Google: the new champion of competition

Google says a Microsoft-Yahoo tie-up would be bad for competition. But then it would, wouldn't it...

Last Updated: 31 Aug 2010

In a blog on Sunday, Google’s chief legal officer David Drummond said that the proposed deal – which would involve Microsoft buying Yahoo for $45bn – ‘raises troubling questions’. Apparently poor little Google is worried that big bad Microsoft might get up to its old tricks again, using a dominant market position to restrict competition. Since the combined entity would have a big share of the web-based email and instant messaging markets, Drummond argued, it might be able to restrict access to competitors’ services. And as he says, Microsoft does have form in this area.

Google, on the other hand, is setting itself up as the champion of ‘the underlying principles of the Internet’. Drummond said primly: ‘We take Internet openness, choice and innovation seriously. They are the core of our culture. We believe that the interests of Internet users should come first as the merits of this proposed acquisition are examined and alternatives explored’.

All very admirable, but we can’t help feeling that this is a bit rich. After all, Google currently has a hugely dominant market position in both online advertising and search – which is precisely why Microsoft is bidding for Yahoo in the first place. Google controls about 60% of the global online advertising market, and runs more than half of all internet searches – which is several times the combined figure for Microsoft and Yahoo (according to comScore, there are more than twice as many searches run on YouTube alone than on all of Microsoft’s sites). And it’s been using this dominance to move into all sorts of other areas and services – the very thing it’s apparently worried Microsoft will do.

So how is this any less of a threat to competition than a combined Microsoft-Yahoo would be? In fact, you might argue that since so many people use Google as their portal to the web, it’s actually in a much better position to restrict competition. That’s certainly the view that Microsoft has been voicing recently – and as it was quick to point out in response to the blog, the deal should actually lead to more competition in these markets, not less.

Microsoft has been known to play fast and loose with competition rules in the past – so the regulators are bound to running a particularly beady eye over its Yahoo proposals. But from where we’re sitting, Drummond’s argument sounds suspiciously like special pleading – from the company that’s potentially got the most to lose if this deal goes ahead...

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