Google has spent the past year trying to dodge trustbusters who snared its archrival Microsoft.
The company has built an army of 22 lobbying firms, donated to political campaigns, hired a former GOP congresswoman, and brought in academics, trade groups, spin masters and others to counter complaints about Google’s business practices.
The leading critic is Microsoft – which settled its long-running antitrust case with the U.S. government in 2001.
“As far as the two of them goes, it’s like the Hatfields and McCoys,” said one Hill staffer with ties to the House Energy and Commerce Committee. “There’s so much he said, she said that goes on behind the scenes.”
At stake is the very future of the tech business. And Google is gearing up for what could be a Pyrrhic war – one not only against the policymakers and regulators who could tie up the company for years in antitrust litigation but also against foes such as Microsoft, Facebook, Apple and others that are trying to use Washington to tip the playing field against Mountain View in the marketplace.
Adding to Google’s urgency is a finding by European regulators on Monday that the tech giant may be using its dominance in search and advertising in a way that harms competitors. However, the European Commission offered the company a critical legal lifeline: Google can propose its own solutions to policymakers’ fears to possibly avoid a lengthy and costly antitrust war in Brussels.
The verdict in Washington is still pending. In the meantime, Google has formed its own political offensive line and has been adopting some of the same whisper-campaign tactics that Microsoft has long used against it.
“We take Washington seriously and we believe it’s important to do all we can to help policymakers understand our business,” a Google representative told POLITICO.
The company has assembled a growing stable of lobbyists, including powerhouses Gephardt Government Affairs and Podesta Group. Once a neophyte, it now outspends Microsoft in lobbying and has a well-funded political action committee as the 2012 election draws closer. In April, Google’s PAC recorded its biggest month in donations to campaigns.
Earlier this year, the company also brought in a well-connected Washington chief – former Rep. Susan Molinari, a GOP insider who’s backing Mitt Romney.
Google has recruited allies on the right and the left to champion its cause. Former Federal Trade Commission competition chief David Balto, once with the Center for American Progress, and conservative icon Robert Bork have written articles for the press defending Google. Bork noted that he serves as an “adviser” to the company when he wrote a recent op-ed in the Chicago Tribune targeting Google’s antitrust detractors.
Meanwhile, Google has funded a flurry of academic reports. Two published earlier this month – one by Hal Singer and Bob Litan, of Navigant Economics, and another by First Amendment legal expert Eugene Volokh – essentially argued in defense of the company’s current work. And a third published last week – this one written in part by Internet expert Marvin Ammori – faulted all of the market remedies proposed by Google’s competitors.
In early May, the company joined Mozilla in raising public questions about whether Microsoft’s next version of the Windows operating system will hinder rival browsers – including Google Chrome. The company told POLITICO in a statement that the move results in “restricting user choice and innovation.”
It’s a “multidimensional chess board,” said Bert Foer, president of the American Antitrust Institute, of the increasingly widespread confrontation between the two companies.
Foer described the Google-Microsoft war – especially in the aftermath of Microsoft’s lengthy antitrust trial in 1998 and subsequent settlement – as the new normal in antitrust, in which companies not only fight a legal battle, but a public relations one to sway policymakers, journalists and consumers alike.
The activity has increased recently because U.S. regulators are likely to decide in the coming months whether to bring charges that Google wields its dominance in search and advertising as a market weapon meant to disadvantage competitors. The FTC did not comment Monday on its timing.
European authorities are moving more quickly. On Monday, the EU’s top competition cop said Google has a short window to propose solutions to a number of concerns that it may be abusing its market dominance. Many of Google’s competitors praised the announcement.
If Google fails to provide those remedies, Europe could issue a formal statement of objections against the company.
To fight detractors in D.C., some say Google is merely taking a page from its biggest rival’s playbook: adopting some of the tactics Microsoft honed as a result of its beleaguered antitrust war.
“Microsoft is perhaps the most prominent, best-funded leader of a group of companies … eager and anxious to point out what they view as unfair, anti-competitive, otherwise problematic actions on the part of Google,” said one staffer on the Senate Judiciary Committee.
