WASHINGTON—Senator Mike Lee (R-UT) today delivered the following opening statement at a Senate Judiciary Committee hearing on Capitol Hill. Lee, the ranking member on the Senate Judiciary Committee’s Antitrust Subcommittee, called for the oversight hearing on Google to review the company's fair competition practices.


                                             Opening Statement


                                              Senator Mike Lee


             “The Power of Google: Serving Consumers or Threatening Competition?”
                                            September 21, 2011

Internet Gatekeeper
Internet search is critical to economic growth in the United States and Google has long been a dominant force in this arena.  Indeed, Americans “Google” so frequently and ubiquitously that the company’s name has become a generic verb that means “to search the Internet.”

In the United States, Google controls somewhere between 65 and 70 percent of general Internet search, more than 75 percent of paid search advertising, and 95 percent of mobile search.  Given its dominant position, most Internet-based businesses rely on Google for a substantial share of their traffic and revenues.  As a result, last year Google generated nearly $30 billion in search advertising revenues.
 

Studies show what most of us know from experience: that the first few Google search results attract nearly 90 percent of all user clicks.  Google’s search ranking therefore has enormous power over the information users find, whichwebsites receive traffic, and the amount businesses must pay to be found on the Internet.

A former Reagan administration antitrust chief recently suggested that this market power has essentially made Google a “monopoly gatekeeper to the Internet.”[1] <#_ftn1>

Whether or not Google formally qualifies as a monopoly under our antitrust laws, one thing is clear: given its significant ability to steer e-commerce and the flow of online information, Google is in a position to help determine who will succeed and who will fail on the Internet.  In the words of the head of Google’s search ranking team, Google is “the biggest kingmaker on the Earth.”[2] <#_ftn2>

General Antitrust Concerns
Google has used its substantial advertising revenues to branch out into a multitude of secondary Internet businesses.  Largely by acquiring more than 100 different companies, Google now offers YouTube video, Gmail, Chrome internet browser,Google Plus social networking, the Android mobile smartphone operating system, and a host of services including Google maps, news, books, shopping, places, and flight search.  And with its recent purchase of Motorola Mobility, Google is now poised to get into the business of mobile handset manufacturing.

With Google’s expansion into so many areas, a large number of businesses, advertisers, and consumer groups have raised concernsregarding Google’s activities, suggesting the company may be acting indeceptive and anticompetitive ways.  As a result, Google is under investigation by antitrust authorities both in the United States and abroad.
This Subcommittee has oversight of antitrust enforcement and competition policy, and I appreciate Chairman Kohl’s leadership in calling a hearing to address this important topic.

Search and Advertising Manipulation
From its inception Google’s stated goal was “to have users leave its website as quickly as possible.”[3] <#_ftn3>  But over time the company appears to have changed its approach: to steer users not to other businesses and sources of information but to its own growing complement of competing services.

Google has worked hard to cultivate the public perception that its searches are comprehensive and unbiased.  But there is growing concern that Google employs different search ranking algorithms and more attractive visual displays to advantage its own secondary sites and products, to the detriment of competing specialized search sites and other disadvantaged businesses.

There is also evidence that Google has taken information and reviews from competing specialized search sites like Yelp and TripAdvisor, used that data as part of its own services, and in the processdemoted the search result rankings of the sites from which Google acquired the information.

In addition, some reports suggest that Google has taken steps to impede competing search engines from crawling, indexing, andreturning search results to its YouTube content and book scans.  Access to these popular stores of content is critical to enabling other search engines to compete.

Exclusive Dealing
There are also allegations that Google has achieved and sought to maintain its dominance in search by imposing exclusivity restrictions in dealings with advertising partners, perhaps in an effort toblock competing search tools.  This includes a broad network of exclusive search syndication deals with websites like AOL and eBay, exclusive arrangements for Google’s search box to appear on browsers like Mozilla Firefox and Safari, and agreements that Google be theexclusive default search provider on the iPhone and many Android models.

Similarly, Google’s contracts with advertisers apparently impose limits on the advertisers’ ability to transfer data associated with Google’s advertising platform to any other advertising platform using third party tools that would make the process simple or even automatic.  Studies by a Harvard Business School professor concluded that the “net effect” of these restrictions “is to reinforce the tendency of small to medium-sized advertisers to . . . use only Google AdWords to the exclusion of competing platforms.”[4] <#_ftn4>

Many observers are also concerned that Google may be seeking to prevent smartphone manufacturers and customers who wish to use its Android platform from using competitors’ services—for example, by tying Android to Google’s location program in order to exclude competing geolocation services.

Consumer Welfare
In assessing each of these concerns, the primary focus of our antitrust analysis should be consumer welfare.  Growing complaints that Google is using its search dominance to favor its own offerings at the expense of competition deserve serious attention, especially if consumers are misled by Google’s self-rankings and preferential display.  Such bias would deny user traffic and revenue to competing sites, depriving those sites of resources needed to develop more innovative content and offer better services to customers.  When competing websites lose traffic, they are forced to increase paid search advertising on Google, ultimately leading to increased prices for consumers.
As a conservative Republican who favors free markets, I believe that ensuring robust competition in this critical area of our nation’s economy will benefit consumers, spur innovation, and lead to job creation.  In this instance, I believe that preserving competitive markets through antitrust principles can help forestall the imposition of burdensome government regulation.


[1] <#_ftnref1> Charles F. Rule, Is Google a Monopolist?, Wall Street Journal (Sept. 11, 2010) (Mr. Rule was head of the Justice Department’s Antitrust Division in the Reagan Administration).

[2] <#_ftnref2> Matt Warner, Google, Caffeine, and the Future of Search, The Telegraph (June 17, 2010) (quoting Amit Singhal, whoheads Google’s search ranking team).

[3] <#_ftnref3>  Google Philosophy, item 3, prior to September 2009.  (After September 2009 it was edited to read: “We may be the only people in the world who can say our goal is to have people leave our homepage as quickly as possible.”).  Available at: http://www.google.com/about/corporate/company/tenthings.html.

[4] <#_ftnref4> Professor Ben Edelman, PPC Platform Competition and Google's "May Not Copy" Restriction, June 27, 2008. http://www.benedelman.org/news/062708-1.html