two, which Oswell fully believes it will. But it’s unlikely that it will drag out overthe course of a decade, like its competitor’s battle did.
“It is different, but could this become a drawn outthing? No matter what happens it’s notgoing to take as long as Microsoft. Here you have strict deadlines, so you canbe sure you’re going to have a resolution for this thing within a handful ofmonths.”
Inan age where companies like Google can build vast empires seemingly overnight,as Apple has done in the music-player business and eBay has done with onlineauctions, they will bring antitrust scrutiny just as rapidly. Antitrustregulators should keep in mind that that same rapid change of pace can createcompetitors just as fast. Just ask Microsoft.