Another opportunity to question Google practices

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Google has acquired over 100 other companies, giving them an opportunity to leverage their dominance in search and search advertising to a variety of new markets – which clearly merits close antitrust scrutiny.

At a Senate hearing this past September, Google Executive Chairman Eric Schmidt conceded that Google is “in that area” when asked if the company was a monopoly, a concession which he seemed to take back later in written answers to lawmakers.  The executive denied that Google was a dominant company despite trying to blur that point at the hearing and all the evidence to the contrary. The facts, however, tell another story. 

In recent years, the company scanned books in the attempt to control the online book and book search marketplace, leading a federal judge to strongly reprimand them for “wholesale copying of copyrighted works without permission.”  Google has also engaged in the illegal collection of personal data from wireless networks with its Street View service, which it later apologized for and had to settle with law enforcement.  

Google also raised controversy for trying to collect social security information from children in a “Doodle for Google” online contest.  Just recently Google entered into a non-prosecution agreement with the Justice Department and paid $500 million for knowingly accepting phony pharmaceutical ads, despite warnings from authorities.  It was later revealed that the CEO of Google knew about the ads.

In the hearing in September, Senators talked about how Google “cooked” search results to determine what consumers find and what websites they would go to and presented compelling evidence over how Google searches seem to lead to favored sites.  That point should be raised again at this week’s hearing.

Smaller competitors testified about preferential treatment and ‘rigged’ search results.  This illustrates the power that Google has to steer consumers to sites of their choosing, and to its own sites.  An Internet where Google decides what websites we can find is a disaster for American consumers and small businesses.  

As Sen. Mike Lee (R-Utah) pointed out, “Growing complaints that Google is using its search dominance to favor its own offerings at the expense of competition deserve serious attention, especially if consumers are misled by Google’s self-rankings and preferential display.  Such bias would deny user traffic and revenue to competing sites, depriving those sites of resources needed to develop more innovative content and offer better services to customers.  When competing websites lose traffic, they are forced to increase paid search advertising on Google, ultimately leading to increased prices for consumers.”

A piece just last week on ZDNet wrote about Google’s “secret war” on small businesses.  It pointed to statistics showing how Google revenue has been increasing while partner revenues have been decreasing.  

In early 2010, Google sites grew 20 percent, while partner sites grew 24 percent.  By the third quarter of 2011, Google sites revenue grew 39 percent, while partner sites grew by 18 percent.  The articles asks, “What did Google do that suddenly, its sites nearly doubled their growth rate while partner sites suffered a massive drop?”  

The answer, according to the ZDNet piece, is that it controls the traffic and that controls revenues.  “Google managed to shift traffic and revenues from its partner network to its own. That means it keeps all the revenues — it doesn’t have to give away 80 percent of AdSense revenues to partners.”

The tough questioning of Google over the past few months should only be the beginning of this close scrutiny.  Various state attorney generals on both sides of the aisle, the Federal Trade Commission and the Department of Justice, among others are examining their market power and business practices. The facts are clear that Google does not “get it” despite their claim to the contrary.  

Their track record does not show that they understand any special responsibility for their behavior, given their dominant market share.  Such reckless corporate behavior by a company with their control over our Internet experience merits close antitrust and judicial scrutiny.

Steve Pociask is the president of the American Consumer Institute.