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March 31, 2011

Microsoft's Antitrust Complaint

Microsoft will file a formal antitrust complaint against Google "as part of the European Commission's ongoing investigation into whether Google has violated European competition law". Brad Smith, Senior Vice President at Microsoft, says that Google's questionable business practices prevented competitors from gaining market share. As Brad Smith puts it, "Google has done much to advance its laudable mission to organize the world's information, but we're concerned by a broadening pattern of conduct aimed at stopping anyone else from creating a competitive alternative".

I was surprised to read some of the complaints.

"In 2006 Google acquired YouTube — and since then it has put in place a growing number of technical measures to restrict competing search engines from properly accessing it for their search results. Without proper access to YouTube, Bing and other search engines cannot stand with Google on an equal footing in returning search results with links to YouTube videos and that, of course, drives more users away from competitors and to Google."

YouTube is just a video sharing site. Google could prevent all the other search engines from indexing it and this shouldn't be a legal problem. But Google doesn't prevent other search engines from indexing YouTube: there are 284 million pages from in Bing's index. Google returns more results from (about 443 million pages), but Google owns YouTube and it can easily index all the pages. If Google prevents other search engines from indexing some videos, it's Google's problem: YouTube loses a lot of views and money from advertising.

"In 2010 and again more recently, Google blocked Microsoft's new Windows Phones from operating properly with YouTube. Google has enabled its own Android phones to access YouTube so that users can search for video categories, find favorites, see ratings, and so forth in the rich user interfaces offered by those phones. It's done the same thing for the iPhones offered by Apple, which doesn't offer a competing search service."

YouTube has some APIs for building apps, so you don't have to be a big company to develop YouTube apps. As a result, you'll find a lot of third-party YouTube apps in Apple's App Store, for example. Unfortunately, third-party apps can't use YouTube's official logo, YouTube's trademarks and there are other usage restrictions. That's probably the reason why companies like Apple, Microsoft, HTC need to partner with Google to create YouTube apps. If Microsoft couldn't reach an agreement with Google, then it's a business issue. Google has no obligation to allow other companies to create software that uses its APIs.

"Google is even restricting its customers'—namely, advertisers'—access to their own data. Advertisers input large amounts of data into Google's ad servers in the course of managing their advertising campaigns. This data belongs to the advertisers: it reflects their decisions about their own business. But Google contractually prohibits advertisers from using their data in an interoperable way with other search advertising platforms, such as Microsoft's adCenter."

AdWords offers some exporting features and even Microsoft admits that you can export AdWords data.

"One of the ways that search engines attract users is through distribution of search boxes through Web sites. Unfortunately, Google contractually blocks leading Web sites in Europe from distributing competing search boxes. It is obviously difficult for competing search engines to gain users when nearly every search box is powered by Google. Google's exclusivity terms have even blocked Microsoft from distributing its Windows Live services, such as email and online document storage, through European telecommunications companies because these services are monetized through Bing search boxes."

This seems to be a valid concern that needs to be addressed by Google. AdSense has some similar terms that prohibit using competing ad/search services on the same page, but not on the same site. The good news is that Google doesn't force the "leading Web sites in Europe" to use Google's search box and they can easily switch to Bing.

All in all, Microsoft doesn't have a strong case, but that doesn't mean that Google hasn't abused its power and that the investigation won't slow down Google. When you have 95% market share in Europe, you're almost a monopoly and an easy target for antitrust investigations.

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