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Google's Outrageous Fortune Draws Slings and Arrows at Senate Hearing

Google's Outrageous Fortune Draws Slings and Arrows at Senate Hearing

Google Chairman and former CEO Eric Schmidt was put to the test by U.S. Congresspeople, Web experts and competitors at a Senate hearing Wednesday to determine whether the search giant abuses its market dominance. The scene reminded many observers of a similar situation over a decade ago involving Microsoft's Bill Gates. Schmidt, however, may have had the benefit of learning from Gates' mistakes.

By Rachelle Dragani
09/22/11 10:59 AM PT

In a scene reminiscent of Microsoft Cofounder Bill Gates' appearance before a Senate hearing on market dominance years ago, Google Chairman and former CEO Eric Schmidt took the stand Wednesday to persuade U.S. Congressional leaders that the search engine giant is not violating antitrust principles.

Schmidt faced Senate officials, led by Sen. Herb Kohl (D-Wis.), who claim his company is using its search dominance to promote its other business interests, such as YouTube, Google Maps and Google Travel. Sens. Al Franken (D-Minn.) and Richard Blumenthal (D-Conn.) did much of the grilling during the hearings.

Jeremy Stoppelman, the CEO of Yelp -- which has faced increased competition with Google since Google bought Zagat -- joined NexTag CEO Jeffrey Katz and various antitrust experts in voicing complaints against Google. Both CEOs said they wouldn't have started their businesses today because of the dominance of Google.

Google and the Senators' offices did not respond to the E-Commerce Times' requests for further comment.

Not Another Microsoft

The parallels between Gates' 1998 testimony and Schmidt's appearance were difficult to ignore going into the trial. Thirteen years ago, the Senate alleged that Microsoft's hold on its Web browser and media player were forcing consumers to stick to Microsoft products.

Since then, Web browsers such as Safari and Firefox have made gains on Internet Explorer's market share, and Apple's iTunes has become one of the most recognized media players on U.S. PCs. However, the DoJ still slapped antitrust suits on Microsoft two months after Gates put forth his defense at the Senate hearings.

But while critics at the time called Gates' defense unconvincing and shaky, Schmidt and Google were perhaps better prepared for the heat. The company hired at least 13 lobbying firms in the weeks leading up to the hearing, met with Capitol Hill policy advisers and launched ad campaigns across Washington, D.C., highlighting the search engine's importance in promoting small businesses.

"People were making the comparisons to Bill Gates and saying Schmidt can't have a similar performance. I think he not just took it to heart but took it very literally. In the opening statement he essentially said, 'We're nothing like Microsoft.' He never mentioned it directly but was constantly drawing the distinction between Google today and Microsoft then," Jerry Brito, director of the Technology Policy Program and senior research fellow at the Mercatus Center at George Mason University, told the E-Commerce Times.

The distinction is important. The charges against Microsoft alleged that the company's operating system, Windows, held an unfair dominance market. At the time, the FTC claimed that since Microsoft owned the platform, it wasn't fair that Windows that favored other Microsoft applications.

In the case of Google, Schmidt asserted during the hearing, the platform is the Internet -- a dominion that no one can claim ownership of. The CEO repeatedly reminded his questioners that other searches are "just a click away."

That's also true in the mobile device space, a market where Google has a huge presence because of its Android platform.

"Android is a platform that Google does own, but it's open source. Google puts it out there and they make deals with companies, but phone makers are also perfectly free to take the Android operating system and make a deal with Bing or Yahoo, which they have," said Brito, referring to devices such as the Samsung Fascinate, a phone that operates on the Android platform but is tied to Bing.

Protecting Consumers

Even if Google did own what Schmidt asserts is its platform (the Internet) and didn't provide an open sourced mobile platform, it would still arguably be providing a valuable service to consumers -- the people that antitrust laws are in place to protect.

"When should Google return a link? When should Google return a zero-click answer? Google increasingly is in the answer business, and you don't need to go to another site if Google can answer your question," Randal C. Picker, professor at the University of Chicago Law School told the E-Commerce Times.

If the DoJ files charges against Google, then, the solution to slimming Google's search prowess would be difficult to determine.

"Let's suppose the court goes along and says this is unfair. The remedy would be to have to stop doing this really great service, and have a lesser product," said Brito.

Whatever the outcome, it's now be left up to the Federal Trade Commission, who have yet to announce when a decision will be reached.


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