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“Don’t be evil.” Google’s informal motto was on everyone’s mind as the search engine giant began its defense in a Senate antitrust hearing this Wednesday on whether the company has become an unfair monopoly.
How did Google fall from grace, and what impact do antitrust rules have on the economy? Let's take a look.
First: What Does a Monopoly Mean for the Economy?
Since the late 1800s and the passage of the Sherman Antitrust Act, the United States government has investigated major corporations that have gained dominance in an industry. When monopolies don’t allow for competition by other companies, the government steps in.
The idea is that our economy depends on fair market competition in order to spur growth and innovation. In other words, it's okay for Google to be the leader in the search engine industry because it has superior technology ... but not because it's been employing unfair practices to purposely stifle competition.
Next: Who's Challenging Google?
Three competitors, Nextag, Yelp and Expedia, have come forward with allegations of unfair conduct on Google’s part. The senator leading the antitrust subcommittee asked, “Is it possible for Google to be both an unbiased search engine and at the same time own a vast portfolio of Web-based products and services?”
As Nextag, Yelp and Expedia see it, the answer is no.
The three Internet companies allege that as Google expanded to include travel and shopping offerings, it began to violate antitrust laws by leading consumers toward its own commerce services using unfair means (for example, listing Google's products higher in search results than its competitors').
If it's true that the search engine was discriminating against other services, Google could be found guilty of being an unfair monopoly.
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The Last Time This Happened ...
For many, the antitrust allegations against Google bring to mind the case against Microsoft in 1998, when the Senate found that Microsoft had, in fact, violated antitrust laws. At the time, CEO Bill Gates was described as “evasive and nonresponsive” during his testimony.
Though Google Executive Chairman Eric Schmidt did not mention the Microsoft case by name, he did refer to it, saying, “We get the lessons of our predecessors … One company’s past needn’t be another’s future.”
While that remains to be seen, Google’s stocks fell 3.44% yesterday.
Image: Flickr/Guillaume Paumier