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Eric Schmidt Testifies in Washington on the Google Threat to Competition

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Eric Schmidt Testifies in Washington on the Google Threat to Competition

On 21 September, Google’s chairman Eric Schmidt testified in Washington before the U.S Senate Judiciary Committee’s antitrust subcommittee in a hearing attempting to determine whether Google abuses its supremacy of the Internet.

Adopting his usual cool and unruffled persona, Schmidt reportedly held his own against several skeptical lawmakers.

The crux of the trial was to determine whether Google shows preference in listing search results to the company’s own services and products.

Google has in recent months expanded its business into travel searches, comparison shopping, business reviews, and, most recently, a mobile payment service known as Google Wallet.

Some, namely Google’s competitors, believe that the search engine giant’s expansion is abusing the company’s dominance over the Web.

Google Accused of Displacing Competition

Not surprisingly, amongst those stating their cases at the hearing was the chairmen of Yelp and Nextag, as well as a lawyer for Expedia.

Prior to the trial, Expedia’s lawyer, Thomas Barnett, who incidentally happens to be a former head of the Justice Department’s antitrust division, spoke of the adverse effects Google’s actions are having on consumers.

“Unfortunately for consumers, there are strong indications that Google is, in fact, foreclosing competition rather than simply competing on the merits of its own products,” said the Expedia lawyer.

Google stands accused of displacing competitors, such as its Google Maps service unseating competitors like MapQuest. It is also accused of using products without permission, such as using Yelp reviews in Google Places.

Schmidt emphasizes his company’s behaviour as being “open competition”, reminding people that “the Internet is the ultimate level playing field.”

Just Business as Usual?

In examining Google’s alleged misdemeanours in abusing its position, it is difficult to ignore the vast amount of economic activity the company has generated for businesses. Schmidt was quick to point out to his critics that Google has created $64 billion in financial activity for small businesses, which derives from Google allowing online sales, non-profit grants and advertisement revenue sharing with website publishers.

The Internet does, of course, thrive and evolve with innovation and advancements, and if it fails to adopt and modernise to the constantly evolving needs of the consumer, users are likely to go elsewhere.

This somewhat logical explanation was another criterion Schmidt used for defending his company’s actions, as prior to the hearing, Eric Schmidt wrote:

“Keeping up requires constant investment and innovation, and if Google fails in this effort users can and will switch. The cost of going elsewhere is zero, and users can and do use other sources to find the information they want.”

Although, during the hearing, senators delved much deeper into Google’s alleged malpractices than its coolly nonchalant chairman wanted to air.

Throughout the trial, lawmakers questioned Schmidt about whether Google showed preference in its owns products and services in search listings, whether the company uses its 40% market share in mobile phones to weaken competition in mobile phone apps, as well as querying the chairman about the alleged $500 million settlement reached between Google and the Justice Department that involved allegations that Google has for years assisted illegal Web pharmacies to acquire ads on Google’s search engine.


Schmidt Plays it Cool

In defence to the allegations that Google prioritizes its own products, Schmidt told the hearing that Google’s products and services are often ranked third, a fact that several of Schmidt’s critics, including Senator Mike Lee, who was present at the trial, believed to be ‘cooked’.

Throughout the hearing, Schmidt’s responses to the questions remained noncommittal, and many even accused him of being ‘fuzzy’. When asked about Google lifting content produced by Yelp, Schmidt reservedly said to his knowledge the company had ended that practice.

This ‘vagueness’ and ‘guardedness’ has been likened to Bill Gate’s response when he was asked in 1998 whether Microsoft held a monopoly in software manufacturing marketplace.

Similar to Google being fried today for its business practises and dominance of the market, back in the late 1990s, Microsoft stood accused of similar actions, namely in undermining competitors.

In the case of Microsoft, two months after the trials, its chairman was forced to defend the company’s actions before a Senate subcommittee, and was ultimately sued by the government for abusing monopoly power. Whether Google will go the same way remains to be seen.

However, Google is a business and like all businesses, it wants to be the most successful in its field.

The recent hearing failed to produce a solid argument that Google holds monopolistic power and that it is somehow hindering consumer choice.

Like most successful businesses, rivals covetously look for ways to hinder its success. The fact that the Google boss was forced to respond to inquiries made from several of Google’s rivals, one of whom was a former head of the Justice Department’s antitrust division, adds weight to the idea that Google’s competitors are simply out to thwart Google’s success.

The one thing that the hearing in Washington did highlight is that Eric Schmidt is a more ‘savvy’ public speaker than Bill Gates ever was, and his indifferent answers may have rescued his company from potential litigation.

Image Credit: SpeedTV

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