Is Google Heading For an Antitrust Trainwreck?

Everyone has misunderstood why Google, from CEO Eric Schmidt on down, is cozying up to Barack Obama. It's not out of some likeminded geekiness. It's out of desperation and fear.

Google has a plan to extend its dominance in search and online advertising into every part of the information economy. It's no secret — it's in the company's mission statement. But antitrust cops look askance at efforts to use market power in one field to move into another.

When Obama appeared at the Googleplex in November 2007, his candidacy was far from preordained. Gullible techies hailed his platform as "Google-friendly." Sure, Google will be helped by support for faster broadband connections. And cofounders Larry Page and Sergey Brin share a cleantech obsession with Obama.

Schmidt was so lackadaisical about courting Obama that he only endorsed him in the waning days of the campaign, threw an inaugural ball, and got rewarded with a token appointment to a science council. For those obviously halfhearted gestures, he didn't get what he wanted: a free pass on antitrust issues.

When it comes to enforcing competition laws, the White House sees Google as just another big, overweening corporation. Assistant Attorney General Christine Varney, appointed last month, mused about Google as the next big antitrust target last summer.

And sure enough, Google is facing two antitrust cases already: one about book search, and another about its board's overlap with Apple. They come after antitrust cops unexpectedly shot down a search deal with Yahoo last year.

The investigation into Apple's board, half of whom are either Google board members or Google advisors, really has to do with the mobile-phone industry. Google makes an operating system for mobile phones, but it's free, so it's hard to argue that, say, T-Mobile's G1 Googlephone competes with Apple's iPhone. But that's a red herring.

The real problem is the potential for collusion in mobile search. Google used to brag about how much search traffic the iPhone generated for it — 50 times more than any other handset, Google executives said last year. One hasn't heard Google trotting out those kinds of statistics lately. Why make it easy for government antitrust prosecutors to see the connection between Apple's iPhone sales and Google's mobile search traffic?

Google executives seem deluded about the company's antitrust risks. In a video interview with BusinessWeek, Dana Wagner, Google's top antitrust lawyer, refuses to use the word "antitrust" to describe what he does. He calls himself a "competition counsel."

Who's going to get Google out of this mess? Not its outside lawyers, Wilson Sonsini. They prepared an analysis of the kind of board conflict Google faces with Apple, which concluded that there was a high risk of collusion. When John Paczkowzki of AllThingsD called to ask questions about it, the document got yanked off of Wilson's website, and deleted from Google's cache curiously fast. Conveniently, Microsoft, which has hired the lobbying firm where Eric Schmidt's ex-girlfriend works to stir up antitrust trouble for Google, still has a copy in its search engine's cache.