Is Google a Monopoly?

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Ready to start a business in spite of the current economic climate? Here are some businesses that thrive during tough economic times.Ever since 1998 when it was named PC Magazine's top choice for search engine of the year, Internet giant Google Inc. has been one of the hottest companies in the news, but recent press hasn't been nearly as positive.

In April 2008, the $157 billion company announced plans to pair up with Yahoo! Inc. in an agreement that would have allowed Yahoo to use Google to sell advertising on its own pages; Yahoo currently uses its own platform to do so.

But the Department of Justice wasn't so keen on the proposed plan and notified Google that it would be slapped with an antitrust suit if it went ahead with the Yahoo agreement; just three hours before the DOJ was planning on filing suit, the deal was dropped.

For now it seems Google has steered clear of federal antitrust charges, but just how close is the Internet phenomenon coming to illegal territory?

What is a Monopoly?

A monopoly arises when one single company controls so much of the market share of a product or service that it significantly affects the terms on which others have access to it.

Antitrust laws were intended to promote competition among providers, consumer choice, lower prices, higher quality, and innovation by providing a level playing field in an open, free market. The Sherman Act of 1890 was the first US antitrust law and prohibited contracts and conspiracies that restrain trade; it still contains the most important provisions in this area of law.

The Defunct Google-Yahoo Deal

Through an investigation headed by Sanford "Sandy" Litvack, former Vice Chairman of Walt Disney Co., the Department of Justice concluded that the proposed Google-Yahoo deal would have violated Sections 1 and 2 of the Sherman Act by unreasonably restraining trade and attempting to monopolize trade.

The investigators found that if Yahoo were permitted to use Google to sell ads on its search pages, the two would become collaborators as opposed to competitors and that the agreement would be "materially reducing important competitive rivalry between the two companies."

In a press release announcing that Google and Yahoo had cancelled plans for the deal, Thomas O. Barnett, Assistant Attorney General and head of the Department's Antitrust Division, said: "The arrangement likely would have denied consumers the benefits of competition—lower prices, better service and greater innovation."

A Warning from the DOJ?

At this point, the DOJ doesn't seem to have plans of pursuing antitrust claims against Google, but its press release announcing the failed deal may offer clues into the future. The DOJ specifically pointed out that "Google is by far the largest provider of [Internet search advertising and Internet search syndication], with shares of more than 70 percent in both markets."

Should Google be worried that this means an antitrust suit is still possible?

Litvack was quoted in The AmLaw Daily as saying that such a statement "may or may not" be intended to put Google on notice of potential antitrust suits in the future.

By all accounts, Google has been steadily building an empire, acquiring companies like DoubleClick, YouTube, and Pyra Labs, creator of blogging platform Blogger. Just as with Microsoft throughout the 1990s, there has been constant rumbling on the Internet and elsewhere about fears that Google is forming a monopoly, but it seems that the Yahoo deal finally pushed the government to take such concerns more seriously.

For now, though, we'll just have to wait and see whether the Department of Justice will continue to pursue antitrust investigations against Google—and luckily we have Google Alerts to keep us up to date on the latest news.