Google stranglehold won't be easily shaken

The search engine giant's dominance has ruffled feathers, with the US being urged to take legal action. But past precedents suggest this is unlikely.
Eric Schmidt is the chairman of Google, which is the subject of an investigation by the US federal trade commission. Jerry Lampen / EPA
Eric Schmidt is the chairman of Google, which is the subject of an investigation by the US federal trade commission. Jerry Lampen / EPA

There are post-election rumblings in the United States that the most powerful man in America may soon be not the newly re-elected president, Barack Obama, but Eric Schmidt, the chairman of the internet search giant Google, unless immediate action is taken.

The US federal trade commission (FTC) is now actively investigating accusations against Google that it is abusing its growing dominance in Web-based services to rig search results while attempting to dominate new industries such as mobile communications and online travel.

Based on the early results of these investigations, the FTC is understood to be preparing a recommendation that the US government takes Google to court to answer the growing allegations in full.

"The underlying strategic issue is the expansion and diversification of services offered by Google. The FTC is responding to concerns by other e-commerce players that Google is preferentially ranking its own services above those of third parties in its results," says Adrian Drury, a principal analyst at the research company Ovum.

He adds that a group that has been particularly vocal in its criticism of Google dominance on the internet has been Web travel companies such Kayak and Travelocity, who are essentially data aggregators themselves, and who are threatened by Google's expanding initiatives to aggregate all real-time traffic data. The search giant is also accused of attempting to establish an unfair dominance of the personal communications industry in its attempts to control the mobile phone market.

Google's Android software for mobile devices is running on 75 per cent of smartphones shipped in the third quarter of this year, as the search company extended its lead over Apple, according to the research firm IDC.

Google's $12.5 billion (Dh45.91bn) acquisition of the US mobile phone maker Motorola Mobility has also added to these concerns.

Other areas in which Google is making inroads include location-based services, where its internationally ubiquitous mapping service gives it what some in the industry allege is an unfair advantage. Google software is also being increasingly used in car navigation systems.

This is not the first time that Google has been accused of manipulating its search software to disadvantage legitimate competitors. Confronted in September last year by the US senator Mike Lee, who suggested Google had "cooked" or skewed search results so that its own services always ranked highly, Mr Schmidt said: "I can assure you we've not cooked anything."

According to Tim Shepherd, an analyst at the international research firm Canalys: "For some, senator Mike Lee being a good example, I believe there is also a philosophical issue at stake - that Google should not be allowed to become too influential and too powerful in too many areas just because it is the starting point and the conduit to the wider web for so many."

He adds: "For a company that purports to hold the statement 'do no evil' as a corporate mantra, this is a case that could have serious implications … Loss of consumer confidence in any area will be damaging to its credibility, its image, its brand value and its perceived 'coolness'.

But there is a growing view that the US government may find it difficult to clip Google's wings, particularly regarding the allegations that it manipulates search results for its own ends.

According to Mr Drury: "The presentation of search is by definition reliant on a filter and our understanding is that a case built around the display of a search engine results page could be a difficult one for the FTC to pursue."

Mr Drury believes that, for this reason, the US government is likely to pursue Google through other avenues such as the patent issues related to its takeover of Motorola Mobility.

Google is also accused of being resistant to releasing data that would enable advertisers to compare results between advertising on Google versus the number of responses from other search platforms such as Bing, Microsoft's rival search engine.

However, Google is not the first IT company to become embroiled in a legal furor surrounding its attempts to dominate the industry.

An antitrust action was taken against Microsoft a decade ago, accusing it of abusing its effective monopoly in the PC operating system market to ensure its success in the Web browser market by bundling its Internet Explorer web browser with the Windows operating system.

"That led to lengthy and costly legal actions both sides of the Atlantic, the imposition of terms to ensure consumers were offered choice, and a degree of damage to Microsoft's reputation," says Mr Shepherd.

"The similarities suggest events may well repeat themselves."

Like the Microsoft of 10 years ago, Google is now facing heavy criticism on both sides of the Atlantic that it is abusing its dominance. Mr Schmidt is aware that in Microsoft's case, an international legal battle lasting years preceded the company's to-date inexorable decline and he may therefore be tempted to reach a speedy settlement.

"We wait to see what deal Google will strike both in the EU and the US," says Mr Drury.

Published: November 11, 2012 04:00 AM


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