I expect this will be my last post on this subject until something actually happens, but I wanted to address a few final concerns and possible misconceptions regarding the Federal Trade Commission’s war against Google:
1. This isn’t about party politics
Ted Frank, a respected critic of the US legal system, observed that Google was partially to blame for its current misfortune because, “Google executives were big cheerleaders for the 2008 Obama campaign, [and] you have to expect Democratic-run federal agencies to adopt a view of antitrust that expands government oversight of successful companies.” I think Ted overstates the importance of the 2008 election. The FTC had already embarked on a far more interventionist direction during the Bush regime. Three of the five sitting commissioners — including Democratic Chairman Jon Leibwoitz — are holdovers from the prior administration thanks to the seven-year term all commissioners serve. Indeed, it was Leibowitz and Republican Commissioner John Thomas Rosch who have been the architects of the FTC’s efforts to aggressively expand both the quantity of the agency’s prosecutions and the reliance on novel Section 5, “unfair competition” arguments instead of more traditional antitrust theories.
Furthermore, 2008 Republican presidential nominee John McCain is hardly a paragon of limited government. Given that George W. Bush — a perceived “pro-business” Republican — put Leibowitz and Rosch on the FTC, it’s hard to imagine McCain would have appointed a bunch of libertarians. The antitrust bar, unlike the tort bar, is a fairly bipartisan entity not beholden to the Democratic Party.
2. The FTC has been building to this for awhile
As I said, the FTC didn’t suddenly become an activist agency when Barack Obama became president. Since the early days of the Bush regime, the FTC has been ratcheting up its attacks on the Internet and technology sectors. I spent years documenting the FTC’s litigation against Rambus — a case that, despite its superficial ties to intellectual property, was really about allowing the FTC to control industry standards — and while that case ended in a defeat, it only proved to be a temporary setback for the Commission.
More recently, the FTC scored a major victory when the Sixth Circuit Court of Appeals upheld the Commission’s decision to seize a privately owned real estate listings database. The FTC said it was “unfair” that database access was restricted to the brokers who paid for its development and maintenance. This set an important precedent: The FTC can declare any “popular” online service a public utility, and thus alter the rules by which the company — and ultimately the public — can access that service. This is exactly what the FTC will try to do with Google.
3. The Internet may not be free much longer
Antitrust cases are first and foremost about enriching the antitrust community. But we shouldn’t ignore the ideological component of all this. Since taking over the FTC, Jon Leibowitz has made it clear that his biggest policy objective is ending the “free” Internet. There are a variety of reasons for this: Free websites are supported by advertising, the FTC’s historical archenemy; online news and commentary has destroyed the market for traditional, government-centered media (including the Washington Post, which employs Leibowitz’s wife); the decentralized exchange of information makes it harder for government agencies to monitor and control the public’s behavior; and, of course, the general paranoia that somehow children are being harmed.
It’s unlikely the FTC wants to destroy Google, or even break it up into smaller companies. What the FTC wants is to control Google’s future development — and by extension, direct the future of the Internet itself. The FTC wants to set standards. And that will mean fewer free services — goodbye Twitter and Facebook — and more websites designed by government committees. There will be more pay walls (to protect “intellectual property”) and greater restrictions on anonymity (mandatory ID codes to access many websites). New product development will be disfavored while incumbent firms — including a new, FTC-overseen Google — enjoy stronger state privileges.