Google Was 3 Hours Away From DOJ Antitrust Charges

turnkeylinux writes "Google Inc. and Yahoo! Inc. called off their joint advertising agreement just three hours before the Department of Justice planned to file antitrust charges to block the pact, according to the lawyer who would have been lead counsel for the government. 'We were going to file the complaint at a certain time during the day,' says Litvack, who rejoins Hogan & Hartson today. 'We told them we were going to file the complaint at that time of day. Three hours before, they told us they were abandoning the agreement.'"

Comments

Could be fun

[Xest]

I can't help but think you could make a game of this.

Announce something to get the government's back up, wait until they've done loads and loads of preparation then rip their opportunity from under them just before they get chance.

The only downside is it's a waste of tax payers cash, not that most public sector jobs aren't a waste of tax payers cash anyway though.

Re:Could be fun

[Roland Piquepaille]

The only downside is it's a waste of tax payers cash, not that most public sector jobs aren't a waste of tax payers cash anyway though.

On the contrary, breaking up formed monopolies is a lot more expensive than preventing monopolies from forming in the first place.

(on a side note: for those who thought Google was any less predatory than Microsoft, think again...)

Re:Could be fun

[Abstrackt]

We could call the game "Antitrust Frogger". You start a merger and jump out of the way just before you get hit by the DOJ. I'm not sure what your reward would be for making it to the other side of the road though...

Re:Could be fun

[Farmer Pete]

The reward is always the same in these matters...Profit!

Re:Could be fun

[rlp]

The only downside is it's a waste of tax payers cash

That does not appear to be a concern of anyone in Washington these days.

Re:Could be fun

[camperdave]

Announce something to get the government's back up, wait until they've done loads and loads of preparation then rip their opportunity from under them just before they get chance.

4. Access their research through Freedom of Information policies.
5. Devise ways of sidestepping their arguments.
6. Profit!!!

Re:Could be fun

[JanneM]

Quite the opposite. The authorities were on the ball, gathered info and told the parties they'd likely be filing a formal complaint. The result: the putative monopoly was broken up almost before it began, with no damage to the marketplace and no long, hugely expensive trial and appeals that would have sucked money and energy from the state and the corporate parties alike. And the way they did it, if Google and Yahoo really thought they would win such a process they were still free to go ahead and face the consequences.

Sounds like the state did a pretty good job in this case.

Re:Could be fun

[ari_j]

These days? Just how new are you to this?

Re:Could be fun

[squiggleslash]

...by threatening to prosecute them every time they announce they're going to do something illegal?

Why is it that on Slashdot giving people a cheap "out" of being prosecuted for something they'll almost certainly lose is considered worse than prosecuting the same people to the full extent of the law?

Re:Could be fun

[FireIron]

So, let me see if I understand this...

Companies like GM and AIG were allowed to grow to the point where their possible failure threatens the entire national (world?) economy -- no questions from DOJ lawyers.

But Google and Yahoo want to pool their advertising resources, and suddenly the republic is threatened.

Mmm hmmm.

Re:Could be fun

[teslar]

Just how new are you to this?

For him to use "these days" in that way evidently indicates that he meant it as opposed to the "good old days when dinosaurs ruled the world". So I guess he's been around for a while :)

Re:Could be fun

[MikeBabcock]

You think that Microsoft would've backed down?

This is not predatory behaviour; they wanted to something, were told they shouldn't, and then backed down.

That's how I expect a good corporate citizen to behave.

Re:Could be fun

[dwarg]

Of course, that is assuming that there is some need to break up a 'monopoly' in the first place.

The sad thing is the proof of the need for antitrust laws has been staring us in the face for months now. Since the bailout of AIG how many times have we heard the phrase, "too big to fail." How many companies are now trying to convince us that they also are too big to fail? In effect these companies are telling us that they represent a single point of failure for the entire US economy.

The leftist view that we need to prop up these companies is completely wrong. The righties' hands-off approach to all things private inevitably leads to wild fluctuations as companies consolidate and dominate government and individual roles followed by epic collapses and rebuilding periods.

Those that worship at the alter of the free market either don't understand: 1. That competition is the heart of capitalism, or 2. Companies hate, and will suppress, competition because it cuts into profits.

