French Court Fails Digital Economics; Claims Free Google Maps Is Illegal

from the yeah,-google's-going-to-jack-up-the-price? dept

Three years ago, we wrote about Bottin Cartographes, a French mapping company, suing Google because Google offers its Google Maps product (mostly) for free. Bottin argued that this was unfair competition, and suggested that it was a version of dumping -- whereby Google was giving away the product to intentionally wipe out the competition, at which point it would raise prices. Amazingly, an economically clueless French court has now agreed, and told Google to pay a fine and damages for its nefarious practice of giving away a product "for free." This is, to put it mildly, ridiculous. Is there any example of Google first wiping out all competition in a market with a free product... and then suddenly jacking up its prices? Yes, Google recently started charging for those who uses its mapping API a lot, but there's nothing, whatsoever, to suggest that the use of free here is somehow an anti-competitive move, rather than just a recognition of a wider strategy. In the meantime, if Google offering free maps in France is somehow illegal, you have to wonder what they think of a project like OpenStreetMap?

Filed Under: antitrust, competition, france, free, maps
Companies: bottin cartographes, google

How Much Of The Collapse Of Recorded Music Sales Revenue Was Due To The End Of Illegal Price Fixing?

from the just-saying.. dept

Harold Feld has made a very important point that has been totally ignored in the debate over the state of the recorded music business. In Cary Sherman's diatribe about how the evil tech industry is destroying the music industry, not only does he pretend that recorded music is representative of the wider music industry's situation (it's not... at all), but he seems to have carefully chosen the date of 1999 as his starting point for the supposed "collapse." Why? Because in 1999 the major record labels (i.e., exactly who the RIAA represents) were charged with illegal price fixing... a practice they then agreed to cease. And, of course, when you stop price fixing, generally speaking your revenue goes down:

This is important because in 1999, according to the Federal Trade Commission (FTC), the major labels were engaged in an illegal price fixing scheme. The major labels agreed to discontinue their price-fixing practices as part of settlement decree in May 2000. Not surprisingly, once the major labels stopped violating antitrust law, their artificially inflated profits declined and independent competitors saw a significant rise in profits.

This is a pretty important point. The "high point" for recorded music sales was completely artificial, not just because of a "legal" monopoly right, but because of illegal antitrust activities in the form of price fixing.

Filed Under: antitrust, cary sherman, music industry, price fixing, recording industry
Companies: riaa

Ex-FTC Officials Remind Current FTC Officials That They're Supposed To Protect Consumers, Not Competitors

from the important-point dept

Two former FTC chairs, James Miller and Daniel Oliver, have written an opinion piece chiding the current FTC for its antitrust investigation into Google. As we've noted in the past, politicians seem to be going after Google simply because it's a convenient target that's big, and not because of any clear harm for consumers. Some Google competitors don't like Google very much, but that's no reason to call out the antitrust guns:

Antitrust is for consumer welfare, not competitor welfare.

In the Reagan years, we were always suspicious of whining competitors. We were suspicious because our view of antitrust law, shaped by Robert Bork and other scholars, was, and still is, that antitrust law should maximize the welfare of consumers, not of competitors.

Has anyone heard consumers complaining about Google? We have not, probably because consumers are under no pressure to use Google. They do so because they get what they want from Google, and they get it for free.

Furthermore, they point out just how quickly things change in the online world:

When Google was started in 1998, Yahoo was the dominant search engine -- by far. Today Yahoo struggles to survive. Only a few years ago, Microsoft seemed a giant, standing astride the digital world. Today its business model is threatened, the competitive marketplace shifting under its feet from licensed software to cloud-based computing. Last year's hot IPOs -- Yelp, LinkedIn, and Groupon -- didn't even exist five years ago.

I would have no problem with the FTC going after Google if there were significant evidence of consumer harm, but no one seems to be able to show that there is any. At all. They just show that Google is big. But, big companies online seem to have a way of fading quickly... mainly by missing the next big thing. Already, we've seen Google struggle (multiple times) to compete with Facebook on social networking, which is taking over a bigger and bigger part of online life (and shielding much of that content from Google). So, once again, we have to ask why there's such a focus on investigating Google these days, other than because some competitors don't like competing.

