Under the high pressure of the antitrust investigation, can Google survive?

 This time, Google may not be able to retreat completely. Among the four major technology giants under investigation at the same time, Google is in the most dangerous position: antitrust lawsuits are right in front of them, and even if they will not be split, they will almost certainly hurt their bones.

Antitrust taboo

Within the Internet giant Google, antitrust (Antitrust) has always been a taboo sensitive word. For many years, whether it’s company meetings, intranet forums or work emails, Google’s management and employees have deliberately avoided topics and discussions in this area, and absolutely must not use “crush”, “kill”, and “kill”. "Block" competitor's statement. Obviously, Google is to prevent it from becoming court evidence in future investigations.

The same thing happens within the chip giant Intel, even if the word market share is mentioned, it will be replaced by market segment share. In fact, the leading giants in every industry will bear the pressure of antitrust. Intel does the same, and Google does the same. Since becoming an Internet search giant, Google has always hung the antitrust "sword of Damocles" above its head. In 2008, the search advertising cooperation between Google and Yahoo was directly rejected by the Ministry of Justice.

Steven Levy wrote in the book "In The Plex" that as early as 2006, Google CEO Schmidt had realized that the company would inevitably face antitrust threats in the future. He has repeatedly emphasized in public that Google’s share of the global advertising market is only 1%, trying to put Google into the global advertising market (not even the online advertising market) to discuss regulation, downplaying Google’s lack of market dominance, but never mentioning it. And Google's share of nearly 70% of the Internet search market. Within the company, Schmidt is constantly emphasizing the importance of staying away from antitrust high-tension lines.

Schmidt is very aware of the power of the antitrust stick. In the late 1990s, as a direct competitor of Microsoft (successfully serving as the president of Sun and then the CEO of Novell), Schmidt actively lobbied the Clinton administration to launch an antitrust investigation against Microsoft and filed a lawsuit against Microsoft's use of Windows' dominant advantages to suppress competitors . Microsoft was almost forced to spin off, Gates then resigned sadly. Even today, more than 20 years later, Gates still feels regret: he was too young to take the government's antitrust lawsuit seriously.

Escaped the supervision

However, what Schmidt worried about still came. Google's first antitrust investigation by the US government was in 2010. Fengshui took turns. Christine Valney, who once sued Microsoft on behalf of Netscape, became the antitrust commissioner of the Obama administration and began to point the antitrust investigation to Google. In 2011, the Obama Administration's Federal Trade Commission (FTC) launched an investigation of Google for nearly two years, and believed that Google was suspected of biasing its search results towards its own services and products.

With the lessons learned from Microsoft and Gates, Schmidt is facing this enemy. In the nearly two years since the FTC launched its investigation, Google hired as many as 25 lobbying agencies to move up and down in Washington, DC. In 2012, Google became the technology company with the largest investment in political lobbying in the United States. This "throne" earned by investing tens of millions of dollars a year has been maintained until now. Schmidt not only went to Washington, DC, to visit important members of Congress in turn, but also took the initiative to participate in Obama's 2012 re-election campaign to cheer for him. During Obama's eight years in power, he has always maintained a good relationship with Silicon Valley Internet giants.

In addition, Google has also used some covert and indirect lobbying measures: they hire senior consultants who may influence the FTC, sponsor think tank scholars with political influence, and fund academic research projects at universities. Upon direct request after Google’s funding, these think tanks and universities either publicly expressed their views against antitrust lawsuits against Google; or invited politicians and parliamentarians to participate in their own Internet forums, subtly conveying what they should not Information that penalizes Google. In 2012, Google even personally drafted guest invitations for George Mason University's Internet forum.

During the congressional hearings at the end of 2011, Schmidt repeatedly emphasized that Google had brought economic and entrepreneurial opportunities to American small and medium-sized enterprises, and publicly accused the so-called preference for their own products as completely frustrated competitors. He also named them. Competitors such as Microsoft, Yelp, a business review site, and Expedia, a travel booking site. Under Schmidt's multi-pronged approach, just after Obama was re-elected in January 2013, the US government announced that it would not take the next step in litigation against Google. Google escaped a regulatory disaster unscathed.

Most at risk

Almost ten years have passed, and Google once again stood in front of the antitrust knife. The Trump Administration’s Department of Justice has launched a 14-month antitrust investigation against Google to determine whether Google has hindered market competition in the areas of search and advertising. But this time, it may be difficult for Google to retreat. Among the four major technology giants under investigation at the same time, Google is in the most dangerous position: antitrust lawsuits are right in front of them, and even if they will not be split, they will almost certainly hurt their bones.

