Searching for A Real Antitrust Problem

Google “Google” and you’ll see results for the company’s many services, from Google News to Google Maps. Google (GOOG) something else entirely, and there’s still a good chance you’ll be directed to one of those services – too good of a chance, according to the Federal Trade Commission.

The FTC is believed to be in the process of preparing an antitrust complaint against Google, on the grounds that it uses its dominance in the search engine market to promote its other services by altering its algorithms to boost their prominence in its results pages. Google claims that it does not privilege results for its own services and that, even if it did, doing so would not be illegal.

With 65 percent of the search engine market share, Google completes more searches for customers than all of its competitors combined. However, what the FTC fails to consider is that the reason Google has attracted so many users is that it is consistently able to deliver results that those users find relevant.

This is exactly the point made by Rep. Jared Polis, D-Colo., in a recent open letter to FTC Chairman Jon Leibowitz. Because Google’s services, for the most part, amount to no more than elaborate sequences of zeros and ones, “there are no barriers to competition,” he writes. “Competition,” he said, “is only a click away.”

There are already plenty of other places to click. These include other search engines, such as Bing (easily reachable by typing “Bing” into a Google search bar), and websites like Amazon that specialize in searches for particular purposes, such as shopping. If users find that Google too often suggests its own services, they can easily switch to one of these other providers.

Online superpowers rise and fall quickly, with no need for outside intervention. As Polis, who is also the founder of ProFlowers and several other technology start-ups, pointed out, many of the dominant firms of the recent past, such as AOL, MySpace and Yahoo (YHOO), have already lost that dominance. Google executives know that, if they stop serving their customers, the double “o” logo will soon be as obsolete as the phrase “You’ve got mail.”

As I have written before in discussing the government’s decision to “protect” customers from the proposed merger of AT&T and T-Mobile, the current administration’s approach to preserving options seems to boil down to taking away the options people are most interested in.

The FTC could find more useful places to devote its resources. Consider college athletics, for example, as I suggested back in 2009. While college athletes, like other students, have plenty of choices for which search engine to use for last-minute research, on the football field or the basketball court, their options disappear. No matter what school they decide to attend, their compensation is controlled by the National Collegiate Athletic Association. And through the NCAA, colleges have reached the convenient conclusion that it is in everyone’s best interest to pay athletes only in scholarships. If this sounds like collusion, that’s because it is. But a lawsuit filed by players is still pending. Meanwhile, the NCAA, so skilled at striking the deals that allow it to control players, may convince Congress to grant it an exemption from antitrust laws.

Looking at who filed the complaints in these two cases yields a valuable lesson. In the case of the NCAA, the complaints came from the student athletes, the ones who have been deprived of choice. In the case of Google, the complaints came from competitors. These companies’ real problem, it seems, is not that customers do not have choices, but rather that customers aren’t choosing them.

If Google’s competitors are right, and Google really is altering search results for its own advantage, users will soon defect on their own. The FTC would do a greater public service by protecting the interests of student athletes who have nowhere else to go.

About Larry M. Elkin 553 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

Visit: Palisades Hudson

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