Filed Under: antitrust, competition, consumers, ftc
Companies: google

Demolishing The Reasoning Behind Senators Bogus Grandstanding Against Google

from the why-do-they-hate-success dept

I have no problem calling out Google when I think the company does questionable things, but I'm really at a complete loss over the desire of some in DC to attack the company these days. The best I can figure it out, they don't like the fact that Google is successful. Back in September there were those bizarrely clueless hearings against Google, which displayed (yet again) a technically clueless Congress wanting to "do something" about a situation they clearly didn't understand.

It appears that we're starting to see the next step in this charade as Senators Herb Kohl and Mike Lee are calling for an antitrust investigation by the FTC. Of course, we're pretty sure the FTC has been investigating Google for antitrust issues for a while now, so it seems a bit strange to send this letter (embedded below) now.

The letter is really quite ridiculous, and demonstrates the insanity of DC these days, where the highly misleading to downright bogus claims by lobbyists for one side are quoted by politicians as fact, with no admission where the numbers come from. Thankfully, the folks at TechFreedom wasted little time in writing what seems like the definitive response to Senators Kohl and Lee. You really should read the whole thing, but just a snippet:

To begin with, the letter asserts that "Google faces competition from only one general search engine, Bing," suggesting that only Bing (and it, only ineffectively) could keep Google in check. In essence, the Senators are prejudging an essential question on which any case against Google would turn: market definition. But why would the market not include other tools for information retrieval? Is it not at least worth mentioning that more and more Internet users are finding information and spending time on social networks like Facebook and Twitter, while more and more advertisers are spending their money on these Google competitors? Isn't it clear that search itself is evolving from "ten blue links" into something more social, multi-faceted and interactive?

In a remarkable leap, the senators then identify the specific alleged abuse that Google’s alleged market power leads to: search bias. That's remarkable because, other than the breathless claims of disgruntled competitors (given plenty of air time at the September hearing), there is actually no evidence that search bias is, in fact, harmful to consumers—which is what antitrust is concerned with. (Read both sides of this debate in TechFreedom's free ebook, The Next Digital Decade: Essays on the Future of the Internet.)

As our colleague, Josh Wright, has thoroughly demonstrated, this "own-content" bias is actually an infrequent phenomenon and is simply not consistent with an actionable claim of anticompetitive foreclosure. Moreover, among search engines, Google references its own content far less frequently than does Bing (which favors Microsoft content in the first search result when no other search engine does so more than twice as often as Google favors its own content).

Making matters even more ridiculous is that the Senators parrot the claims of Google competitors/companies, who seem to just be jealous of Google, without questioning the sources. Thankfully, TechFreedom is around to step up and help provide some context and debunk some of the more ridiculous claims:

The letter also reports, again with no caveats, claims by the CEOs of Yelp! and Nextag that "75 percent of Yelp!'s web traffic consists of consumers who find its website as a result of Google searches, and . . . 65 percent of Nextag's traffic originates from Google searches," and that losing this much traffic to Google preferencing its own content would be catastrophic. But the letter fails to mention that most searches for brand names on Google are "navigational" rather than "informational." As Google competitor Expedia’s CEO recently explained:

The majority of, at least Expedia’s, and I believe Hotel.com’s traffic that comes from search to our site actually come through people searching for Expedia, for example. So in typing in Expedia in Google or so on, typing in Hotels.com in Google. So of the 25% for Expedia, for example, the majority of that traffic is someone who’s already looking for Expedia, and that person is going to find Expedia one way or the other because they are searching for something very specific. (Expedia earnings call, 10/28/10, quoted here).

Indeed, a recently published independent academic study conducted across search engines concluded that 52% of "business queries" (and 72% of organizational queries) were navigational. In other words, most of the Google traffic going to these sites was likely from users who simply typed in "Yelp" or "NextTag" as a convenient way of getting to those sites. Such searches are not diverted (and not even claimed to be diverted) to Google’s own sites, and the first search result for the search term “Expedia” will always be expedia.com. Thus, the majority of these searches that are claimed to make up 75% and 65% of the complaining companies’ traffic is not in any way threatened by Google’s business model, and is completely irrelevant to assessing the effect of Google preferencing its own content.