Not unlike Google, Microsoft now spends more than $13 million on advocacy work, at both the state and federal levels, according to the company. Inside the Beltway, Microsoft counts among its ranks more than 20 outside lobbying shops, including Covington and Burling, Elmendorf Ryan and Patton Boggs.
More than a year ago, Google was pointing fingers at Microsoft, claiming it was the target of “an anti-Google industrial complex” – and noting that, in addition to lobbying, Microsoft was funding a clandestine network of operatives to help drive third-party complaints to regulators, plant articles in the press and drum up calls for Google executives to answer questions on the Hill.
“We place a high premium on our reputation for transparency and integrity,” Microsoft’s Senior Director of Public Relations Jack Evans said in a statement. “As such, we cooperate with requests from policymakers on a myriad of issues and utilize the expertise of some of D.C.’s best policy advocates.”
Now, Google is devoting more of its own resources to that very same game – and chalking up some political victories, too.
In February, Google won clearance from the Justice Department to proceed with a $12.5 billion purchase of Motorola Mobility, and with it, a trove of about 17,000 patents – including many covering key wireless technologies to help it fight back in patent suits against rivals.
Earlier in the year, the company helped beat back anti-piracy legislation in Congress, which had the support of powerful lobbies such as the Chamber of Commerce and the Motion Picture Association of America. The proposals would have put new requirements on search engines to ferret out music, movies and other documents shared illegally. Google has also worked with other tech companies to successfully stave off privacy regulations in Congress.
But there’s still a lot of one-upmanship between rivals. Google recently trumped Microsoft on its own turf: winning the largest federal government cloud computing email contract to date.
Google’s advocates in D.C., however, say they’re mostly playing defense against Microsoft’s offensive onslaught. Rick Murphy, one of Google’s outside lobbyists, told POLITICO that “most of the grenades have been lobbed by the Microsoft people.”
And Google is beginning to “burn up the shoe leather as well,” he said.
It’s kept the two companies locked in a constant tug of war. Microsoft’s lobbyists and PR operatives are quick to seize on Google’s troubles, spinning some of the company’s recent privacy and antitrust woes to regulators and journalists alike. And Microsoft earlier this year hired a key FTC lawyer who advocated against one of Google’s acquisitions.
Microsoft is also a key driver behind FairSearch.org, a collection of companies that formed initially to try to sink one of Google’s acquisitions and now is working to push further antitrust scrutiny domestically and abroad.
Another group, The Association for Competitive Technology, once worked on Microsoft’s side during its own antitrust trial, though the group currently focuses on representing app makers. Microsoft is still a key financial backer of the association, which doesn’t include Google as a member. Instead, Google joined a rival app lobby in D.C. – the newly formed Application Developers Alliance.
The result is a shell game that often keeps regulators guessing – and in some cases, infuriates them, too.
An email exchange between the chairman of the FTC and one of his top aides in 2010 underscores the fact that lawmakers and regulators are wise to both sides – in addition to other business rivals – trying to get their enemies in trouble with the law.
The FTC officials wondered in an exchange, first reported by The Washington Times, whether Google rivals were behind Consumer Watchdog in its calls for the agency to investigate Google’s Street View mapping project, which captured data from unsecured Wi-Fi networks. FTC Public Affairs Director Cecelia Prewett wrote to colleagues asking who was backing the group, speculating in an email, “[It’s] also Microsoft and Yahoo which probably funds the consumer group making the complaint.”
FTC Chairman Jon Leibowitz later responded, “And maybe Facebook – one of the folks who works for them sent it to me.”
That’s why some stakeholders see the fight between Google and Microsoft as a microcosm of a larger tug-of-war in the tech universe.
With more scrutiny than ever on the industry, it’s not just the two giants amassing reserves – it’s also companies such as Facebook, Apple, Amazon and others recognizing they may have to get political to safeguard their interests and market share.
But for Google and Microsoft, at least, the messaging might be getting muted in Washington.
“After a while, you get a little tone-deaf to it all,” said the staffer with ties to the House Energy and Commerce Committee. “And obviously, they both have their strengths and they both have their faults.”