Archives For steven pearlstein

Steven Pearlstein at the Washington Post asks if it’s “Time to loosen Google’s grip.”  The article is an analytical mess.  Pearlstein is often a decent business reporter–I’m not sure what went wrong here, but this is a pretty shoddy piece of antitrust journalism.

For the most part, the article is a series of tired claims about Google leveraging its monopoly . . . blah, blah, blah.  See my posts here, here, and here for some detailed responses to those claims.

Pearlstein is at least a decent writer, so the prose is nice and flowery.  I don’t think he even uses the word “leverage.”  Instead we get this:

The question now is how much bigger and more dominant we want this innovative and ambitious company to become. Google has already achieved a near-monopoly in Web search and search advertising, and has cleverly used that monopoly and the profits it generates to achieve dominant positions in adjacent or complementary markets. Success in those other markets, in turn, further strengthens Google’s Web search dominance and reduces the chance that any other competitor will be able to successfully challenge it.

It’s the same old line:  “Google is dominant (in a market we wave our hands and say is antitrust-relevant).*  It uses its profits to ‘leverage’ its power to control other ‘adjacent’ markets.  Said leveraging reinforces Google’s monopoly, making it nearly impossible for anyone to compete.  Wash. Rinse. Repeat.”

Pearlstein claims not to be bothered by Google’s legitimate monopoly–it’s the crass buying of other companies that worries him ($6 billion for Groupon?!?! Talk about stimulus!  Why isn’t the fed subsidizing this?–Oh, wait.  I guess they are . . . ).  And here’s where Pearlstein really flubs it.

Check out this paragraph:

In theory, antitrust laws were meant to restrict such acquisitions by a monopolist. In practice, however, it hasn’t worked out that way. Decades of cramped judicial opinions have so limited application of antitrust laws that each transaction can be considered only in terms of how it affects the narrowly defined niche market that an acquiring company hopes to enter.

By “such acquisitions,” Pearlstein means the ones he knows to be anticompetitive.  OK, that’s not fair.  They are the ones where a monopolist “buys its way into new markets and new technologies.”  I must be reading different antitrust laws.  I can’t recall the part where the Sherman Act makes it illegal for a monopolist to improve its product or its business processes, even if it does so by buying another company in a different (though “adjacent”) market in order to run it better.  And could it really be ok for a monopolist to develop its own new technology to accomplish the same ends, but not ok for the company to just take the more efficient route and buy the technology from another company?  I mean, it has to come from somewhere.  Google is either paying its own employees to develop technology or it’s paying another company’s employees to do it.  What’s the difference? Continue Reading…