The government should play a role in enforcing competition in a healthy market place. Too much government intervention leads to inefficiency and no government intervention leads to corruption. It is through the involvement of an INFORMED electorate that WE THE PEOPLE control how our government interacts with the private sector.

I say use the bailout money to break these companies up into more manageable and competitive pieces that, once established, will be made into private companies again.

Boiling your opinions down to oversimplifications like, "no government intervention ever!" is an excuse to remain uninformed and ignorant of what the problems actually are and will lead us away from any real solutions.

Both parties spend large sums of money on propaganda campaigns through right and left wing media outlets to convince us of the correctness of their oversimplified slogans and misrepresentations of the other side. If you believe them, know that you are being used.

Re:Could be fun

[Anonymous Coward]

(on a side note: for those who thought Google was any less predatory than Microsoft, think again...)

It's amazing the stupidity of the average slashdotter. That's why I love this place, I guess.

Just to remind you, Microsoft bundled IE with Windows when it had a monopoly on Windows. And, just to remind you in case you forgot, there's nothing illegal about having a monopoly. It just means you outcompeted everyone else. What is illegal is abusing that monopoly.

Let's look at TFA:

The never-filed government complaint would have charged that the agreement violated Sections 1 and 2 of the Sherman Act, Litvack tells the Am Law Daily in one of his first interviews since the companies canned the venture. Section 1 bans agreements that restrain trade unreasonably. Section 2 makes it unlawful for a company to monopolize or attempt to monopolize trade.

So they were basing this on the idea that this would restrain and monopolize trade, so it sounds like all Google did was to make a bigger monopoly and there's a law against that. They didn't abuse any monopoly, which is what Microsoft did.

But let's look closer. Google's deal with Yahoo was actually proposed as a joint venture whereby Yahoo was supposed to profit as well, and furthermore, Yahoo had the option to back out of the deal and use Google only to the extent they wished.

So, if you want to compare Google to Microsoft, let's try to come up with an analogy that would, maybe, make your complaint not sound like the ramblings of a 4 year old. Perhaps if Microsoft and Apple penned a deal to put Windows on the Mac because Apple wasn't selling as many Macs as they wanted because the market preferred Windows.

Anyway, my point is simply this: There's a clear difference between what Google did and what Microsoft did. Google offered to sell its products to its competitors at a rate that was apparently fair enough that they considered it. Microsoft tried to destroy its competitors by abusing an existing monopoly in an unrelated space.

Personally, I think it might be a good thing that the DOJ stopped this (though maybe not if MS now buys Yahoo and guts them), but if you can't see there's a difference between getting a monopoly by being better than your competition and abusing a monopoly because you can't compete in a space, then maybe you should avoid posting things like the above that make you sound like an idiot.

Anyway, let me leave you with one final tidbit from the article:

Litvack acknowledges that Microsoft Corporation and other companies lobbied the department to block the agreement, both publicly and and in private meetings. Litvack insists, though, that Microsoft's lobbying had no bearing on his recommended course of action or on the division's ultimate decision. Microsoft was represented by Cadwalader, Wickersham & Taft.

Sure, I believe that.

Re:Could be fun

[Shikaku]

Shit's going to hit the fan when Google releases their own OS with drivers compatible with Windows drivers.

I'm calling it. I have no proof but I'm calling it anyway.

Re:Could be fun

[muellerr1]

Very insightful post and I agree with just about everything you said, except this part:

The leftist view that we need to prop up these companies is completely wrong. The righties' hands-off approach to all things private inevitably leads to wild fluctuations as companies consolidate and dominate government and individual roles followed by epic collapses and rebuilding periods.

The government leaders of both left and right want to prop the companies up. It's everyone else who opposes this. As soon as the economy started tanking the 'free market' right turned immediately to corporate welfare, and the left went along with it because they're spineless.

The left has more to lose here as their base strongly disapproves of corporate welfare while the right's base is more interested in keeping their portfolios afloat than actual free market ideology.

Re:Could be fun

[Zeinfeld]

Just to remind you, Microsoft bundled IE with Windows when it had a monopoly on Windows. And, just to remind you in case you forgot, there's nothing illegal about having a monopoly. It just means you outcompeted everyone else. What is illegal is abusing that monopoly.

