Microsoft’s Antitrust Volley and Google’s Way Forward

Business and law are pragmatic vocations. So where a company stands on some principle usually hinges on the circumstances in which it sits. ask Microsoft, long the world's No. 1 antitrust defendant, that on Thursday filed a formal antitrust complaint in Europe against Google, as they reported. Microsoft understands the optics, as political analysts call it. We appreciate the irony, Bradford Smith, Microsoft's general counsel, said dryly in an interview on Wednesday. Positive, the comment is self-serving. Yes, Microsoft is making an antitrust complaint simultaneously it is investing heavily to try to meet up with Google in search and search promotion (making some recent progress , though at great cost).

And it is exactly because of our experience, Mr. Smith added, that they are studiously avoiding recommending any steps that would delay innovation.

Google replies that Microsoft has plenty of access to Google's know-how, like Android operating method code, and Google-controlled content  notably, YouTube  for searching. That access, Google adds, may not be as much as Microsoft might like, but Microsoft is not being targeted or specifically disadvantaged by Google's practices.

Antitrust, of coursework, can be seen as another competitive tactic in business. And what to make of Microsoft's claims remains to be seen and analyzed, based on volleys of testimony and facts from both sides. In antitrust terms, Microsoft's complaint in Europe  not a public document, incidentally appears to be a collection of refusal to deal and monopoly maintenance claims.

Reasonable people can disagree, on both sides. But Mr. Smith is onto a core issue when they mentions innovation. Google, like Microsoft historicallyin the past, is finally probably going to must make some changes in its business practices because of antitrust scrutiny, in return for being able to protect what it regards as its necessary freedom to innovate.

Google, put basically, dominates a giant marketplace in search and search promotion. And it is fundamentally a private marketplace in which Google makes the rules. Others benefit from it, as other companies benefited from building personal computer program that ran on Microsoft's dominant Windows operating method. But the single greatest beneficiary is Google.

Google, to be positive, is not Microsoft. But there is an echo on the innovation issue and antitrust. In Microsoft's case, the company defined its birthright innovation as the freedom to bundle whatever it desired to in its Windows operating method. There were plenty of other changes  bullying partners, contract restrictions, exclusive deals in the antitrust suit filed against Microsoft by the Justice Department and 20 states in May 1998.

But Microsoft would have settled the case before it was filed agreeing to other changes in its corporate behavior  if the government had dropped the bundling, or technological tying,charge.

Recall that while Microsoft lost on several counts in both the federal district court and appeals court, the technological tying charge was pulled out by the appeals court. Microsoft later signed a settlement and consent decree, and agreed to change some business practices. Still, for all the drubbing Microsoft took in court and to its reputation, the company preserved its freedom to design its operating method as it sees fit.

For Google, it seems, the core innovation principle would be to defend its search algorithm, which determines search results. In some tech and antitrust circles, there has been talk that Google's search algorithm is so essential to finding information and to Net commerce that it ought to be ruled an essential facility and placed in the public domain. The same argument was made about the Windows operating method years ago.

But well-intentioned calls for greater openness and transparency in Google's black-box algorithm, antitrust specialists say, could nibble away at the company's ability to do as it sees fit with its essential intellectual property. But, they add, Google ought to stay free to pursue all manner of algorithmic innovations, as long as the tweaking is not designed to discriminate against a rival.

There is no chance, legal specialists say, that would happen with Google. The cases in which intellectual property has been deemed by the government to be an essential facility are limited to industries where a government-created monopoly prevailed, like telecommunications before Ma Bell was broken up.

On that score, Microsoft agrees. We're not asking regulators for Google to share information about its algorithm, said Mr. Smith, Microsoft's chief counsel.

At this stage, the antitrust pursuit of Google is mild compared to what Microsoft faced. Nor is there any hint that the authorities, in the United States, have any desire to mount the kind of wide-ranging challenge directed at Microsoft.

But antitrust owner also evolves by individual decisions that establish the rules of the road in new industries and new contexts. The next one to watch will be the Justice Department's review of Google's planned $700 million purchase of ITA, an airline flight information program company, and what conditions, if any, the antitrust regulators attach to their expected approval of that deal.