Google: Government Barks, Company Tempts Fate

Posted by: Stephen Wildstrom on May 12, 2009

I’m in San Mateo, Calif., hosting the 3rd annual Tech Policy Summit, so I’m spending more time than usual thinking about tech policy. It happens that the opening day of the conference coincided with Justice Dept. antitrust chief Christine Varney’s declaration that the hand-off competition policy of the past eight years was no longer operative. “As antitrust enforcers, we can no longer sit on the sidelines,” Varney declared.

I have written before about the risks Google was taking by ignoring Washington’s suspicions about what it sees as the company’s anticompetitive tendencies. But while the government is doing everything but painting “Surrender Eric” on the side of the airship that sails out of Moffett Federal Airfield near the Mountain View Googleplex, CEO Eric Schmidt is stepping up his defiance. At a press luncheon before Google’s May 8 annual meeting, Schmidt said he had no intention of leaving the Apple board. “From my perspective, I don’t think Google sees Apple as a primary competitor,” he said.

For a very smart man who runs a very smart company, this is really dumb. Google has acknowledged that the Federal Trade Commission is looking into the possibility that Schmidt's service on the Apple board, along with that of another director common to both boards, constitutes an illegal interlocking directorate. And Google probably wasn't far from the mind of Varney, a former FTC commissioner herself. Not many companies have done better lately at building--legally--a monopoly than Google, with its vast and growing share of the Internet search market.

Google, a company of, shall we say, great self-confidence, is convinced it is right. But even if you are right, the government can make your life very miserable. Being a monopolist is not illegal, but it does impose constraints on your behavior that a non-monopolist needn't worry about. In effect, a monopolist suffers the burden of proving its innocence.

Schmidt's service on the Apple board has already become more trouble than it's worth. And Google is going to have to do some other things foreign to its freewheeling culture, for example, setting up an antitrust compliance committee with teeth and listening to lawyers' objections to any corporate decisions with antitrust implications. Otherwise, it is likely to find itself the target of a suit that could prove devastating to the spirit of one of the country's most innovative companies, a fate that Google can still easily avoid.

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Bloomberg Businessweek writers Peter Burrows, Cliff Edwards, Olga Kharif, Aaron Ricadela, and Douglas MacMillan, dig behind the headlines to analyze what’s really happening throughout the world of technology. Tech Beat covers everything from tech bellwethers like Apple, Google, and Intel and emerging new leaders such as Facebook to new technologies, trends, and controversies.

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