No, what Google and Yahoo were planning to do was to stop competing with each other and from a joint venture. That is specifically prohibited under the anti-trust laws. Obtaining a monopoly through fair competition is legal in the US. Obtaining a monopoly or dominant market position by forming a cartel with competitors is not.

It is very different from what Microsoft was accused of which in turn was rather different from the anti-competitive behavior that they engaged in. David Boies botched the Microsoft anti-trust case from the start. He brought it on the basis of complaints from Sun and Netscape that were really more about providing an alibi for their own incompetence than justified compaints. Netscape's treatment of Spyglass was vastly more aggressive than Microsoft's treatment of Netscape. Sun could have partnered with Microsoft to establish itself as a viable alternative to Intel. Instead they tried to challenge Intel and Microsoft at the same time.

Netscape was giving the browser away so that they could sell a server that exploited exploit the latest essentially proprietary features of their client. By essentially proprietary I mean their habit of releasing a product and submitting the 'standards proposal' to W3C on the same day with no prior discussion whatsoever. That is how cookies were deployed, that is how SSL was deployed and that is how Javascript was deployed. And in every case the Netscape version was initially broken in ways that have taken years to fix afterwards. If you tried to use Javascript in 1995 it was much more likely to crash your browser than do what was intended.

Now if the DoJ had concentrated on the pricing of Windows they had a real argument. The unit pricing scheme was certainly anti-competitive. But giving away the browser with the O/S was not anticompetitive, the browser was originally intended to be free software that shipped with the O/S. tim Berners-Lee proposed the deep integration into the O/S.

Re:Could be fun

[ShatteredArm]

True, to a point. Monopolies are only problematic when the barriers to entry are large. It would be silly, for example, to break up a trust that is limited to the greeting card industry--even if they did decide to ramp up their prices, someone else could easily come in and undercut them. It's a little different, on the other hand, if the startup costs and/or time is sufficiently large. I think we often overstate the power of monopolies to control the markets, though.

I would argue that the AIG support has nothing to do with a monopoly. They don't have a monopoly, and their competitors are at least as viable as they are, they've just been able to convince politicians that it'll hurt too many of their counterparties should they fail. This behavior can certainly encourage monopolies to form, though.

no government intervention leads to corruption

I'm not sure what would lead you to this conclusion. Government is a party in corruption, and in the absense of government there can't be corruption. If you look at a corporation as a quasi-government, then yes, that corporation can have corrupt people in power, but that will be in the interests of the shareholders to prevent (if the executives weren't given special legal protection from shareholders). Governments and corporations operate more or less the same way, except corporations actually have a fiduciary obligation to the shareholders.

More pragmatically, though, there are good reasons for regulation, but those regulations should be designed to provide (a) transparency and (b) accountability. Free markets require, in addition to competition, correct information in order to operate correctly, so you can't have corporations blatantly lying about their financial data.

Re:Could be fun

[Wescotte]

http://www.reactos.org/en/index.html

It's closer than you think.

Re:Could be fun

[Tanktalus]

A healthy industry is one where two or three (or more!) participants share equal or near equal mind-share (and market-share). A dominated (but not monopolistic) industry is where the #1 supplier has nearly 2/3rds marketshare, the #2 supplier is nearly 1/3rd, and a bunch of niche players round up the rest. A monopolistic industry is where the #1 supplier has 80%+ (or 90%+) of the market, and there is no widely-recognised #2 player (which is why Microsoft was so insistent that Macs were real competition). That doesn't mean that you're alone in the industry (though when you are, it's more obviously a monopoly), just that practically speaking, you are.

Is there a widely-recognised #2 in the search market? If that's Yahoo! (and especially if there is no widely-recognised #3), the marketing campaign would treat the industry as a monopoly - using their combined power monopolistically, and, so alleges the Justice Department, illegally.

Google is not a monopoly (yet). But it is close. However, if you combine Google and Yahoo! into a single marketing campaign, their combined power probably is monopolistic. All the other search engines are niche players that probably don't generate noticable amounts of traffic (relative to Google and Yahoo! combined). The Justice Department merely is saying, it seems, that, no, you two can't gang up and demolish the niche players.

By keeping #1 and #2 at each others' throats, the niche players can be ignored by the big guys and thrive, albeit at a smaller scale. If #1 and #2 play nice with each other, they can turn on the niche players and destroy them. That changes from capitalism/competition to monopoly, and that's what the Justice Department was trying to prevent.

