The Department of Justice should take a hint from the Microsoft suit: Don't go after Google.

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July 28 2009 5:02 PM

The Case Against the Case Against Google

The Department of Justice should take a hint from the Microsoft suit: no more antitrust actions against tech companies.

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Google founders Sergey Brin (left) and Larry Page

Is Google too powerful? The Justice Department's Christine Varney thinks so. As Fred Vogelstein reports in Wired, the attorney who represented Netscape during the federal government's long-running Microsoft antitrust case sees the tech world's newest giant as the latest threat to online innovation. "For me, Microsoft is so last century," Varney told a conference last year. "They are not the problem. I think we are going to continually see a problem, potentially, with Google." Ever since Barack Obama appointed her to head the DoJ's antitrust division, Varney has been promising a tough line against firms that dominate their industries. The online-policy wonk doesn't just think Google is getting too big. She might be ready to do something about it.

Before we get too excited about a potential antitrust action against Google, it's worth noting that the rest of the Obama administration appears less enthusiastic than Varney about a potential trustbusting spree. I'm on the anti-Varney side as well: Prosecuting tech giants for getting too big is so last century. Google may well become the next Microsoft, acquiring enough industry power to hold its rivals hostage. But in the years since the Microsoft trial, we've learned that such power isn't of great use. Google may be big now, but it'll eventually find itself just as beaten down as Microsoft has become, and it'll get there without any help from the government. How can I be so sure? Because we've seen this movie before.

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I never thought I'd say this, but here goes: The antitrust prosecution against Microsoft was misguided. To be sure, the government had the facts right—in the late 1990s, the software giant looked unbeatable. Microsoft's operating system came pre-installed on nearly every computer sold in the world; every business, whether large or small, considered its Office suite indispensible; its Web browser had become the dominant way most of the world got online; and it looked bent on becoming a powerhouse Internet company, too.

Every shred of evidence presented in the trial showed that Microsoft used its power ruthlessly. Microsoft strong-armed computer makers into leaving Netscape's browser off their machines—it even threatened to cancel Office for the Mac if Apple didn't make Internet Explorer the default Mac browser. Bill Gates was personally involved in keeping competitors at bay. When Gates learned that Intel was building a chip that would let programmers deploy enhanced graphics within non-Microsoft operating systems, he wrote to Intel CEO Andy Grove, "I don't understand why Intel funds a group that is against Windows 95." Intel stopped developing the chip.

But if the government was right on the facts, it was wrong on the big picture. The theory behind the prosecution was that Microsoft's mobster tactics would raise the price of software and slow down innovation. But that didn't happen. In 2002, Microsoft settled the antitrust case with the Bush administration; it faced no substantial penalties for its years of bad behavior. At that point, it still looked unbeatable—it had the same OS monopoly, office-software monopoly, and Web-browser monopoly. And you know what happened? It got beat anyway. Many of Microsoft's assets turned out not to matter, because upstarts like Google and old foes like Apple found ways to innovate around them.

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