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European Commission Buys Google's Dubious Antitrust Pitch

September 1, 2007
By David B. Kopel

Google markets itself as a twenty-first century innovator, but lately the company has been following a failed business model from the previous century: Trying to game the antitrust laws against the competition.

Google markets itself as a twenty-first century innovator, but lately the company has been following a failed business model from the previous century: Trying to game the antitrust laws against the competition.

Amazingly, bureaucrat interpretations of laws in Europe have grown so crazy that Google was able to use them in order to get government help in taking business away from smaller competitors.

Google is king of the Internet search engines to the point where "to google" means to run an Internet search. According to searchenginewatch.com, as of April 2007 Google performs an astonishing 55.2 percent of all U.S. searches on the Internet. In some countries such as Germany, Google's market share is far higher.


Google's Dominance

But this actually understates Google's dominance. Google provides the search results for America Online, which has 5.4 percent of the U.S. market. Thus, three of every five U.S. Internet searches get their results from Google.

Outside the Google empire, the most popular search engines are Yahoo, with 22 percent, and Microsoft, with 9 percent.

Google's search engine already gets plenty of business from people who like it. Yet Google works awfully hard to put itself on people's computers even when people don't actively choose it.


Google's Partnerships

For example, Google has an agreement with Sun Microsystems to attach its search engine to Sun's Java software program. Java is widely used programming software that supports presentation of everything from database information to moving graphics on the Web.

To encourage its use by Web site programmers, Sun gives away Java "client" software for free to PC users. The Google-Sun deal means that today a standard Java installation attaches a Google toolbar to your browser.

Likewise, Mozilla gives away its Firefox browser for free. But Google pays Mozilla handsomely for incorporating a Google search box in the browser and setting the program to open on the Google home page by default.


Google's Competitors

There's nothing wrong with Google using its enormous resources to form partnerships aimed at increasing its markets share. But it's perverse to twist antitrust law to prevent competitors from responding in like ways.

For example, much in the manner of Google's deal with Mozilla, Yahoo partners with PC manufacturers to pre-set a search box on the latest version of Microsoft's Web browser, Internet Explorer 7. Thus, if you buy a Hewlett-Packard computer it will be preset with the Yahoo search box.

If the manufacturer doesn't do anything to the Microsoft browser, the default search engine is Microsoft's "Live Search." If you don't like your computer's default setting, you can change it in about 10 seconds and two mouse clicks.

The previous version of Internet Explorer (IE) didn't have the handy little search box. By default, IE would use the Microsoft search engine for a search term entered in the address bar. To change the address bar to use a different search engine was fairly simple, although not blindingly easy. If you installed the Yahoo Toolbar, for example, the address bar search would automatically use Yahoo.

Once you made the change, Microsoft respected your choice. If, after selecting Yahoo as your favorite search engine, you updated to IE 7, the new version would retain your preference. The Yahoo search box would stay in the browser.


Google's Demands

Believe it or not, Google complained to the U. S. Department of Justice (DOJ) and to the European Commission that Microsoft was violating antitrust laws by allowing IE 7 simply to copy the setting from the address bar search on IE 6.

The DOJ disagreed. As department officials realized, Google's demand for action was based on an extremely thin legal reed. Given Google's 60 percent share of Internet searches, compared to Microsoft's 9 percent, it's pretty clear the chances of Microsoft taking over the search engine business are not much better than the chances of Michael Vick winning an award from the Humane Society.

Yahoo also opposed Google's protest--with good reason. As Yahoo accurately pointed out, if the DOJ ordered Microsoft to follow Google's wishes, computer users who had set their IE 6 address bar to search with Yahoo would find their choice disabled when the IE 7 upgrade was installed.

Unfortunately, the story doesn't end with the DOJ's sensible decision.


Google's End Run

Google also complained to the European Commission, which had already fined Microsoft a billion dollars on unrelated matters. American antitrust law can be nebulous, but European "competition" law is so vague as to be essentially Kafkaesque.

The EC liked Google's theory. Microsoft, deciding discretion was the better part of valor, relented. But the EC's decision had worldwide implications. So now, for any user anywhere, the IE 7 upgrade won't copy search preferences from IE 6. Instead, it prompts users to choose a default search engine.

For power users who have clear preferences, the question makes no difference, since they will just pick what they know they want. Some of the less technologically savvy consumers, who were using the Yahoo toolbar in IE 6 but not paying much attention, will end up switched to Google. (In part because of Google's greater name recognition.)


Google's Government Allies

You might say the whole thing is trivial, but Google, Yahoo, and Microsoft obviously didn't think so. They put a lot of time and legal fees into fighting over the issue.

They recognized the result would be taking search engine users away from Yahoo and Microsoft and giving them to Google.

It shows how bizarre the European Commission's "competition" law has become that the EC claims to promote competition by moving customers from companies with smaller market shares to the company that already has three-fifths of the market.

And it seems ridiculous that the details of the installation of a computer program written in Redmond, Washington are being decided by bureaucrats in Brussels.


David P. Kopel (dave@davekopel.org) is research director at the Independence Institute in Golden, Colorado.

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