In this economy, is a Google antitrust probe "un-American?"

Is a probe of a leading tech company, at a time when the tech industry seems poised to buck the current economic trend, really the smartest move out of Washington?
Written by Sam Diaz, Inactive

Update: Google says in its official blog this morning that it received "formal notification" from the FTC about an investigation but that's it's still unclear what the FTC's concerns are.

In recent years, I've taken Microsoft to the mat for being behind the curve when it comes to technological innovation - but a section of Larry Dignan's post yesterday about a possible government anti-trust probe against Google really made me stop and think about how Microsoft got to this point. It read:

It’s unclear how the investigation will impact Google’s operations, but history provides a quick guide. Typically, these antitrust investigations make the target company less competitive. After all, companies under the antitrust microscope try to stay out of trouble and that means paring back their natural competitive impulses.

Dignan noted that one could argue that Microsoft became less competitive after its high profile battle with the Department of Justice in 1998, which revolved around the company using its operating system dominance to push its Internet Explorer browser. Microsoft settled with the DOJ in 2001 but Dignan goes on to note that "since that settlement, Microsoft has missed the tech curve in a few key areas—notably mobile. Microsoft had to watch its bundling practices going forward."

Essentially, Microsoft was on alert after the settlement, just like a kid who takes a beating from a bully  and then left to walk around campus on eggshells so as to not upset the bully again. But looking back, the timing of the Microsoft suit is noteworthy. We now refer to the 1998-2001 time frame as the dot-com years, one of the most booming and energetic times in Silicon Valley's history - and the earliest years of a new company called Google, which incorporated in September 1998.

I raise this point now because, in many ways, the start-up energy around Silicon Valley today feels a lot like those early days of 1998 - companies are hiring, there's traffic on the freeways again and marketing and networking events featuring up-and-coming companies are back. The Q1 2011 Venture Capital report by CB Insights suggested that "VC is back" and that the amount of funding and the number of companies being funded in Q1 came in at pre-recessionary deal and funding levels. The report notes:

Given the $1B jump in funding over the prior quarter with a similar number of deals, it is also clearly a quarter driven by mega-financings in both internet and greentech companies as well as larger venture capital median deal sizes.

Finally, in the aftermath of one of the most turbulent economic times in nearly 100 years, there's some good news coming out of a sector that has already proven to resonate through national and global economies. And now the government wants to start poking around one of the big players because it might be too big? Here we are in a time when several big players - Apple, Facebook, Google, Microsoft - are all trying to out-innovate each other and the government wants to throw a wrench in it?

Now, I'm not saying that some eyebrows haven't been justifiably raised over Google's dominance in certain markets, including search. But I do know that, as a consumer, I have choices, such as the ability to use Bing instead of Google Search on my Google Chrome browser or my Android mobile phone. And if I recall correctly, consumers are asked, when they first start using Android phones, to choose a default search engine.

But I also have to ask myself: did any good really come from the government probe and suit against Microsoft a decade ago? Was it because of the suit and the pushback against Microsoft that Google became a powerhouse? Was it because of the suit that Microsoft has fallen behind in many of the computing platforms today?

I remember downloading Firefox because I thought it was a better browser than Internet Explorer, not because something was or wasn't bundled on my computer. In that sense, innovation trumped government interference.

So, with that said, dare I ask this question: Is it un-American for the government to launch a probe of one of the leading companies in an industry that has the potential to put the U.S. back on the global map?

There are a lot of startups out there that are building on the work that Google and the other powerhouses are doing. How many small businesses are easily benefitting from a listings in Google Maps, making it easy for customers to discover them via smartphones? How many developers are working by building mobile apps for competing platforms, such as Apple's iOS and Google's Android?

And Google isn't even winning every race. Microsoft Office is still bigger than Google Apps. Facebook is eating everyone's lunch in social. Buzz was certainly no Twitter. And Google Music Cloud is facing competition from Apple and Amazon.

Sure, maybe there's a compelling reason for Washington to start poking around. But I might argue that Washington and New York (aka Wall Street) have already done enough to screw up this country. The last boom originated when Silicon Valley innovation was thriving. And now that we're back at a point where Silicon Valley appears to be poised to come in and save Washington's and New York's butts again, along comes a threat of a government probe.

Forgive me if I'm a bit cynical.

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