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— Burn Rate —
Jarvis, director of the interactive journalism program at the City University of New York, also asserts that Google is no monopoly. In other words, the Feds should leave the Mountain View, Calif., Internet giant be. Supply, demand and a few thousand Ph.Ds will take care of the rest. Nonsense. To belabor the obvious, investigating big mergers and, in this case, contracts for their potential effect on competition is what antitrust enforcers do. Or at least what they are supposed to do.
The Justice Department that Jarvis implicitly chides for presuming to examine the Google-Yahoo! deal is one of the laxest antitrust regimes in recent history. The last time this DOJ challenged a commercial arrangement like this one on competition grounds was, well, never -- that's right, they haven't opposed a single one. The agency is hardly any more aggressive in policing mergers. Under Assistant Attorney General for Antitrust Thomas Barnett, Justice has yet to challenge a merger, although it did retroactively move to block a small newspaper deal in West Virginia. Even the Federal Trade Commission is getting exasperated, recently accusing the Justice Department of weakening antitrust law in an uncommonly stern rebuke of a fellow regulatory agency. Indeed, whether Google's pact with Sunnyvale, Calif.-based Yahoo! is anticompetitive remains an open question. Under the deal, which the companies struck in June as Yahoo! scrambled to deter Microsoft Corp.'s $47.5 billion hostile offer, the Internet portal would outsource part or all of its search-ad needs to Google. Regulators are studying whether the pact violates the Sherman Act, which prohibits anticompetitive contracts and corporations seeking excessive market power. In joining forces, Google and Yahoo! would control roughly 80% of the online search ad market. Google's rising power has the Association of National Advertisers, a trade group that represents major companies, worried enough to spur it to send a letter earlier this month to the Justice Department condemning the deal with Yahoo!. That doesn't make Google a monopoly, which is also a function of other factors, such as market concentration and definition, barriers to entering the industry and other considerations. Still, there's enough smoke here, especially given customers' concerns with the deal, to warrant a careful look. Among Jarvis' other arguments for allowing the two Internet companies to cooperate on ads is that Google is winning fair and square; Yahoo! approached Google, not the other way around; and media, ad agency and other customers love doing business with Google. Even if all that were true, and it's arguable, the impact the alliance will have on competition and prices in online advertising is unclear. Meanwhile, although Jarvis says he has long argued in favor of preserving competition in the ad business, he says "that it's not going to come from regulation. It's going to come from getting off our asses and creating those competitors." Yes and no. Naturally, innovation is part of the answer. But regulation, or at least the threat of it, is an essential dynamic in innovation. The mistake, as we're seeing now play out on Wall Street, is in assuming that government oversight is inimical to business, when in fact business cannot function without it. That said, Jarvis, let alone Google and Yahoo!, shouldn't worry too much. The DOJ would have to secure a preliminary injunction in court to block the ad deal, a tall order without hard evidence that consumer interests are in serious jeopardy. The market in question is also new, fluid and complex, anathema to antitrust enforcers. More probable is that the Justice Department exacts a promise from the companies to remain on good behavior and to ensure that existing competitors can stay in the game. If there's any evidence a year or so from now that the deal is harming competition, regulators can take stronger measures. Americans don't hate success; quite the opposite. Success, as F. Scott Fitzgerald eloquently chronicled, is central to the American mythology. Indeed, we learn from a tender age that it's the stuff dreams are made of in this country. So to buzz the government, when for once it's doing its job, in the name of unfettered innovation is to mistake free enterprise for the freedom to do anything. |
Media critic Jeff Jarvis has a novel theory for why the U.S. Department of Justice is scrutinizing 
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