In the past ten years, Google's advantage in the US Internet market has further expanded. Nowadays, Google's share in the web search market exceeds 90%, its share in the mobile operating system market exceeds 80%, and its share in the segmented service market such as web browsers, maps, and videos exceeds 70%. Among the four Internet giants currently under investigation, Google has an overwhelmingly dominant position in its core market compared to Amazon in the e-commerce field, Facebook in the social field, and Apple in the mobile field. Looking at the world, Google also occupies a dominant position in almost every market except for a few countries such as China and Russia.

At the Congressional hearing of the four major technology companies in July this year, Google and Facebook became the main targets of congressmen. Congressmen of the two parties have very different concerns about the two companies: Republicans are more concerned about whether the two major online platforms are biased in political speech, while Democrats are more focused on whether the two major technology giants hinder industry competition. Although the two parties have different starting points, they have reached a consensus on handling Google's issues.

Last week, the US House of Representatives Antitrust Committee (led by Democrats) published a 400-page antitrust investigation report, which clearly stated that the four major technology companies have abused their market position and called on Congress to legislate to spin off their businesses. Google is in the search field. The monopolistic behavior was also highlighted. Judging from the results of current polls, the Democratic Party is likely to control both houses of Congress next year, which means that they may continue to advance the current antitrust legislation agenda.

Political influence

According to US media reports, the US Department of Justice has reached a unified opinion on Google's antitrust case, but there are differences in the progress of the lawsuit. Investigators hope to collect more evidence in order to hold more chances of success in subsequent antitrust lawsuits, while Attorney General Barr (William Barr) and others hope to file a lawsuit against Google as soon as possible. There are some contradictions between the White House and Google behind this. The current president has always accused Google of deliberately favoring the Democratic Party and presenting search results that are unfavorable to him.

The U.S. Department of Justice has previously divided two groups of investigations into Google: Google’s search business is the focus of antitrust; the other group investigates Google’s online advertising business. According to the previous definition of natural monopoly in the US antitrust regulations, a company that relies on its own products and technology to gain market dominance is not a monopoly, but it is illegal to use its dominance to suppress competitors.

In addition to the U.S. Department of Justice, the attorney generals of more than ten states including Texas, Colorado, Iowa, and Louisiana are planning to sue Google together. In the question of prosecuting Google, there is no distinction between red and blue states. Although Qualcomm and other companies have encountered FTC antitrust lawsuits before, considering Google’s market size and influence, this antitrust case will undoubtedly become the most eye-catching United States in the past two decades after the United States v. Microsoft in 1998. Antitrust litigation.

However, in accordance with the normal litigation process and the possible continuous appeal process in the future, it may take four to five years or even longer from the US Department of Justice to the final judgment. The two parties are more likely to reach a settlement plan. Google accepts the government's request to make major business adjustments, and may even split some of its businesses. In 1998, the United States and 19 states jointly prosecuted the Microsoft case and reached a settlement after three years of formal prosecution. During the period, Microsoft was ordered by a federal district judge to split into two companies, and then overturned the split decision in the Court of Appeal.

Amend monopoly legislation

The current Internet giant's antitrust investigation will also have a profound impact on the future US antitrust legislation process. The United States was the first to implement antitrust legislation. As early as 1890, the Sherman Act (Sherman Act) made clear provisions on monopoly, and then the Clayton Act was passed in 1914. Defined price discrimination and hindered competition, and created the Federal Trade Commission. Subsequently, some amendments were made to the anti-monopoly law through a series of laws.

As mentioned in the U.S. House of Representatives investigation report, the basic judgment standard of the U.S. anti-monopoly regulatory law was that consumers are the focus, that is, whether monopoly affects consumers' economic interests. The U.S. House of Representatives investigation report recommends that Congress re-draft anti-monopoly laws to adapt to the new changes in the Internet era and change the monopoly judgment standard to focus on industry competition, that is, whether monopoly affects the innovation of other competitors in the industry.

The House report mentioned that today's technology companies have become the kind of monopoly power in the era of oil tycoons and railroad tycoons. In a sense, Apple, Google, Amazon, and Facebook today can be compared to the big families a century ago: Rockefeller (oil tycoon), Morgan (financial tycoon), Vanderbilt (transportation tycoon), Carne Ji (steel tycoon) also occupies an unshakable leading position in their respective industries. But compared to traditional industry monopoly giants occupying resources and production capacity, the Internet era giants dominate data and algorithms. Whoever controls user data controls the market.

