Google's Exclusive Dealing Limits Innovation and Consumer Choice

Google has maintained and expanded its dominance in search and search advertising by imposing exclusivity restrictions on its partners.

Google has locked up as much as 90% of search syndication through its network of exclusive deals with websites, browser companies, software developers and device manufacturers. These exclusive deals help ensure that Google controls these searches and make it difficult for Google’s current and potential competitors to achieve the “scale” that could enable them to compete more effectively with Google.

Take the Android mobile operating system for example.

According to The New York Times, Android phones must adhere to a “compatibility” standard determined by Google. In an e-mail on Aug. 6, 2010, Dan Morrill, a manager in the Android group, noted in passing that it was obvious to the phone makers that “we are using compatibility as a club to make them do things we want.”

In fact, recently, Google’s tactics have come under fire. Case in point: reactions to the complaint of location technology provider Skyhook Wireless.

• “The suit accuses Google of using its Android mobile operating system to strong-arm handset manufacturers into using Google’s location technology rather than Skyhook’s. At one point, the suit says, Andy Rubin – the man who oversees Google’s Android project – told Motorola co-CEO Sanjay Jha that if the handset manufacturer didn’t drop Skyhook, Google would remove official Android support from the devices. This would mean that Motorola could not use proprietary Google services such as the Android Market.”
• “What Skyhook is suggesting is that Google uses its contract terms to force OEMs to bend to its will–however unpredictable that will is. The use of strong-arm tactics with Motorola also highlights that Google could choose to do the same over any other technical aspect of Android. The maneuvers remind us of the stink that kicked up when Microsoft forced Internet Explorer on the world to suppress competing browsers, or the mess caused by Intel bullying its OEM partners into ditching support for rival AMD chips in their shipping products–both events sparking multi-billion-dollar lawsuits.”

Google’s exclusionary conduct denies revenue and traffic to sites that compete with Google, hindering the ability of those sites to bring more innovative online content and better services to consumers.