Google, Yahoo and the Stanley Cup

I'm surprised by the number of bloggers and journalists circling the DOJ's so-called Google-Yahoo investigation. I'm no lawyer, but I've covered Microsoft's antitrust problems for years—and learned a fair bit about U.S. antitrust law along the way.

The Google-Yahoo deal was non-exclusive, and if it becomes a permanent arrangement there is likely no antitrust problem as long as there is no exclusivity. Trustbusters might find fault in an exclusive deal, given Google's large search market share or because of advertising/keyword search logistics, where a small percentage of searches account for the greater revenue. But there's nothing exclusive here.

During Microsoft's antitrust case, legal experts aligned either for or against the company told me the same thing: The Justice Department couldn't have made a case if not for Microsoft's exclusive deals. The company engaged in exclusive arrangements, from a monopoly position, that shut out Netscape. Microsoft's other tactics, while extremely aggressive, mostly fell into the rough play allowed by U.S. antitrust law.

Back in 1999, William Kovacic, then a university professor and now FTC chairman, gave me a great analogy for U.S. antitrust law: Hockey. He explained that during the Stanley Cup playoffs, the referees allow plenty of rough play. U.S. antitrust law also allows and even encourages rough play. Microsoft might have spent no time in the penalty box if not for the exclusive agreements.

Google's position is similar to Microsoft's, and arguably much less. Google's search marketshare is close to 60 percent, according to ComScore. Microsoft's Intel-based operating system marketshare was well more than 90 percent when the Justice Department filed its antitrust lawsuit in May 1998. Google is dominant, but by no means a monopoly. Selling ads/keywords non-exclusively alongside Yahoo's extends Google's reach, but Yahoo would be the bigger beneficiary, by way of improved efficiency and increased revenue.

Something else: The Bush White House is remarkably pro-business, the most of any other administration in my lifetime. Would the Washington crew that cleared the Google-DoubleClick merger suddenly turn on Google and Yahoo? I suppose Microsoft's lobbyists could be tearing up the U.S. Capitol, encouraging legislators to pressure the Justice Department to investigate the deal. It is an election, after all.

Something more: The Justice Department is in the business of investigations, many of which go nowhere substantive. There is no presumption of guilt in an investigation like the one widely reported this week. Some blogs and news stories insinuated guilt, simply by investigation. If Google and Yahoo wanted a long-term deal, they could have it, methinks. Nobody has been hit in the head with a hockey stick here.