Source : Politico
How Washington fumbled the future
A decade ago, a surging Silicon Valley giant was making plans to dominate the internet. Given a chance to stop it, regulators chosen by Barack Obama misread the evidence in front of their eyes.
Few moments in the power struggle between Washington and Silicon Valley have inspired more anger and bafflement than one in January 2013, when antitrust regulators appointed by former President Barack Obama declined to sue Google.
The decision still rankles the company’s rivals, who have watched the search giant continue to amass power over smartphones, data-hoovering devices and wide swaths of the internet, unimpeded by laws meant to deter monopolies. It has fueled some lawmakers’ calls to overhaul the Federal Trade Commission, the agency that spent 19 months investigating Google’s efforts to overpower the competition — and critics say, blinked.
The commission has never disclosed the full scope of its probe nor explained all its reasons for letting Google’s behavior slide.
But 312 pages of confidential internal memos obtained by POLITICO reveal what the FTC’s lawyers and economics experts were thinking — including assumptions that were contradictory at the time and many that turned out to be incorrect about the internet’s future, Google’s efforts to dominate it and the harm its rivals said they were suffering from the company’s actions. The memos show that at a crucial moment when Washington’s regulators might have had a chance to stem the growth of tech’s biggest giants, preventing a handful of trillion-dollar corporations from dominating a rising share of the economy, they misread the evidence in front of them and left much of the digital future in Google’s hands.
The documents also add to doubts about whether Washington is any more capable today of reining in the tech industry’s titans, despite efforts by a new generation of antitrust enforcers to turn up the heat on Google, Facebook, Apple and Amazon — all of which now rank among the United States’ wealthiest companies. That will be a crucial test awaiting President Joe Biden’s regulators, including the outspoken Silicon Valley critic he plans to nominate to an open slot on the FTC’s five-person board.
Nearly a decade ago, the documents show, the FTC’s investigators uncovered evidence of how far Google was willing to go to ensure the primacy of the search engine that is the key to its fortunes, including tactics that European regulators and the U.S. Justice Department would later label antitrust violations. But the FTC’s economists successfully argued against suing the company, and the agency’s staff experts made a series of predictions that would fail to match where the online world was headed:
— They saw only “limited potential for growth” in ads that track users across the web — now the backbone of Google parent company Alphabet’s $182.5 billion in annual revenue.
— They expected consumers to continue relying mainly on computers to search for information. Today, about 62 percent of those queries take place on mobile phones and tablets, nearly all of which use Google’s search engine as the default.
— They thought rivals like Microsoft, Mozilla or Amazon would offer viable competition to Google in the market for the software that runs smartphones. Instead, nearly all U.S. smartphones run on Google’s Android and Apple’s iOS.
— They underestimated Google’s market share, a heft that gave it power over advertisers as well as companies like Yelp and Tripadvisor that rely on search results for traffic.
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