Furthermore, the letter does not mention Yelp's recent boast that over 40% (and growing) of its searches are now conducted on its mobile app—insulating it from whatever "power" Google might exercise over traditional searches.

Oops. If this were an honest debate about Google's practices, you'd think that the Senators would have been at least a little skeptical of such easily debunked claims by these companies. Unfortunately, in the world of politics today, that's not how things work. Actually looking at facts or understanding what they're trying to regulate is ignored in favor of going after targets that generate headlines.

And, of course, if you're looking for a thorough, detailed and devastating response to any time anyone grandstands about search engines without understanding any of the details, you should always go to the master on the subject, Danny Sullivan, who writes, Dear Congress, It's Not Ok Not To Know How Search Engines Work, Either, picking up on last week's meme about SOPA. Sullivan notes that the letter from Kohl and Lee is "jaw-dropping," not just in how one-sided it is, but in how superficial it is. Again, you should read the entire thing to get tidbits about how the letter seems to not even know what guidelines the FTC has already put out, and about how the Senators (rather shockingly) blatantly misquote Google VP Marissa Mayer and don't even understand what she's saying. But there's also this section, where it appears the Senators have simply no idea about the relationship of Microsoft and Yahoo and what it means relative to Google:

Bing: A Microsoft & Yahoo Production?

What really set off my alarm bells was this:

Bing, a partnership of Microsoft and Yahoo

Despite substantial amounts of staff time and money spent to have the hearings, the committee mistakenly believes that Microsoft’s Bing search engine is a Yahoo and Microsoft production.

It’s not. Bing is a wholly-owned part of Microsoft. Yahoo has no ownership in Bing.

But wait. Isn’t there a partnership? Yes, but one that gives Yahoo a minor role handling Bing’s ad sales to “high volume” advertisers. The deal came after Bing was launched. It wasn’t an essential part of it, nor does it help with Bing building consumer market share against Google.

If the committee fully understood the competitive space, they’ve have said instead:

Yahoo Search, a partnership of Microsoft and Yahoo

That would be far more accurate. That’s because Yahoo no longer has its own core search technology, nor its own search ad serving technology.  It gave all these up to partner with Microsoft (it would have kept them in a deal with Google. See our side-by-side comparison).

Heck, Yahoo’s former CEO Carol Bartz was quite specific that her goal was to use Bing’s technology as a way to somehow beat Bing at its own game. Bing wasn’t a partnership to her; it was the competition.

Bing & Yahoo Distant To Google?

Perhaps the committee thought that the “partnership” was the overall “search alliance” between Bing and Yahoo? If that was the case, then why did the letter go on to say

…which is a distant second in market share and is losing an estimated $2 billion annually…

Those stats only make sense if you’re talking about Bing itself, having a 15% share to Google’s 65% in the United States, as recently reported. If you’re talking about Bing and Yahoo combined, they come up to 30%, much healther competition.

It's really quite amazing that Congress can get away with such blatantly dishonest grandstanding -- but, on tech issues, Congress still seems to think that its own blissful ignorance is a plus when it comes to regulating. For those of us who live in this world, that's pretty damn scary.

Filed Under: antitrust, ftc, grandstanding, herb kohl, investigation, mike lee, senate
Companies: google, microsoft, yahoo

ICANN Sued Over .xxx; Porn Company Points Out That It's A Pure Money Grab

from the moneygrab.xxx dept

With .xxx domains now available, we've noted how organizations were snapping them up not because they want to create porn websites, but because they don't want porn sites under their name. Of course, that just highlights the key problem with any new TLD: they become a total cash grab by ICANN and whoever manages the TLD. It's even worse with .xxx, since many organizations feel they need to grab their brands on that to prevent any connection to porn.