Previously unsustainable physical assets, now user data has greater value. Moreover, data is sustainable. Users will constantly generate new data when using the product. A large amount of data will continue to promote the improvement of algorithms and continue to expand the dominant advantages of the giants. Apple, Google, Amazon, and Facebook are also giants in the AI ​​field. They control users' online portals and control almost all data on users' social contacts, consumer shopping, hobbies, and so on.

IBM and Microsoft

In the US antitrust litigation over the past century, several major monopoly giants that were forcibly split up include: In 1911, the Rockefeller family's Standard Oil Company was split into 34 companies, and the current Mobil Oil Company is one of them; 1945 , Alcoa (ALCOA) was forcibly split after 8 years of litigation, and now Alcoa is one of them; in 1984, after 12 years of antitrust litigation, the telecommunications giant AT&T finally split into eight Subsidiaries (a long-distance telephone company and seven regional telephone companies), and now the two major US carriers, Verizon and AT&T, are members of the previous Bell system.

The two major technology giants, IBM and Microsoft, escaped the spin-off. The US government began investigating IBM in 1969 and formally filed a lawsuit in 1975. The US government pointed out that IBM’s act of offering discounted prices to customers is predatory pricing, and that the company’s vertical integration of hardware, software, and support departments is essentially monopolistic expansion. Although the two parties finally reached a settlement in 1982, IBM escaped the destiny of the spin-off, but they also had to abandon the previous competitive strategy. Without this antitrust lawsuit, there would be no personal computer era in the 1980s, let alone the rise of Microsoft.

It was precisely because IBM did not dare to monopolize the personal computer industry under the pressure of the government's antitrust litigation, Gates and Allen, who were almost fledgling, were given the opportunity to develop an operating system (the processor was handed over to Intel). Gates' mother and IBM chairman serve as directors in the same charity. She recommended her son's software company Microsoft to IBM. Because IBM and other bidders did not reach an agreement, they finally chose Microsoft in 1980. At that time, Gates did not even come up with his own software products. He spent $50,000 to buy a personal computer with a DOS system that was slightly modified and licensed to IBM. After the success, he licensed it to other hardware manufacturers and eventually became an operation in the PC industry. System overlord.

Twenty years later, it was replaced by Microsoft's antitrust lawsuit from the US government. Although Microsoft successfully appealed and reversed the spin-off ruling, Gates also resigned as CEO because of the lawsuit. Microsoft entered the age of Ballmer. Under the shadow of antitrust, Microsoft abandoned its aggressive expansion strategy and turned to pursue commercial profits. Another by-product of Microsoft's antitrust lawsuit was that Gates agreed to invest US$150 million in Apple, which was on the verge of bankruptcy, for the purpose of retaining competitors. Only then did Jobs lead Apple to life. By the same token, Intel, which has been under long-term antitrust pressure, cannot live without AMD.

Spin-off is not an end

From IBM to Microsoft to Google, the antitrust litigation interval of the three big technology giants is 20 years. But like the two previous giants, Google is also unlikely to suffer a spin-off. From the Federal District Court to the Court of Appeals to the Supreme Court, the antitrust litigation between Google and the US government will take at least four to five years or more. In Silicon Valley, the pro- Biden came to power, the two sides still possible to reach a settlement.

The U.S. economy is in a period of recovery after the severe epidemic. The technology industry has become an engine of economic growth. Technology stocks have directly led the surge in the U.S. stock market and helped the U.S. occupy a dominant position in the new global digital economy order . Under such circumstances, it is difficult for the US government to kill the global technology giants and dampen their competitiveness in the global market. This is also the logic of Zuckerberg's repeated mention of Chinese Internet giants in Facebook hearings: suppressing Facebook will only benefit Chinese companies and dampen the competitiveness of the United States in the global Internet field.

However, government antitrust investigations and lawsuits will have a profound impact on subsequent market competition. Regardless of whether the government can win the lawsuit, or whether the court forcibly split the giant company, it will force these industry giants to change their business strategies and bring new market growth opportunities to many small competitors. Moreover, anti-monopoly litigation also helps legislators clarify the business rules of the Internet industry and formulate new anti-monopoly regulations.

As far as the Google case is concerned, the US Department of Justice's investigation is mainly in the search and advertising fields, but not in other business areas such as Android. However, under antitrust pressure, Google may also be forced to relax its control over the Android operating system and Chrome browser, giving many smaller competitors more room for market competition. Google also holds a dominant share in these two areas.

Spin-off of giants is not the purpose of antitrust. It is to deter giants, break down barriers, and encourage competition.