Why Is Obama's Top Antitrust Cop Gunning for Google?

(By: Wired.com)


Christine Varney's blunt assessment sent a buzz through the audience at the National Press Club in Washington, DC. Varney, a partner at Hogan & Hartson and one of the country's foremost experts in online law, was speaking at the ninth annual conference of the American Antitrust Institute, a gathering of top monopoly attorneys and economists. Most of the day was filled with dry presentations like "Verticality Regains Relevance" and "The Future of Private Enforcement." But Varney, tall and professorial, did not hide her message behind legalese or euphemism. The technology industry, she said, was coming under the sway of a dominant behemoth, one that had the potential to stifle innovation and squash its competitors. The last time the government saw a threat like this—Microsoft in the 1990s—it launched an aggressive antitrust case. But by the time of this conference, mid-June 2008, a new offender had emerged. "For me, Microsoft is so last century," Varney said. "They are not the problem. I think we are going to continually see a problem, potentially, with Google."

Coming from Varney, it was a particularly damning comparison. As an attorney who represented Netscape in the late 1990s, she was instrumental in painting Bill Gates and company as overeager bullies. Now, Varney was suggesting that Google was repeating Microsoft's expansionist behavior. Instead of dominating the desktop, Varney said, Google was starting to colonize the emerging cloud-computing industry, amassing "enormous market power" and potentially creating an ecosystem that customers would be powerless to escape. She acknowledged that her remarks might ruffle some feathers at Google headquarters in Mountain View, California. "If any of my colleagues or friends from Google are here," she said, "I invite you to jump up and scream and yell at me."

Nobody took her up on that offer. But it is safe to assume that plenty of Googlers were jumping and screaming six months later when President Obama appointed Varney head of the Justice Department's antitrust division, making her the government's most powerful antimonopoly prosecutor. On May 11, during her first public speech on the job, Varney made it clear that her stance had not changed much since her presentation at the conference: She planned to take a forceful approach to applying the nation's antitrust laws. "In the past, the antitrust division was a leader in its enforcement efforts in technology industries, and I believe we will take this mantle again," she said. She did not mention Google by name, but there was little doubt to whom she was referring.

Ever since its founding 11 years ago, Google has seen itself as one of the Good Guys. Founders Larry Page and Sergey Brin conceived their company as a kind of public trust. "We believe a well-functioning society should have abundant, free, and unbiased access to high-quality information," they wrote in the run-up to Google's IPO five years ago, a goal that requires "a company that is trustworthy and interested in the public good." They created a touchy-feely work environment with perks like onsite laundry facilities and free food. Prospective hires were grilled on not just their technical expertise but also their ethics—whether they were "Googley." Google's self-image was pithily summed up in its famous founding credo: "Don't be evil."

For most of its history, investors, users, and tech gurus shared Google's view of itself. After all, the company's rise to prominence—on the back of search algorithms so powerful and elegant they changed the Internet forever—is a case study in heroic entrepreneurialism. Its long-tail business model gives even the smallest Web sites a chance to make money. It routinely creates and distributes great products for free, even when there is no obvious benefit to the company. Its spirit of openness and collaboration laid the groundwork for the mash-upable, user-generated modern Web.
But recently, Google's size and ambitions have begun to obscure its halo. Advertisers have watched nervously as the company's share of the search-advertising market has jumped to 75 percent from 50 percent over the past three years. In 2007, Google attracted a yearlong antitrust review from US and European regulators after it announced plans to acquire online ad firm DoubleClick. In 2008, the DOJ swatted down a search-ad deal Google had made with Yahoo, arguing that it "would have furthered [Google's] monopoly." The company is currently under investigation by the DOJ for its ambitious book-scanning project, which aims to make every book ever published searchable on Google. And the Federal Trade Commission is looking into whether the Apple board seats held by Google CEO Eric Schmidt and board member Arthur Levinson violate federal antitrust law.

For much of its history, Google has responded to most criticism with two words: Trust us. The company has repeatedly persuaded skeptics that its immensity is a mere byproduct of its altruistic mission and that the algorithms it uses to organize the Internet, while proprietary, are objective and benevolent. But in an economy destroyed by bad faith, secretive formulas, and complicated mathematics, trust is in short supply, and Google's assurances are losing their persuasive power. More than 15 years ago, federal regulators began making Microsoft the symbol of anticompetitive behavior in the tech industry. Now, a newly activist DOJ may try to do the same thing to Google.