Even worse, it appears that the registrar handling .xxx, ICM recognizes this and is even advertising with that in mind:

When the sellers of .xxx domain names put them on sale last week, they did not address their marketing campaigns just to adult content owners. Instead, they ran ads with headlines like ".XXX LANDRUSH IS NOW OPEN. PROTECT YOUR BRAND" or "SECURE YOUR DOMAIN. PROTECT YOUR REPUTATION," By heeding their warnings, brands, universities, and individuals flocked to the sites of domain name sellers and bought up tens of thousands of names, at about $200 per name. According to press reports, more than 70,000 applications have been received since the doors opened, netting sellers more than $15 million barely out of the gate.

Basically, the company admits that this is a borderline shakedown: if you want to "protect" yourself from someone building a porn site with your brand, pay up.

The whole thing appears to have angered online porn giant Manwin Licensing International, who is now suing ICANN and ICM saying that the whole thing is about "monopolistic conduct, price gouging, and anticompetitive and unfair practices." I would imagine that in any such lawsuit, ICM's advertising practices around the "buy up or else" won't look too good...

Filed Under: .xxx, antitrust, domain names, tlds
Companies: icann, icm, manwin licensing

Barnes & Noble Claims That Microsoft Patent Shakedown Over Android Is An Antitrust Violation

from the sounds-about-right dept

There's finally been a growing recognition that intellectual property laws are about providing monopolies, and that misusing patent and copyright laws thus could be considered antitrust violations. While it's true that copyright and patents involve legal monopolies, misusing them would clearly be an abuse of a monopoly, and should be ripe for actual antitrust investigations (rather than silly antitrust attacks on companies just because they're "big.") So it's interesting to see that Barnes & Noble is pressing the feds to go after Microsoft on antitrust grounds for its Android licensing shakedown. Barnes & Noble is pretty direct in its accusations.

Instead of focusing on innovation and the development of new products for consumers, Microsoft has decided to invest its efforts into driving open source developers from the mobile operation systems market. Through the use of offensive licensing agreements and the demand for unreasonable licensing fees, Microsoft is hindering creativity in the mobile operation systems market.

The complaint also notes some odd behaviors on Microsoft's part, such as refusing to explain what patents it was threatening B&N over, unless B&N agreed to sign a non-disclosure agreement.

Microsoft specifically alleged that Barnes & Noble's Nook was infringing six patents purportedly held by Microsoft. When Barnes & Noble asked Microsoft for more detailed information related to these patents, Microsoft refused, claiming that the information was confidential and could not be shared unless Barnes & Noble first executed a non-disclosure agreement ("NDA"). Because both the patents and Barnes & Noble's Nook product are public -- meaning there was no need for an NDA -- Barnes & Noble refused to sign.

The company continued negotiating with Microsoft over what seemed like a pretty bizarre discussion concerning whether B&N had to sign an NDA just to find out what patents Microsoft wanted the company to license. Because B&N did eventually sign a limited NDA, it's asking the DOJ to step in and subpoena the details it can't reveal. Still, B&N claims that Microsoft's patents would severely limit its ability to innovate:

This proposed licensing agreement covered Barnes & Noble's use of Android on its existing eReader devices but is structured in such a way to presume that Microsoft's portfolio of patents dominate, and thereby control, the entire Android operation system and any devices that use Android. Indeed, the proposed license would have severely limited and, in some cases, entirely eliminated Barnes & Noble's ability to upgrade or improve the Nook or the Nook Color, even though Microsoft's asserted patents have nothing to do with improvements.

Unfortunately, I just don't see the Justice Department gearing up for this, but that's really unfortunate. It should be watching out for abuses of patent law that appear to impact wider innovation. Instead, it's running around chasing companies based on size, not actual impact.

Filed Under: android, antitrust, patents
Companies: barnes & noble, microsoft

Times Change; Dominant Tech Firms Change

from the antitrust? dept

An amusing tongue-in-cheek post from Adam Thierer looks back at the internet titans of the mid-90s (merely a decade and a half ago), and wonders if they should have been regulated for antitrust problems at the time:
click for larger version If you can't see it that well, it's a spread from PC Computing, showing Prodigy, CompuServe, AOL and MSN as the "top online services." How quickly things change. That's why, a few months ago, we thought it was pretty amusing to see people fretting about a new "gang of four" who dominate the internet space: Google, Apple, Amazon and Facebook.

