Microsoft, Google, the FTC and Unintended Consequences

The pro-Google crowd is calling Microsoft out for sic'ing the FTC on Google. They shouldn't be surprised.

Microsoft was dealt a setback in its perpetual feud with Google when the FTC, after a two-year investigation into how it treats search competitors, essentially gave Google a pass. Google will have to change some of its patent practices, but by and large the ruling will have relatively little effect on how the company competes.

Microsoft accused Google of "search bias," which meant favoring Google search results while unfairly demoting rival companies' sites in its search listings. In a 4-to-1 ruling, the FTC said there was no evidence Google had broken any antitrust laws but that there had been a "plausible connection" between Google's listings and efforts to improve user experience.

So Microsoft comes out the loser in this one. But it's been the reaction to the case that has gotten my attention. Microsoft VP and Deputy General Counsel Dave Heiner wrote a Technet post on Thursday airing out Microsoft's complaints. Readers were sure to bring up Microsoft's own anticompetitive past in the comments:

"Apple litigates, Google innovates, Microsoft whines."

"Microsoft's whining about Google's abuse of patents or monopoly in general is a pinnacle of hypocrisy. May be [sic] you first should look at your own abuses in the same areas?"

"Why is there no 'Share on Google+' option from this page … You have every other option available -facebook, redit [sic] , linkedin etc…."

"Stop whining and move on, innovate! Ohhh...Microsoft forgot what that is 20 years ago."

To everyone, I say you let this dog loose 20 years ago when the FTC was called in for Microsoft's aggressive and oftentimes unfair practices. The problem is that once you let the government genie out of the bottle it doesn't go back in, and Microsoft now has a precedent to turn around and use the government club against its own competitors.

This is an industry that moves far too fast for the slow-moving government to fix anything in a timely manner. Look at the Netscape case. Netscape sued Microsoft after years of losing market share, and in the end, Microsoft wound up with Netscape APIs it bought from AOL in 2011.

While the government found Microsoft had misbehaved and abused its position, by the time it took any action people were saying "now what do we do, put Netscape back in business?" The company had been dead and disbanded for years.

Following the original Microsoft antitrust case, economist Milton Friedman said "you will rue the day when you called in the government. From now on the computer industry, which has been very fortunate in that it has been relatively free of government intrusion, will experience a continuous increase in government regulation. Antitrust very quickly becomes regulation."

His reasoning is that "antitrust laws tended to do exactly the opposite, because they tended, like so many government activities, to be taken over by the people they were supposed to regulate and control."

Prior to the antitrust investigation, Microsoft had no lobbying office in Washington. It had a staff of one in Chevy Chase, MD. Well, that’s changed. The office was moved to K Street, where the lobbyists reside, and the staff was bulked up to include lawyers like Michael Kinsley. Lobbying last year sucked up $7.3 million and the company gave $4.2 million to candidates, about a 3:2 split Democrat to Republican, with the vast majority going to incumbents.

But Google followed Warren Buffet's maxim - "It's better to learn from your opponent's mistakes than your own" – to a T. It already had a huge office in D.C., and Politico notes it spent $25 million on defeating this investigation.

Could that $25 million have gone into making search a little smarter? Gmail a little friendlier? Getting Android out sooner? You bet. But Google has to play the game.

The industry cried to the government over Microsoft's dirty play when it should have fought back. That gave Washington all the excuses it needed to stick its nose into a thriving, innovative industry. Now Microsoft is going to turn around and wield the same club that was cracked over its head against competitors. And millions of dollars that could have gone into engineering and design will instead flow into K Street.

Unintended consequences? Oh yes, absolutely. But now you just have to live with it, Silicon Valley, because you made this mess.

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