For those of us who follow Google closely and understand how their business harms competition and consumers, it was hard not to notice three glaring trip-ups by Eric Schmidt at last week’s Senate antitrust subcommittee hearing on Google’s business practices.
Advertising Illegal Drugs — Google’s Eric Schmidt stumbled badly on basic factual questions from Senator John Cornyn regarding Google’s recent nonprosecution agreement with the U.S. Department of Justice and payment of a historic $500 million forfeiture to avoid indictment. Schmidt tried to cut off Senator Cornyn’s line of questioning about the illegal drug deal, saying—under oath—“Unfortunately, as part of that agreement, and I have been advised very clearly by our lawyers, that we have an agreement with the Department of Justice that we are not to speak about any of the details of it, so I would have to ask you to speak to the Department of Justice for more of that.”
That agreement says nothing of the kind, as rampant audience whispering noted. Senator Cornyn did his homework and knew Schmidt’s statement to be false. He courteously handed Schmidt a shovel to dig his way out of the hole, but instead Schmidt dug himself deeper by acknowledging that the illegal behavior covered by the nonprosecution agreement happened with his knowledge. Senator Cornyn asked, “Was it the result of oversight or inadvertence or were there some employees in the company that were doing this without your knowledge or —“ and was cut off by Eric Schmidt, who replied, “Certainly not without my knowledge.”
As Senator Lee noted in his follow-up, “the primary focus of our antitrust analysis should be consumer welfare.” Violating the Controlled Substances Act for the importation—essentially smuggling—of controlled substances into the United States is illegal and detrimental to consumer welfare. And now we know it was done with Schmidt’s knowledge.
Facilitating and profiting from piracy — Google search also routinely points millions of consumers to counterfeit and infringing non-pharmaceutical goods, another act that hardly maximizes consumer welfare. Senators Klobuchar and Franken questioned Schmidt about how little Google does to prevent linking to known infringers. Schmidt opined that it’s easy for someone like Senator Klobuchar to recognize an infringing site, but very difficult to train a computer to recognize one, saying it is a “very hard computer science problem”.
Google could either use a human to “know it when they see it” or block infringers such as the Pirate Bay (criminal conviction confirmed months ago). They don’t do this probably because Google knows that people want “free” content and Google intends to sell advertising to them where they get it. This also begs the question of how Google maximizes the consumer welfare of advertisers who don’t want their brands associated with illegal goods—Google fails that test miserably.
No content license, No problem! – As we heard from witnesses Nextag and Yelp!, Google’s modus operandi with content owners is consistent. Google indexed web content without consent—copying web content without a license for use in its monopoly search. Google then decided to compete with content owners and tries to license for a competing Google product the same content they just copied for search. If Google can’t make a license deal it likes, Google takes the content anyway—until the government steps in. Google used this approach with Nextag and Yelp! as well as YouTube, Google Books, Adsense,
Blogger—the alternative being that you can opt out of search altogether or don’t advertise with Google online. Or as we in the music business refer to Google’s DMCA notice and takedown practices, ‘that’s notice and shakedown.’
Senator Al Franken drew the most incriminating answer in the hearing from Schmidt regarding Google’s biased treatment of its own products in search results: “[Senator Lee] asked you…do all your rankings reflect an unbiased algorithm, and you said after a little hesitation, ‘I believe so.’ That seemed like a pretty fuzzy answer to me coming from [Google’s] Chairman. If you don’t know, who does?”
Schmidt’s answer?
Crickets.
Music Technology Policy 