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The antitrust sledgehammer

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Lovers of freedom and protectors of keeping out-of-print books out of print are dancing with glee at the announcement yesterday from Google and the trade associations who sued the company that they are renegotiating their settlement. This in light of the torrent of objections received by the court, notably a last-minute (technically after the deadline) tirade from the Justice Department that the deal raised serious antitrust concerns.

As I write in Chapter 7 of "The Laws of Disruption," invocations of antitrust have a nasty habit of boomeranging against those who chant its doctrines, especially when they don't really understand how dangerous a body of law it is. Most of the IT industry was thrilled (secretly or otherwise), when the Justice Department came down on IBM, AT&T, and more recently, on Microsoft and Intel. What could be better than having a major competitor distracted, perhaps for years, by the 19th century machinery of litigation against the federal government?

Of course some of the loudest braying on behalf of inserting the government into the structure of the computer industry came from Oracle. CEO Larry Ellison famously cheered on the Justice Department's pursuit of Microsoft; that is, until the Antitrust Division challenged his takeover of PeopleSoft in 2004. Oops.

The Obama Justice Department has promised to put more teeth into antitrust enforcement and it clearly has Google in its sights. This despite the fact that the feds understand nothing of the very different economic properties and behaviors of information. There seems to be something, well, Unamerican about being so successful. We love scampy underdogs, but when they win, we turn on them pretty much immediately as oppressive tyrants. It's why the Rocky movies never really worked once he won.

Justice is already poking holes in the Bing-Yahoo deal, for example, as Lance Whitney reported the other week. This despite the fact that Google enjoys an enormous majority of the search market (which it got how, exactly? Oh yeah, innovation) and despite the fact that consumers, ten years into the Web revolution, continue to pay NOTHING for search services.

Oracle itself is again is in the antitrust cross-hairs, this time in Europe for its attempt to takeover Sun. U.S. antitrust regulators are misguided; the E.U.'s current class of clowns are just plain mean, setting a new low in undefining a legal standard for "harm to consumers." (Mostly they just mouth the words as they go after companies who aren't European enough for E.U. Antitrust chief Neelie Kroes.) Regulators must "examine very carefully the effects on competition in Europe," Kroes said earlier this month, "when the world's leading proprietary database company proposes to take over the world's leading open-source database company."

Yes, Oracle will take over Sun and then proceed to destroy what's left of its assets, that is, MySQL, which has .4% of global DBMS revenues. Good business sense there.

Gartner Group's Donald Feinberg has another explanation. Again, Lance Whitney at CNET has the story. "It's a political agenda," Feinberg says bluntly. "[I]t is the re-emergence of protectionism...The EU is looking for how it can protect the companies in Europe."

Antitrust started out as political. Then it became grounded in economics. Now, with the emergence of a new kind of economy, it's lost its way and gone back to being political.

Which should serve as a powerful warning to those who get in bed with antitrust regulators. Today, the Google Books settlement and the Oracle-Sun and Yahoo-Bing deals. Tomorrow, when the political winds change, it will be you.

That's about the only thing predictable about antitrust these days.