December 16, 2012 Onetime Allies in Antitrust Part Ways Over Google By STEVE LOHR NY Times
http://www.nytimes.com/2012/12/17/technology/onetime-allies-in-antitrust-part-ways-over-google.html In the digital economy, 14 years is an eternity. Fast-shifting technology means that companies, once feared and seemingly invincible, fade, while new powers rise to dominance, raising fresh sets of concerns. Exhibit A: In the spring of 1998, the federal government and 20 states filed a landmark antitrust suit against Microsoft. A few months later, Google was founded. Now Google is the subject of major antitrust investigations in the United States and Europe. In the United States, regulators are expected to announce a decision within days to sue or settle, and under what terms. The European decision will come soon as well. Much has changed over the years, but two lawyers who helped build the case against Microsoft are playing important roles once again. But this time, Gary L. Reback and Susan A. Creighton are on opposite sides. The two lawyers, and the positions they have taken, point to some striking similarities yet also significant differences between the two high-stakes investigations — and why the pursuit of Google has proved challenging for antitrust officials. In 1996, Mr. Reback and Ms. Creighton were partners, representing Netscape, the pioneering Web browser company. They wrote a 222-page “white paper,” laying out Microsoft’s campaign to use its dominance of personal computer software to stifle competition from Netscape, the Internet insurgent. After Netscape sent their report to the Justice Department, the head of the antitrust division ordered an investigation. Mr. Reback is now an attorney at Carr & Ferrell in Silicon Valley, where he represents several companies that have complained to the government about Google. He does not represent Microsoft, though that company is a born-again champion of antitrust action, against its rival Google. In Google, Mr. Reback sees a familiar pattern — a giant company trying to hinder competition and attack new markets. Google, he says, is unfairly using its dominant search engine to favor the company’s offerings in online shopping, travel and local listings and thus stifle competition from Web sites that rely on Google search for traffic. “From my perspective, it’s an instant replay of the Microsoft case,” Mr. Reback said in a recent interview, though he would not comment for this article. “It’s the same playbook.” Not to Ms. Creighton, a partner in the Washington office of Wilson Sonsini Goodrich & Rosati, who is in Google’s corner. She has testified before Congress on Google’s behalf and negotiated with the Federal Trade Commission, the agency conducting the antitrust investigation, and where she was a senior official during the Bush administration. “Google’s conduct is pro-competitive,” Ms. Creighton declared in her Senate testimony last year. “Far from threatening competition, Google has consistently enhanced consumer welfare by increasing the services available to consumers.” Ms. Creighton hits two main themes in Google’s defense. The first is the consumer benefit of all Google’s free services. The second is that the cost to consumers of switching to Internet alternatives like Microsoft’s Bing search engine, the Expedia travel site or Yelp local listings is “zero,” she said. Or, as Google repeatedly says, competition is “just a click away.” In the late 1990s, Microsoft had its version of both arguments. Microsoft bundled a free Web browser into its Windows operating system — an added feature at no cost, surely a consumer benefit. In its trial testimony, Microsoft showed that millions of people had downloaded the competing Netscape browser onto Windows — a rival product just a double-click away. But in the trial, the evidence taken as a whole portrayed a wide-ranging effort by Microsoft to crush Netscape. It is not an antitrust violation for a powerful company to gain a dominant share of one market and then expand into other markets. The legal issue is the tactics the dominant company employs to expand its empire. In the Microsoft case, the evidence showed that it had bullied industry partners and had negotiated deals to try to thwart Netscape’s advance. The internal e-mail and witness testimony was damning, including an account of a meeting with a Microsoft executive who said its strategy was to “cut off Netscape’s air supply.” In Silicon Valley today, venture capitalists routinely tell start-ups to steer clear of Google’s plans, as they once did with Microsoft. “I tell them to know what Google’s flight path is,” said Mitchell Kapor, a venture investor and former technology executive, who competed against Microsoft. “If you do something that falls under their shadow, you feel a chill.” Still, Mr. Kapor said, the industry environment is quite different today. “The Google guys grew up with the Internet and its openness,” he said. “Without the open Internet, there would be no Google, and they understand that.” Others point to another force that helped Google — government action. “Without the antitrust case and the restraints on its behavior, Microsoft would have built search into the operating system and we might not have had Google,” said Christine Varney, a lawyer who represented Netscape in Washington and is the former head of the antitrust division the Justice Department in the Obama administration. The Google claim that the company faces genuine competition today in its key markets like search and search advertising is an exaggeration, industry executives say. But things are more open, as Mr. Kapor says. And there are other digital giants in technology — Apple, Facebook and Amazon — in nearby markets with designs on parts of Google’s business, in a way that was not the case in Microsoft’s heyday. For example, 30 percent of online shoppers in America begin their search on Amazon, more than twice the share for Google. “Google inhabits a larger, more complex and faster-moving environment than Microsoft did in the 1990s,” observed William E. Kovacic, former chairman of the F.T.C. “So the difficulty of both diagnosis and remedy seems greater than in the case of Microsoft.” Mr. Reback and Ms. Creighton are both products of elite universities; he is Yale and Stanford Law, she is Harvard and Stanford Law. But former colleagues say the two have sharply contrasting personalities and, to some degree, ideologies. Mercurial and impassioned, Mr. Reback strongly believes that government should be the guardian of competition, especially in high-tech markets. He laid out his view in a book, published three years ago, “Free the Market! Why Only the Government Can Keep the Marketplace Competitive.” “Dominant firms can more easily manipulate these markets,” he wrote. “And natural forces make the strong even stronger.” Ms. Creighton is quieter, more understated, and has a wry sense of humor. In 2001, after the Microsoft trial, she joined the F.T.C., but before the company reached a settlement with the Justice Department. She joked with a reporter that joining the Bush administration was her exit strategy. “Unlike you,” she said, “I am off the Microsoft case.” At the time, Ms. Creighton called herself a “law-and-order Republican” — laws should be enforced, but government intervention is a tool to be used sparingly. “Susan is a superb advocate, and one not inclined to defend absurdities,” said Mr. Kovacic, who worked with Ms. Creighton at the F.T.C. Mr. Reback, he said, brings a deep belief and passion to his work. “For Gary,” said Mr. Kovacic, who is also a professor at George Washington University Law School, “there are no molehills, only mountains.” -- ================================================= George Antunes Voice (713) 743-3923 Associate Professor Fax (713) 743-3927 Political Science Mail: antunes at uh dot edu University of Houston Houston, TX 77204-3011 _______________________________________________ Please be sure to include a URL to the article. 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