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Google antitrust case could explore unknown threats

In 1998, Microsoft's antitrust defense claimed that the tech industry's dynamism prevented monopoly control. Google could try something similar when its case begins next week.

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At its antitrust trial in 1998, Microsoft argued in its defense that the tech industry is too dynamic to be controlled by any company. Even though it all but owned the PC operating system market and was taking control of the browser market from Netscape, it faced unknown but real threats, it argued.

This aspect of Microsoft's argument fell flat with U.S. District Judge Thomas Penfield Jackson, overseeing the case, who seemed visibly amused with this line of defense. But Microsoft was right. A startup, Google, incorporated just months before the trial began, became Microsoft's leading browser market threat.

Microsoft tried to overcome the skepticism about unknown threats by arguing that Linux could emerge as a viable desktop operating system competitor. The government believed Linux would remain primarily a server operating system.

Google now faces its own legal crucible, which might be the most important antitrust case in tech since Microsoft. The government is broadly alleging that Google, which the U.S. calls "the gatekeeper of the Internet," uses anti-competitive practices in its search and advertising markets. The trial begins Tuesday in Washington.

Google, like Microsoft, will likely work to minimize the government's characterization that it is a dominating force, or in this case, the internet's gatekeeper. It might paint itself as a company under continuous competitive threat, just like Microsoft did in 1998.

But 25 years later, Google is in a stronger position to argue that it faces "unknown long-term threats." And that's because some of its threats are here, now.

Google can cite, for instance, Microsoft's multibillion-dollar investment in OpenAI. Generative AI could change how people gather information, relying more on conversational searches, summarization and media integration. The advances in AI could open the door for new companies to challenge Google's grip on search.

The government filed its search engine case against Google in 2020, well before ChatGPT changed how people began imagining a future based on AI.

A lengthy trial

Like the Microsoft case, this will be a lengthy trial and is expected to last 10 weeks, giving plenty of time for the government and Google to move into broad areas, such as generative AI's effects on search.

Much of the testimony will be from witnesses who will support or refute the government's contention that Google used "exclusionary agreements" to build its dominance.

For instance, the government alleges that Google used long-term agreements with Apple to require it as the default search engine on its Safari browser and other search tools. Microsoft faced a similar allegation. In its case, the government contended that it used exclusionary agreements to increase its browser market share.

Microsoft's final settlement with the government gave PC makers the ability to add competitive products to Microsoft on the PCs they sold. It banned retaliation against computer makers and software developers for developing competing software, among other terms.

Google's case will revolve around these business contracts and conduct issues. But like the Microsoft case, expert witnesses might raise the tech industry's big competitive questions.

In the Microsoft trial, economist Richard Schmalensee of MIT testified for the software giant and argued that Microsoft lacked monopoly power. Its Windows pricing was "severely constrained by largely unknown long-term threats to its position," according to the plaintiff's findings of fact.

In his ruling, Judge Jackson didn't give credence to the unknown threat theory, writing that Microsoft "placed an oppressive thumb on the scale of competitive fortune." He ordered the breakup of Microsoft, which would split it into two, separating its operating system business from its applications business and giving the government what it wanted.

Jackson's breakup didn't last. The Justice Department, under newly elected President George W. Bush in 2001, said it would not seek a breakup. A settlement was reached a few months later.

Antitrust can't stop the creation of large and seemingly all-powerful tech companies, but antitrust aims to keep incumbent businesses from crushing the next startup.

In its 2004 IPO prospectus, Google cited Microsoft and Yahoo as its top competitors, but foresaw competitive risks to include "companies that are not yet known to us."

Patrick Thibodeau covered the Microsoft antitrust trial. Today he reports on HCM and ERP technologies for TechTarget Editorial. He's worked for more than two decades as an enterprise IT reporter.

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