Watch Out Google, Obama's Antitrust Chief Is Looking To Make An Example Out Of You

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The Obama Administration’s new chief antitrust enforcer at the Department of Justice, Christine Varney, is making it very clear that she is going to be much more aggressive in bringing antitrust actions against large, American corporations. The Bush Administration took a hands-off approach to antitrust enforcement, and that is about to change. Varney needs a high-profile case to make her name, and all indications are that she is eying Google. After all she needs to make an example out of a big powerful corporate “predator” and in this limping econmy there simply aren’t that many powerful companies to chose from.

Google, quite literally, is the new Microsoft when it comes to antitrust scrutiny (although, Microsoft itself is also still under the magnifying glass, as is Intel, at least in Europe). Even under the Bush Justice Department, last year Google had to drop its advertising deal with Yahoo because of antitrust issues. Today, Google is dealing with an antitrust investigation over to its book-scanning settlement, the newspaper and magazine industries are rattling their sabers, and every other industry facing disruption by the internet is lining up to blame Google for their woes. Varney will be encouraging competitors of all potential antitrust targets to file more complaints, so you can be sure that anti-Google lobby will grow.

Google makes a nice, juicy target and it is one of the few companies with cash on hand to pay a large fine. Google really needs to tread carefully now. It is effectively being treated as a monopoly because of its overwhelming dominance in paid search advertising, which gives it carte blanche to move into other markets with disruptive pricing models (i.e. free). There are many ways an antitrust case could be made against Google (here is one approach). While more scrutiny is not necessarily a bad thing if it serves to keep Google honest, especially in the areas where it is carving out a natural monopoly for itself in search and search advertising, tying up Google with antitrust lawsuits could do more harm than good.

Any antitrust action should really be based on proven consumer harm or predatory pricing, not simply because Google is out-competing other companies. The problem with antitrust lawsuits, particularly in fast-moving industries such as technology, is they take so long to go through the courts that by the time a ruling is handed down the market has moved on (see Microsoft). The market will always do a better job undermining monopolies than the Justice department will. Varney would serve the country better looking at more entrenched industries such agriculture, health care or energy that could use some shaking up. In the technology industry, overturning the status quo is the only way to survive.

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