Google: A 'natural monopoly'?

The search giant says competition is "a click away." So what if it hasn't materialized?

EMAIL  |   PRINT  |   SHARE  |   RSS
 
google my aol my msn my yahoo! netvibes
Paste this link into your favorite RSS desktop reader
See all CNNMoney.com RSS FEEDS (close)
By Jia Lynn Yang, writer

NEW YORK (Fortune) -- For the second week in a row, reports have surfaced that government regulators are closely eyeing Google.

The Justice Department is taking a closer look at Google's settlement with authors and publishers over how material will be accounted for on Google's book search service. And the Federal Trade Commission is wondering whether the boards of Google (GOOG, Fortune 500) and Apple (AAPL, Fortune 500) are a bit too close.

It was bound to happen: Google couldn't get this dominant - with 76% of the search market - without attracting some attention in DC. The question is whether the company has played by the rules in gaining its status.

The last thing the "do no evil" company wants is a rehash of Microsoft's situation in the 1990s.

Google has a number of explanations for why it plays fair, which it's been sharing in a presentation called "Google, Competition and Openness."

For one, the company likes to say its competition is "just one click away." In other words, there's nothing really preventing users from switching to another search engine - aside from sheer habit - if they want to find better results.

As proof, Google points to an incident from January 31 when a Google coding error affected all of its search results and users shifted search engines immediately; Yahoo (YHOO, Fortune 500) queries apparently doubled over the usual figures.

As for the charge that the Google can produce the best search algorithm because it has more data on what users want than anyone else, the company says its search improvements are based only on 1% of searches.

Another difference between Google and Microsoft (MSFT, Fortune 500) of yore: Google tries to keep its software formats open, so users aren't tied to their programs. So it's possible to export Google Docs into Word, PDF, OpenOffice and others. Again the idea is that Google doesn't lock anyone in; if a user wants a better piece of software, the open formats makes it easy to change.

(This is a topic the European Union has tirelessly hammered away at Microsoft for, saying the company tries to limit consumer choice by steering them towards formats exclusive to Microsoft products. Microsoft, however, responds that its applications are interoperable with a large range of document formats. For instance Office supports about a dozen formats, including non-Microsoft formats like PDF, ODF and HTML.)

The advocacy group, Consumer Watchdog, released a marked-up version of Google's presentation that raises questions about Google's openness claims, saying the company is not transparent about its ad auction system, quality score, Page Rank and use of private user data.

Regulators are so far just nibbling around the corners. When they seemed really ready for a fight last year over Google's proposed search ad partnership with Yahoo, Google backed down from the deal, proclaiming it wasn't worth the trouble.

As James Stewart wrote in The Wall Street Journal this week: "Google's continued gains in market share bear out my contention that Google is that rare breed: the natural monopoly. By natural, I also mean lawful, since the monopoly derives from Google's skill and qualities inherent in the business, not from anticompetitive behavior."

Adds Stewart: "I sometimes get the sense that antitrust regulators, in their single-minded zeal to promote competition, ignore the fact that monopolies, in and of themselves, aren't illegal, or even necessarily bad."

So go ahead. Call Google a monopoly. But the government hasn't turned up anything untoward yet. And whatever Google's doing, it's making it very hard - for now - for anyone to unseat it from its throne. To top of page

Company Price Change % Change
General Electric Co 9.45 -0.11 -1.15%
Advanced Micro Devic... 26.44 0.08 0.30%
Bank of America Corp... 28.18 0.42 1.51%
Foot Locker Inc 44.40 -8.43 -15.96%
Intel Corp 44.57 0.04 0.09%
Data as of May 24
Index Last Change % Change
Dow 25,585.69 95.22 0.37%
Nasdaq 7,637.01 8.73 0.11%
S&P 500 2,826.06 3.82 0.14%
Treasuries 2.32 0.03 1.22%
Data as of 1:28pm ET
More Galleries
10 of the most luxurious airline amenity kits When it comes to in-flight pampering, the amenity kits offered by these 10 airlines are the ultimate in luxury More
7 startups that want to improve your mental health From a text therapy platform to apps that push you reminders to breathe, these self-care startups offer help on a daily basis or in times of need. More
5 radical technologies that will change how you get to work From Uber's flying cars to the Hyperloop, these are some of the neatest transportation concepts in the works today. More
Sponsors
Worry about the hackers you don't know 
Crime syndicates and government organizations pose a much greater cyber threat than renegade hacker groups like Anonymous. Play
GE CEO: Bringing jobs back to the U.S. 
Jeff Immelt says the U.S. is a cost competitive market for advanced manufacturing and that GE is bringing jobs back from Mexico. Play
Hamster wheel and wedgie-powered transit 
Red Bull Creation challenges hackers and engineers to invent new modes of transportation. Play

Most stock quote data provided by BATS. Market indices are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer. Morningstar: © 2018 Morningstar, Inc. All Rights Reserved. Factset: FactSet Research Systems Inc. 2018. All rights reserved. Chicago Mercantile Association: Certain market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. Dow Jones: The Dow Jones branded indices are proprietary to and are calculated, distributed and marketed by DJI Opco, a subsidiary of S&P Dow Jones Indices LLC and have been licensed for use to S&P Opco, LLC and CNN. Standard & Poor's and S&P are registered trademarks of Standard & Poor's Financial Services LLC and Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC. All content of the Dow Jones branded indices © S&P Dow Jones Indices LLC 2018 and/or its affiliates.