Fifteen years from now, do people really think that any of those four will still be as dominant, let alone all four? The tech world changes fast. Companies come and companies go. It's ridiculously difficult to stay on top for very long. The idea that the government needs to get involved just doesn't make much sense.

Filed Under: antitrust, dominance, internet companies
Companies: amazon, apple, facebook, google

Funny How Microsoft's Views On Responsibility To Competitors Differ Based On Who's In The Antitrust Hot Seat

from the this-is-known-as-hypocrisy dept

We recently mentioned the latest round of Microsoft's antitrust fight, dating back to some of its actions around Windows 95. To be clear, I think the action against Microsoft is pretty silly. It's pretty clear that the market is quite capable of dealing with any perceived Microsoft "monopoly" and routing around it. That said, one thing that is quite stunning in all of this is the sheer hypocrisy from Microsoft in discussing this case, as compared to Microsoft's own efforts to drag Google into an antitrust battle as well. Now, some will shrug and say that this is basic self-interest on Microsoft's part. It's always going to favor things that help Microsoft. But it certainly seems to weaken the validity and credibility of Microsoft's arguments.

Back in March, we noted just how ridiculous this was, when Microsoft complained about Google to the European Union, whining that Google made it difficult for Microsoft's platforms (mainly the Bing search engine and Microsoft's mobile platform) to access YouTube video data. At the time Microsoft's General Counsel sure seemed to insist that Google had a duty to engineer its platform to make life easier for its competitors. Here's the quote we highlighted back in March:

First, in 2006 Google acquired YouTube--and since then it has put in place a growing number of technical measures to restrict competing search engines from properly accessing it for their search results. Without proper access to YouTube, Bing and other search engines cannot stand with Google on an equal footing in returning search results with links to YouTube videos and that, of course, drives more users away from competitors and to Google.

Second, in 2010 and again more recently, Google blocked Microsoft's new Windows Phones from operating properly with YouTube. Google has enabled its own Android phones to access YouTube so that users can search for video categories, find favorites, see ratings, and so forth in the rich user interfaces offered by those phones. It's done the same thing for the iPhones offered by Apple, which doesn't offer a competing search service.

Note how in both paragraphs, Smith seems to clearly suggest that Google has a duty to engineer its products to make life easier for Google's own competitors.

Okay. Now, jump over to the ongoing antitrust lawsuit against Microsoft by Novell. And note how Microsoft's lawyers appear to argue directly against this idea that a company should have a duty to build its products to help competitors:

Microsoft attorney Steve Aeschbacher said Novell is saying it wishes Microsoft would have developed Windows 95 differently than it did.

"The law basically doesn't require people to design their products to the whim or demand of other companies. You get to design your own products. There isn't any legal obligation for us to do what they wanted us to do," he said.

Seems to directly contradict what Microsoft said just months ago when it was talking about Google. Furthermore, in Microsoft's motion for summary judgment (pdf) in the current case -- a brief you can be sure MS General Counsel Brad Smith was well aware of -- Microsoft again appears to argue the exact opposite of what it said in regards to Google just months ago:

The allegations underpinning count I are premised on the notion that Microsoft had some affirmative duty to assist—or to continue assisting—a competitor. Novell complains that Microsoft harmed its office productivity applications designed for use with Windows 95 by (i) discontinuing the formal documentation of six APIs in pre-release versions of Windows 95, (ii) failing to include in Windows 95 certain functionality that Novell would have liked, and (iii) failing to endorse Novell’s applications by granting Novell a license to use the Windows 95 logo. These allegations are not cognizable under the antitrust laws.

