Intellectual Property Law

Google Uses Oldest Trick in Book to Counter Microsoft

By Cynthia Brumfield

For a company that only recently came up to speed in Washington, Google is playing by the rules spelled out in the unofficial big company lobbying handbook. The search giant has launched a swift and seemingly all-out effort to thwart Microsoft's $44.6 billion acquisition of Yahoo!, including the old standby: hobble competition by inviting government intervention.

Over the weekend, Google's lobbyists and lawyers were working overtime to point out the "troubling questions" a Microsoft-Yahoo! merger raises, as David Drummond, Senior Vice President, Corporate Development and Chief Legal Officer for Google put it in a broad critique of the deal posted on Google's blog yesterday. Google is using Microsoft's history of anti-competitive behavior in the PC world as a big wedge to pry apart the deal .

Could Microsoft now attempt to exert the same sort of inappropriate and illegal influence over the Internet that it did with the PC? While the Internet rewards competitive innovation, Microsoft has frequently sought to establish proprietary monopolies -- and then leverage its dominance into new, adjacent markets.

The New York Times says that one of Google's main objectives is to run out the clock until a new and presumably Democratic administration takes office. Stalling for time is yet another page from the corporate lobbyist handbook, but in this case would be even more effective. A Democratic administration working in conjunction with a Democratic Congress is bound to make Microsoft miserable.

Buying time is one thing, but succeeding in getting the DOJ or FTC to derail the deal is another kettle of fish altogether. The adage that "you better watch out what you wish for" is an apt warning for Google because if it succeeds in getting the feds to block the merger, this outcome could bite Google on the bum farther down the road.

Both the DOJ and FTC rely on well-established merger guidelines that are driven by how the relevant market is defined. A Microsoft-Yahoo! merger becomes more problematic from an antitrust perspective if the agencies choose to define the relevant markets narrowly.

For example, if the DOJ or FTC (it's not clear which agency would review the deal, but probably DOJ) defines the relevant market as "advertising," it's clear that a Microsoft-Yahoo! merger would not materially lessen competition in that market because the two companies account for only a small fraction of total advertising sales (TV and newspaper ad revenue dwarf anything that Microsoft-Yahoo! could conceivably generate). But if the relevant market is "Internet advertising," then the question of whether Microsoft's acquisition of Yahoo! would reduce competition becomes far more interesting.

In other words, the narrower the market definitions get, the less likely Microsoft's deal would survive antitrust scrutiny. Google, however, would have to live with those narrow definitions too, making any future Google deals likely subject to the same strict review.

And you'd better believe that if Microsoft's deal falls through because Google messed with the feds' heads, the Redmond giant will be the first to squawk loudly the next time Google tries to push through a deal of its own.

Therein lies the problem with asking Washington to cripple a competitor through adverse laws, rulings and regulations. It's a vicious cycle of payback. In fact, this latest salvo by Google may very well be a result of Microsoft's own meddling into Google's deal to buy DoubleClick.

The funny thing is that both the FTC and DOJ conduct these sorts of investigations anyway when mergers of this magnitude are announced and the economists and attorneys who review the deals are relatively immune to lobbying. Still, pressure can't hurt, particularly if Google gets a few members of Congress or Senators, or a Democratic administration, to "advise" the antitrust agencies.

Whatever the case may be, one thing is clear: Google is a DC-neophyte no more.

Full post as published by IP Democracy on February 04, 2008 (boomark / email).