Posted by: Stephen Wildstrom on May 5, 2009
It’s time for Google to be very careful not to make the same mistake Microsoft made in the 1990s. Microsoft failed to understand that its growing market power would draw the serious interest of federal antitrusters. It didn’t get really serious until the day it was found guilty of civil antitrust violations. In the end, Microsoft escaped serious penalties when the young Bush Administration settled on easy terms, but the ordeal cost Microsoft years of momentum—and it is still paying the price.
Now it’s Google’s turn. In the last couple of months, Google has attracted antitrust interest on three fronts. Public objections by the government derailed a proposed search deal with Yahoo!. The Justice Dept. is looking into Google’s proposed Book Search settlement with authors and publishers. And the Federal Trade Commission is looking into the relationship between Google and Apple.
Where there is this much smoke, there will sooner or later be fire. And Google would do well to make sure that when the feds come poking around, the find the company on the right side of the law. This will inevitably require some reining in of Google's free-wheeling culture--more power for the lawyers, new compliance regimes, and all the other prices you pay for becoming big and dominant.
The most important thing Google should do right away is get CEO Eric Schmidt disentangled from Apple. To put it bluntly, Schmidt has no business continuing to serve on Apple's board. Apple and Google necessarily have a complex business relationship as partners and competitors. Google is an important supplier of technology to Apple, particularly for the iPhone. And phones built on Google's Android software compete directly with the iPhone. This is an untenable solution and will only get worse as new Android phones come to market.
The fact that this does not seem obvious to Schmidt is a sign that Google is not taking its potential antitrust liabilities anywhere near seriously enough. As Microsoft (and IBM before them) learned, when you get mired in an antitrust case, you lose even if you win. Google does not want to go there.