The DOJ won't help

[Thelasko]

The way I see it, two things could happen:
1. Google and Yahoo could partner, leading to a monopoly.
2. Yahoo will go out of business, leading to a monopoly.
There is no way to prevent a monopoly.

Re:The DOJ won't help

[krou]

The third option is if Yahoo and Microsoft team up, in which case there is a slim chance that it could counter Google's search monopoly.

Re:The DOJ won't help

[N1AK]

I appreciate the point you are trying to get at, but your arguement is flawed.

If Google got hold of Yahoo a company with market dominance to form a Monopoly WILL be formed.

If they don't merge, and IF Yahoo go under, and IF Yahoo isn't bought out by Microsoft or a less obvious Internet competitor (News Corp? Facebook? etc) who continue it and finally IF all Yahoo users choose to migrate to Google, then you would have a Monopoly.

I accept it could be argued both situations may well lead to the same situation, but the odds would be quite different.

Re:The DOJ won't help

[webreaper]

Erm, it's already a monopoly. Does anyone actually use Yahoo? :)

Re:The DOJ won't help

[nschubach]

Also, Google doesn't provide a proprietary service by any means. You don't NEED www.google.com to do your job, open your documents, or run your applications. At least, not right now.

At any point in time, someone else could create a better search algorithm and steal users away from Google's search, ads, and possibly email. (Though I kind of wish some free services like Bigfoot.com would have stayed around as a mail redirector so you could change mail providers on a whim. [Disclaimer: I haven't checked in a while.])

Re:The DOJ won't help

[MosesJones]

So the third option is

3. Have Yahoo team up with an already convicted monopoly (MS) to help stop Google becoming an monopoly

Making MS stronger doesn't exactly help the consumer or do anything to weaken MS' already existing monopoly on the desktop (as found by the previous DoJ investigation).

Rock, Hard place, Alaska in February

Re:The DOJ won't help

[rhsanborn]

Microsoft has a desktop monopoly, and the government says that Microsoft has certain responsibilities not to abuse that monopoly. They don't have any goal to take actions to actively weaken the monopoly, and they don't have any goals to stop Microsoft from growing in other sectors (like advertising) in which they do not have a monopoly.

Re:Why doesn't...

[carbon 68k]

Free Market + Government Intervention & Punishment + Taxpayers Dollers = LOLFAILWHALE ECONOMY

Free Market + Government Suggestion & Aid + Taxpayer Dollers = Working Economy

A "hey, we're probably going to have to sue you if you do this" seems equally like "suggestion" to me. This is part of how the contours of what's permissible and what's not get drawn, and companies in the future will look at this and say "Google and Yahoo went this far, but got warned off. To what extent is our deal like that one?"

They'll have problems from now on.

[Samschnooks]

Any business transaction that Google may try to do will be under scrutiny. They are the: Coke, Kleenex, Jell-O, Sheetrock, Skillsaw, etc... of the internet. A brand name that is also a name for a type of product - a marketer's wet dream.

Re:They'll have problems from now on.

[molotovjester]

Yes and no -

Marketing a product that has so much brand recognition that you can spend/focus less on brand awareness and more on getting customers in the door is wonderful (and much more quantifiable).

But when your brand name or product becomes synonymous with the type of product itself, then, in the case of a Q-Tip, your product name no longer sells itself, but instead sells every cotton swab in the industry.

Why would Google acquire that dinosaur?

[GMonkeyLouie]

Honestly, if I were Google, I would only be trying to buy Yahoo for Flickr, which seems extremely synergistic with Google's current offerings.

Yahoo's search tech is archaic and inferior, Yahoo's e-mail is not up to par with GMail, and most Yahoo site features are irrelevant and poorly executed on their site.

Both sites have a daily reach of about 30%, maybe they just want to make Yahoo.com redirect straight to Google. That would be good for a laugh and some ad revenue.

Re:Why would Google acquire that dinosaur?

[Enderandrew]

Google was never going to purchase Yahoo. Google was going to infuse Yahoo with money for a partnered search deal to protect Yahoo from Microsoft, but the DoJ thought that was practically a monopoly, while the DoJ thought it would be great if Microsoft BOUGHT Yahoo, and that wouldn't be a monopoly.