The objective of our antitrust laws is to promote competition. Successful companies—even monopolists—are encouraged to compete vigorously. Foremost Pro Color, Inc. v. Eastman Kodak Co., 703 F.2d 534, 544 (9th Cir. 1983) (“A monopolist, no less than any other competitor, is permitted and indeed encouraged to compete aggressively on the merits.”). Monopolists are encouraged to innovate and are entitled to retain the benefits of such innovation. Berkey Photo, Inc. v. Eastman Kodak Co., 603 F.2d 263, 281 (2d Cir. 1979). Moreover, a monopolist is not required to help its smaller rivals or shield them from the rigors of competition. Olympia Equip. Leasing Co. v. Western Union Tel. Co., 797 F.2d 370, 375-76 (7th Cir. 1986) (“A firm with lawful monopoly power has no general duty to help its competitors.”); Twin Labs., Inc. v. Weider Health & Fitness, 900 F.2d 566, 568 (2d Cir. 1990) (“Antitrust law . . . does not require one competitor to give another a break just because failing to do so offends notions of fair play.”).

I agree very much with the Microsoft filing in this case. Antitrust law shouldn't be about propping up competitors or requiring a company to engineer its products in a certain manner to help competitors. And while I understand that Microsoft's position will shift depending on whatever benefits Microsoft best, it seems like the company is being ridiculously short-sighted in being so blatantly hypocritical and inconsistent. It hurts its chances in this particular lawsuit, and it hurts Microsoft's overall credibility. While I understand that Microsoft thinks tossing around antitrust accusations at Google may make life difficult for Google, it seems like both companies would be a lot better off if neither of them tossed antitrust arguments at the other. It seems only likely to backfire.

Filed Under: antitrust, brad smith, competition, responsibility
Companies: google, microsoft, novell

Bill Gates Called To Testify In Antitrust Trial Over Windows 95; No This Isn't An Old Post

from the the-wheels-of-justice-turn-slowly dept

Thought that Microsoft's antitrust troubles from a decade plus ago were all settled and over with, beyond a little monitoring? Think again. The case involving Novell is continuing onward... and lined up on the docket to testify is Bill Gates, who's being called to explain some questionable emails he sent all the way back in 1994, which seem to suggest plans to use Windows to limit competing office productivity software offerings. Of course, perhaps if Novell hadn't been spending so much time and money fighting Microsoft, it could have spent more time actually building products people want.

Filed Under: antitrust, bill gates
Companies: microsoft, novell

If The DOJ Really Wants To Review Anticompetitive Patenting, Why Doesn't It Look At Intellectual Ventures?

from the seems-like-a-more-reasonable-target dept

We were just noting the oddities of Intellectual Ventures suing Motorola Mobility Inc. as MMI is likely being acquired by Google -- since Google is an IV investor, and supposedly immune from suits over IV's patents. It would seem like once a deal closes, that the lawsuit would be moot. Along those lines, the folks at M*CAM, who spend a lot of time doing detailed analysis of patent quality, have written a compelling open letter to the Justice Department. You see, the Justice Department is investigating the Motorola Mobility buy to see if it would be anti-competitive. Now, pretty much everyone (including Google) has admitted that the Motorola Mobility buy is mostly about the patents, and patents are technically a monopoly, but they're a legal monopoly. However, the pooling of patents can be anti-competitive. Either way, M*CAM can't quite figure out the reasons here, noting that vertical integration isn't seen as a problem by the Justice Department (see, Oracle, Sun). But if it's the patents that are the issue, M*CAM suggests the DOJ is "looking into the wrong thing:"

There’s a shakedown going on, but you’re too concerned with the parking meters across the street to hear the tinkling of coins on the sidewalk.

Because speaking of patent pooling... an intellectual venture across that street will lead you to a nice pool to dive into. And lucky for you, we happen to have the insight to light up that pool for a nightly swim, should you decide to take the jump in on behalf of Lady Justice.

Yes, the letter then shifts into an analysis of how Intellectual Ventures appears to be involved in anti-competitive behavior, that appears to go against the DOJ's own guidelines on what constitutes an anti-competitive patent pool. It's worth reading the whole thing, and wondering which company is likely to do more to hinder innovation over the next five years: Google merged with Motorola Mobility or Intellectual Ventures?

Filed Under: antitrust, justice department, patents
Companies: google, intellectual ventures, motorola mobility