Tech Policy Summit blog

Google/Yahoo and Microsoft Face Off in Senate Judiciary Hearing

The Senate Judiciary's subcommittee on Antitrust, Competition Policy and Consumer Rights is holding a hearing this morning to learn more about the proposed Google-Yahoo advertising agreement and its impact on the online ad market. The hearing, which just returned from a brief recess, has featured testimony from the legal chiefs at Yahoo, Google and Microsoft, along with executives from Askthebuilder.com and Yellowpages.com (both representing the consumer market).

In his opening statement, Yahoo general counsel Michael Callahan emphasized that the proposed deal to partner with Google on advertising is not a merger and that it in no way signals Yahoo's plans to exit the search business. He insisted that "Yahoo is here to stay" and that the company has every intention of fighting and winning against Google in search advertising and other arenas. He explained that the non-exclusive agreement would allow Yahoo to make similar deals with other partners.

When it was David Drummond's turn to deliver opening remarks, the chief legal officer for Google echoed most of what Mr. Callahan had already said about agreement promoting ongoing competition between the two companies. He characterized the deal as merely giving Yahoo the option to display Google's ads, not requiring it. He added that the partnership is limited to search advertising in the United States and Canada and does not include emerging markets like mobile advertising.  

Mr. Drummond also went on the offensive against rival Microsoft, accusing the company of having a desktop monopoly that he said could harm the cloud computing market. He refuted claims Microsoft has made that the Google/Yahoo ad agreement would lead to price fixing and increased costs to customers. He said that his company is looking to sell more ads, not sell ads at higher prices. 

But the most dramatic moments of the hearing, so far, came when Microsoft's senior vice president Brad Smith told Subcommittee Chairman Herb Kohl (D-WI) about a meeting he and three other Microsoft executives including CEO Steve Ballmer had with Yahoo execs on June 8th in San Jose. According to Mr. Smith (and paraphrased by me), Yahoo CEO Jerry Yang said at that meeting that the market for search advertising had two poles with Google on one end and Yahoo, Microsoft and others on the other end. Mr. Yang reportedly said that , if the Google/Yahoo deal went through, it would leave one pole with Google on one end and no one else able to compete on the other end.

When questioned, Michael Callahan who said he was present at that meeting as well, said he couldn't recall if Jerry Yang had made those remarks. But some of the Senators including Sen. Arlen Specter (R-PA) suggested that there might need to be another meeting to follow-up on that and other details of the agreement.

Think Ad Tracking Threatens Privacy? Tell the FTC.

While the Federal Trade Commission (FTC) voted 4-1 yesterday to approve Google's acquisition of DoubleClick after concluding that the merger won't harm competition in the online ad market, concerns remain about the privacy implications of such a deal. Which is why the FTC released a set of industrywide "self-regulatory" principles for online advertisers yesterday as well.

The proposal, which is based in part on the FTC's November townhall on behavioral advertising techniques, offers a set of suggestions for addressing privacy concerns, including:

1. Inclusion of a clear, concise statement on sites, informing consumers that their personal information is being collected for behavioral advertising purposes and letting them know how they can opt out of that process.
2. Making sure to provide "reasonable security" to protect consumers' data.
3. Retaining consumer data only as long as necessary.
4. Taking steps to get express consent from consumers to use their data if it's in a way other than what was originally agreed to.
5. Only collecting "sensitive data" for advertising purposes if consumers have given their express consent.

To read the rest of this post, visit TechPolicyCentral.com.

Microsoft Ends EU Appeals

The major news services have just announced that Microsoft has formally ended its appeals of the European Commission's antitrust decisions and it will comply with all orders.

The Associated Press notes that "Microsoft's legal battle with the European Commission has lasted years and cost it hundreds of millions of dollars in fines." Including a $357 million fine that EU regulators imposed last summer when it ruled that Microsoft had failed to turn over technical information to competitors.

Some People Complain, Others Sue

While Apple's stock hovers around its 52-week high of over $167 a share, not everyone is feeling love for the iPhone maker. A disgruntled iPhone owner in California has filed a lawsuit against Apple that accuses the company of violating the state's antitrust laws by only offering its phone service through AT&T. The case has been filed as a class-action suit in hopes others will jump on the bandwagon in asking the California courts to prohibit Apple from selling locked iPhones.

According to Macworld, "the antitrust lawsuit is the latest legal challenge...earlier this month a New York woman filed suit against Apple for its $200 iPhone price cut, claiming price discrimination, unfair and deceptive practices, and underselling. Over the summer Apple was sued repeatedly over the iPhone’s lack of an easily user-replaceable battery." Have the days of writing a nastygram to customer service when you have a product complaint been replaced by the threat of lawsuits?

EU Opens Antitrust Investigation of Qualcomm

According to Computerworld, the European Commission has launched an antitrust investigation of mobile chip maker Qualcomm, following complaints from Nokia, Ericsson, Texas Instruments, Broadcom, NEC and Panasonic that Qualcomm is overcharging for royalties and failing to license "its technology on fair, reasonable and nondiscriminatory (FRAND) terms." While the complaints stem back to the fall of 2005, EU investigators now say its a priority.