Re:Why would Google acquire that dinosaur?

[Anonymous Coward]

Look at the search market share to see why.

a combined Yahoo-google alliance would have control around 80% of the market. (google holds around 60-80%, yahoo around 10-15% depending on the source)

A Yahoo-Microsoft deal would only control around 20-30% of the market share, still short of what google already has and thus the DOJ would view MS in this area as making itself more competitive.

A very diverse company like MS is treated as though it was sepperate companies, their monopoly in one area does not impact or affect their status in another. Their desktop monopoly does not give them any leverage here so it doesn't apply or affect their decision.

Re:Where did it go?

[Abcd1234]

The free market relies on companies not becoming monopolies.

Not quite. The free market relies on companies not *leveraging* their monopolies.

Re:Microsoft

[Enderandrew]

And it isn't like Microsoft doesn't have a dog in the search business.

Re:Where did it go?

[digitig]

The free market that is...

It has never existed, and hopefully never will. Its only advantage is doctrinal purity for some economists who don't like dealing with the messiness of the real world. There would be no advantages for any society that implemented it, and significant disadvantages because it has no effective way of managing the many cases where the cost of an action is not borne by those who benefit from the action. Mixed economies are the only pragmatic economies; the real debate is just over what the precise mix should be.

What's his name

[Enderandrew]

Who was the douche that threw his company under the bus, calling out Yang and saying Yahoo was stupid for not immediately selling out to Microsoft? He didn't care about the future of Yahoo as a company. He wanted a quick payout of his stock. He threw a fit, started a huge fight with the board, made Yahoo look bad, and not only is the future of Yahoo in question, but his own stock has plummeted. Now a Microsoft deal may happen, but for far less. The bitching caused the stockholders to lose their ass, and their company. I say that is a job well done.

Re:What's his name

[snspdaarf]

I believe the douche you are looking for is Carl Icahn.

Re:Microsoft

[starfishsystems]

Might be to advance the perception of fairness, nobody is immune, let the courts decide, stuff like that.

And actually, in the long run, that may bring out the best. The difference may be subtle, but I see a difference in how Google and Yahoo responded here in comparison to how Microsoft has historically responded to such moves. Google and Yahoo respectfully withdrew once it became certain that they were on a collision course with public authority. I believe the record is abundantly clear that in cases of conflict with public interest, Microsoft, historically, has pushed ahead with its agenda to the fullest extent possible, sometimes (as in the EU antitrust case for example) past the point where legal avenues have been exhausted.

Correct me if I'm wrong, and watch for changes in this distinction, but I'd like to think that in the long run a pattern will become evident in which corporations that play fair are rewarded and those which don't lose the advantage.

Re:Where did it go?

[deraj123]

It's proof that Government intervention is required in order to maintain a free market. The free market also relies on a voluntary exchange of goods or services - which requires government "regulation" to prevent theft and other involuntary exchange. Government is also needed to provide things such as tort resolution and contract enforcement.

There is a third option

[elrous0]

I prefer a third option. Here goes:

Yahoo, in a desperate bid to get MS's attention, hires actress Natalie Portman to seduce me to enlist my help in the matter. After hours of outrageous sex, including several acts involving grits, she convinces me to help. I go over to Bill Gates' house to resell him on the idea of a Yahoo/MS merger. Gates, grateful for my help and insight in the matter, agrees to call Ballmer up and talk to him about it, gives me a $2 million tip, and lets me take hom the biggest TV in his house. The next day, after another night of crazy mad oily sex with Natalie Portman, I meet up with Ballmer and Yang at Yahoo HQ. I make them apologize to one another, secure the deal to create a new search engine giant to compete with Google (called "MiYahoo"), get a nice portfolio of stock in the new company, then leave to go rent a goat and a midget for another night of insane smelly filthy sex with Natalie Portman.

Problem solved.

Re:There is a third option

[Toll_Free]

I read this as

After hours of pointless masturbation, I ate my body weight in grits

Then I reread it, and my mind babelfished it the same way.

Anyone else have that problem? :)

--Toll_Free

Re:Where did it go?

