Is Google too big? Some government officials in Washington, D.C., certainly seem to think so.
Last week, the Federal Trade Commission launched a formal investigation of the Internet search giant's business practices, potentially marking the start of an antitrust saga that could end in federal court. The FTC's move has left the millions of Americans who freely choose Google's products scratching their heads. But at a time when beating up on big business is in vogue, that's politics as usual.
The FTC hopes to find evidence that Google is "unfairly" using its market position to undercut rivals. Some would call this competition but government technocrats see things differently. They claim that once a company grows too large and successful, business decisions that would otherwise be perfectly legal must be vetted by federal regulators.
What is Google's alleged sin? According to critics, its search engine is biased in favor of Google's own offerings, such as Gmail and Google Maps.
Google denies such claims. But even if the accusations are true, why should government get involved? If Google buries competitors' superior offerings by manipulating search rankings, it would weaken the quality of its search results. That would drive users to competing search engines like Microsoft's Bing, whose market share has grown 40 percent over the past year.
Ironically, to Google's antitrust critics, even conduct that benefits today's consumers justifies government intervention. If Google innovates too quickly, they argue, it risks becoming an entrenched monopolist so far ahead of the competition that its incentive to innovate will be overwhelmed by complacency and greed.
Yet neither Google nor any other firm enjoys this luxury. The forces aligned against a would-be monopolist are too vast and unrelenting to permit any one firm to parlay its market power into profitable anti-competitive conduct. This is especially true in dynamic Internet markets, as embodied by the near-death and subsequent resurgence of Apple and the meteoric rise of college dorm startup Facebook after it vanquished MySpace.
Recall that Google itself was launched only in 1998. It soon toppled then-Web search leaders AltaVista and Yahoo due to its innovative approach to search rankings. But if Google doesn't continue offering services that users find superior, it too will be toppled by tomorrow's next big thing.
Why should the FTC's Google probe worry consumers? The government's track record when it comes to antitrust interventions in the high-tech sector is abysmal. The most famous prosecution of an alleged digital monopolist is that of Microsoft, which appeared to be an indomitable juggernaut in the late 1990s. After years in court, the Justice Department won a ruling in 2001 that placed Microsoft under a decade of federal supervision that expired just this year.
Yet it was not the federal government, but rather the relentless forces of creative destruction, that ensured Microsoft would not take over the information age. Even law professor Lawrence Lessig, a top adviser to the Justice Department in its Microsoft prosecution, conceded in 2007 that he "blew it on Microsoft." The open source software revolution, embodied by Linux, the ascent of cloud computing and the recent explosion of mobile ecosystems have rendered Microsoft's still-lucrative position in the operating system market an afterthought.
Had government left Microsoft alone, Bing might be on closer footing with Google than it is today. We'll never know. This is the folly of antitrust; it distorts the evolution of markets and discourages innovative businesses from competing as aggressively as possible. Google may look as unstoppable today as Microsoft did in 1999, but it won't remain king of the hill for long unless it continues to innovate and take risks.