In a Reuters article on the investigation, an EU representative stressed that the Commission doesn't have "conclusive proof of any infringement," and Qualcomm's European chief strongly refuted the charges, calling them "complete rubbish."  News of the investigation comes just days after Qualcomm announced that it had hired Apple's general counsel Donald Rosenberg to be its new GC (Apple in turn announced it was hiring away Oracle's GC Daniel Cooperman).

What's the Impact of the EU's Ruling Against Microsoft?

According to reports in the International Herald Tribune and Computerworld, Monday's ruling by the European Court of First Instance against Microsoft may create a ripple effect that impacts other tech companies like Apple, Intel and Qualcomm. The European Commission's case against Microsoft, which began nearly a decade ago, concluded that the software company had "abused its market power" by bundling its media player with Windows.

So how does the decision impact Microsoft, and what does it mean for other tech companies doing business in the EU?

To the first point, Harvard professor David Yoffie told IHT that the "direct impact" may be negligable but that the longer-term consequences could still be dramatic:

"If you end up handicapping a major player in new markets [e.g. Microsoft], you may actually not enhance competition but hinder it, and help create new monopolies...the obvious example is Google in Internet search and Apple in digital music."

On the larger question of what the precedent set in the Microsoft case might mean for other tech companies, here's a quote from Computerworld by U.S. assistant attorney general Thomas Barnett:

"We are concerned that the standard applied to unilateral conduct by the CFI [Court of First Instance], rather than helping consumers, may have the unfortunate consequence of harming consumers by chilling innovation and discouraging competition...This was a landmark decision, and a landmark case...First, it's a declaration of independence, a statement that the [EU's]anticompetitive policy is not going to be dictated by U.S. policy. Second, it clears the way for the [European] Commission to pursue new cases."

In a press conference following the Microsoft announcement, EU Commissioner Neelie Kroes denied that the decision would embolden her or her colleauges to take action against other tech companies. More details on Kroes statement can be found on the ACT blog here.

EU Takes Next Step in Intel-AMD Case

According to the International Herald Tribune, "in a case reminiscent of their legal battle with Microsoft, European Union antitrust regulators on Friday accused Intel of abusing its leading position in the market for computer chips to try to drive out competitors." The charges, outlined in the European Commission's statement of objections, claim that Intel used rebates and other incentives to encourage customers to use its chips instead of those made by AMD.

Intel has acknowledged the existence of its discount program, but asserts that it's not anti-competitive. The company, which faces hefty fines if found guilty, now has 10 weeks to formally respond to the Commission's charges.

In describing the Intel-AMD case, the IHT article highlights differences between European and American regulators. Quoting Intel's general counsel Bruce Sewell, the article states, "behavior which constitutes abusive behavior within Europe is less clear than in the U.S. so companies are trying to find the boundary lines." A Brussels-based antitrust lawyer named Dennis Oswell adds, "Companies participating in anti-competitive behavior are looking over their shoulder more in Europe than in the U.S...You definitely have a gap at the moment."

NYT: FTC Opens Investigation of Google-DoubleClick Deal

The New York Times' Steve Lohr reports that the Federal Trade Commission (FTC) has opened a "preliminary antitrust investigation" into Google's recent $3.1 billion acquisition of DoubleClick. As we blogged about last month, the FTC received a complaint from three consumer advocacy groups that are concerned that the purchase will provide Google with too much information on consumers' Internet surfing habits. However, as the Times article points out, the FTC's primary concern should the antitrust investigation continue would be the impact the acquistion has on competition. Read more here (free sub required).

Commerce Committee Considers SIRIUS-XM Merger

The U.S. Senate Commerce Committee, chaired by Sen. Daniel Inouye (D-Hawaii), held a hearing yesterday to discuss the proposed merger between satellite radio providers SIRIUS Satellite Radio and XM. Speaking to the committee, SIRIUS' CEO Mel Karmazin argued that the merger would benefit consumers by offering cost savings and greater choice.

Opponents of the merger disagree, on the grounds that the SIRIUS-XM merger will stifle competition and  lead to even more consolidation among media companies. According to The Hollywood Reporter, Senator Byron Dorgan (D-ND) stated that the merger "will eliminate the competition that exists between the two separate companies, and it will injure consumers. [It] isn't even a close call."

European Commission Targets iTunes

On the heels of yesterday's announcement that EMI will start selling DRM-free music via iTunes, the Financial Times and other news outlets reported that the European Commission issued formal charges against Apple, EMI and other major record labels for allegedly violating competition rules.

According to FT.com, "the Commission’s main concern is that iTunes’ set-up in the European market prohibits users in one country from downloading music from a website intended to serve another [country]." Apple insists, however, that it "always wanted to operate a pan-European iTunes store" and that it will work with the EU to resolve the matter.

For more, check out FT.com here.