[Kelbear]

Something that is often forgotten is that the free market is NOT a natural phenomenon. When left to their own devices, the businesses will try to fuck the consumer, and the consumer who has virtually no individual power, will seek consumer rights via collective bargaining, eventually forming large concerted organizations that will act against the interests of the business. In other words, there are checks and balances in play, and the government's part in regulating the economy was created as a check against businesses seeking to overpower the public.

There are few if any free markets in the world for a good reason. They don't work. If you want to find a free market, you can look towards Somalia, no government interference there.

Comment removed

[account_deleted]

Comment removed based on user account deletion

Re:Where did it go?

[Cowmonaut]

The American idea of "Free Market" is kind of like "Free Software". Basically the goal is to have everyone play nice and have an equal chance to contribute and so on. Nothing about that precludes government regulations. SOME people insist you should have an "anarchic market" and then go around calling it "free".

Fact is, people need rules. They're a fundamental part of society once you go beyond a certain population size. Without them you get anarchy, which is only bad when there are bad people. If everyone just loved everyone else then we'd be peachy. But then you get stupid things like wars based on race, religion, ideals, or just flat out greed. That's reality. That's life.

Some think you can change it, but they're delusional. Unless you are willing to trample over someone's rights and reprogram them (which to me the idea is worse than rape, though not by much) you are going to have people that will just see that as weakness and, like a predator, act accordingly.

The real trick in my opinion is to have AS FEW laws/regulations as possible. The US started out pretty damn well like that but has been slowly corrupted over the years. I'm fairly certain the Founding Fathers would be among those that speculate a revolution or civil war in the US within the next 100 years. Considering the level of military might the US has, that is a pretty damn scary thought.

Correction

[brian0918]

DOJ Was 3 Hours Away From Violating Google's Rights

There, fixed that for ya.

Re:Where did it go?

[MikeBabcock]

You might think it would be dumb, but if you're providing something like an Operating System for computers everyone buys, who cares if you provide what the consumer wants or not when you can essentially force them to purchase it anyway?

People who believe in truly free markets often ignore the barrier to entry for competition. Competition is not a given, and competition may be essentially impossible under some circumstances (the local telco's owning all the copper and poles and rights thereto and new competition not having the right to erect new poles).

Re:Where did it go?

[theelectron]

You forget entirely about price collusion. When everyone is screwing the customer, what business can customers turn to?

Re:Where did it go?

[brian0918]

You forget entirely about price collusion. When everyone is screwing the customer, what business can customers turn to?

The newly-created one that has the huge incentive of customer demand for cheaper products.

The problem with this whole debate is the pragmatic, unprincipled approach taken by everyone opposing the free market. According to this approach, nobody has a right to any of their products, services, or property - the customer instead has all those rights. Unfortunately for that argument, individuals have rights, regardless of how popular it has become to violate those rights. By promoting the violation of Google's employee's rights through government intervention, you promote the violation of your own rights.

Google PREDATORY?

[mi]

for those who thought Google was any less predatory than Microsoft, think again...

Thought again... And again... Nothing... What predation are you talking about? Microsoft's is well known:

• deliberately crashing non-Microsoft's software on Microsoft's operating system
• deliberate withdrawal of specifications required for compatibility
• deliberate changes of standards/formats to cripple competing software
• se of one monopoly (Operating System) to build another (web-browser, office software) — this one is, actually, not only predatory, but also illegal.

What has Google done to justify being called equally predatory?

Foreign markets.

[MMInterface]

I think one thing you are overlooking is foreign markets. Yahoo has a larger market share for some of its services in some nations outside the US: for example, Yahoo Search in Japan. When you look at that market it almost seems like the consumer prefers some of these "inferior" services. The most popular sites there don't usually resemble the clean minimalist design that Google services tend to have. That is until you consider that they are usually viewing the mobile site on their cellphone, and services like web mail are often used quite differently. Even really closed services that run contrary to Google's philosophy continue to do quite well there: iMode.

Re:Where did it go?

[geekoid]

"The newly-created one that has the huge incentive of customer demand for cheaper products. "

wow..simply..wow.

completly ignorant of reality to say that.

OK, your create said company. Now you need to crack the monopoly. What's that, you look like you have a shot? ok, now the coluding companies drop there price below your, you go away, and they jack up there prices.

You should really study up an large company behavior during the beginning of the 20th century to see where this leads.

Ther was a time when there was no regulation, regulation came about becasue of monumental abuse.