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Is The Antitrust Trap Getting Ready to Close Around Google?

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With the deadline for the parties in the Google Books case to submit their revised settlement agreement to the court fast approaching, the company that once made “Don’t Be Evil” its credo has been getting a lot of evil looks of late.

In addition to critics of the original settlement in the U.S., which included the Department of Justice, Google’s ambitious book-scanning project has drawn sharp criticism from the governments of France and Germany, which maintain the search giant is violating international copyright rules by scanning the works of authors from those countries. And on Sunday, Chinese authors added a twist of irony to the debate by adding their own copyright complaint (this from a country long-regarded by Western copyright owners as a black hole of piracy).

But Google’s legal problems may not end with copyright disputes. Rather, the Books case, by attracting the attention of an articulate and politically connected constituency made up of writers and intellectuals, has drawn an ever-brightening spotlight onto the company’s size, ambitions and influence in the marketplace of ideas. And it’s getting a bit hot under the glare.

The U.S. Justice Department dropped the biggest bombshell when it intervened in the Books case, siding with those who saw potential antitrust problems with the Books settlement. The company is fighting off antitrust regulators on other fronts as well. Google CEO Eric Schmidt was forced to resign from Apple’s board earlier this year as the Federal Trade Commission pressures the companies to disentangle their overlapping boards of directors.

Google still has friends in very high places, of course, thanks to Schmidt’s close ties to the Obama Administration. But that honeymoon may be ending. The Obama Administration, in fact, has stepped up scrutiny of the tech industry generally, launching a probe of IBM, asking questions about cellphone exclusives and preparing antitrust litigation against Intel.

In Europe, things could get even hotter. The EU levied a record $1.6 billion fine against Intel and earlier this year launched yet another probe of Microsoft’s browser tactics. Although European antitrust authorities have not yet focused on Google, the Books case has put the company squarely in the political cross-hairs. At the opening of the Frankfurt Book Fair last month, German chancellor Angela Merkel ripped Google over its book-scanning project.

The biggest danger facing Google, however, could be its own oddly glib attitude toward the new scrutiny it is under. Despite Schmidt’s access to Obama and an enormous lobbying shop in Washington, Google often seems not to grasp the seriousness of its position.

In an op-ed in the New York Times last month, co-founder Sergey Brin sounded as if he were channeling Bill Gates circa 1998 when he dismissed the company’s critics: “Others have questioned the impact of the [Books] agreement on competition, or asserted that it would limit consumer choice with respect to out-of-print books,” he wrote. “In reality, nothing in this agreement precludes any other company or organization from pursuing their own similar effort. The agreement limits consumer choice in out-of-print books about as much as it limits consumer choice in unicorns.”

Alas for Brin, while the unicorn is a whimsical, mythical creature, the U.S. Justice Department and the European Commission are not, as Microsoft discovered to its lasting dismay. Under antitrust law, good intentions don’t count. Market power does. And if the math convinces the authorities Google has it, behavior that might otherwise have been permissible will be questioned.

One of the downsides for Google of having a tech-savvy administration in charge is that the regulators understand the implications of the technology. One of the implications of allowing Google to ingest the world’s libraries is that Google could accumulate market power in the business of providing digital access to that data.

Even if you’re not being evil, market power tends to draw attention.

Question of the week

How should the tech industry respond to heightened antitrust scrutiny?