Eric Schmidt defends Google in Senate antitrust hearing
Google Inc. Chairman Eric Schmidt, defending his company on Capitol Hill for the first time as it faces increased scrutiny of its operations, bluntly denied that his company “cooked” its search engine results to send users to its growing stable of online services.
Schmidt faced tough questions Wednesday from members of the Senate antitrust subcommittee, who have been investigating complaints by competitors that Google is abusing its dominance in the online search market to harm competition.
The Internet giant’s share of the search-engine market was 64.8% in August, more than twice that of its closest competitor, the search partnership of Yahoo Inc. and Microsoft Corp. And it is expanding into such businesses as travel data software and mobile phones, which can take advantage of its search engine.
Antitrust officials in the U.S., Europe and Asia have launched inquiries following criticism by privacy advocates about the vast data collection practices of Google, which once was championed as a populist site bucking Microsoft’s dominance.
Indeed, Schmidt’s testimony echoed the 1998 grilling faced by then-Microsoft Chief Executive Bill Gates as the government was launching a landmark antitrust case against the software maker.
In one pointed exchange, Schmidt was asked to explain an independent study that compared the search results on three popular product-comparison websites and the Google shopping site. While the results from the other sites varied widely, Google Shopping results consistently ranked third, Sen. Mike Lee (R-Utah) said.
“When I see you magically coming up third every time … you’ve cooked it so you’re always third,” Lee charged.
“Senator … I can assure you we have not cooked anything,” Schmidt responded.
He said Google Shopping was different from a product comparison site because it simply pointed users to where to buy the item rather than to sell it to them.
“I’m not aware of any unnecessary or strange boosts or biases” given to Google services in search results, Schmidt said.
But Schmidt’s answer didn’t satisfy some senators. Sen. Al Franken (D-Minn.) called the response “pretty fuzzy.” And as Schmidt was finishing his 90-minute appearance, Lee said: “I’m troubled by what we’ve learned today about Google’s practices.”
Schmidt said Google has adapted its original business model to go beyond simply providing a list of results. With people wanting information more quickly, Google now sometimes produces “the answer” to their search result so that they don’t have to click on any other sites, such as by directly providing a stock quote or map.
“We run the company for the benefit of consumers and frankly not for the other websites,” Schmidt said.
Jeremy Stoppelman, chief executive of Yelp Inc., which allows users to review local businesses, said Google plays unfairly. He said the search engine tries to force sites like his to allow some of their content to be used to boost Google’s own competing service, Google Places.
“It has little to do with helping consumers get to the best information,” Stoppelman said. “It has everything to do with generating more revenue.”
Sen. Richard Blumenthal (D-Conn.) said Schmidt’s description of Google’s switch to providing search answers sounded as though the company is biasing its results to favor its own services.
“You run the racetrack. You own the racetrack. For a long time, you didn’t have any horses,” Blumenthal said. “Now you have horses ... and your horses seem to be winning.”
After the hearing, Lee said he feared Schmidt’s testimony “may only encourage those who are calling for
legal enforcement or government regulation.” He urged Google to act voluntarily to address concerns raised by competitors.
“Today Google doesn’t play fair,” said Jeff Katz, chief executive of Nextag Inc., one of the product-comparison websites cited at Wednesday’s hearing. “Google rigs its results, biasing in favor of Google Shopping and against competitors like us.”
The Federal Trade Commission this year launched a formal antitrust investigation into Google’s business practices. And the Senate subcommittee has been looking into Google’s power in the search market — even sparing with Google just to set up the hearing.
Google originally offered its chief legal officer to testify, but Sen. Herb Kohl (D-Wis.), the subcommittee’s chairman, and Lee, the subcommittee’s top Republican, pushed for Schmidt or Chief Executive Larry Page.
With the embarrassing possibility of being subpoenaed, Schmidt agreed to testify.
He said Google had learned the lessons of Microsoft, which tried to ignore Washington’s concerns about its business practices and ended up facing a landmark antitrust suit.
“In the years since, many of us in Silicon Valley have absorbed the lessons of that era,” said Schmidt, who was involved in those battles when he worked for Microsoft competitors Sun Microsystems and Novell. “We get it.”
Thomas Barnett, a former Bush administration antitrust official who represents travel website Expedia, said Google is risking government action if it doesn’t change its ways.
“Google doesn’t get it,” Barnett said.
The company’s antitrust troubles increased as it moved beyond search. It pulled out of a proposed search advertising deal with Yahoo in 2008 after U.S. officials said they were preparing to challenge the acquisition on the grounds that it would erode competition.
Other deals have been approved, but only after tough government reviews. Regulators approved its acquisition of travel data company ITA Software Inc. but with conditions that included a requirement that Google license the software to other websites on reasonable terms.