As Google launches products, regulatory woes linger
By Don Reisinger, contributor
FORTUNE — Is Google in jeopardy of turning into the next Microsoft? It hardly seemed the case this week, as the California company unveiled a raft of new products, including a tablet computer and even futuristic glasses. But Google is still under serious regulatory scrutiny in several countries around the world, echoing the troubles that plagued Microsoft even as Google was in its very earliest days.
When Google (GOOG) emerged, Apple (AAPL) seemed troubled, Yahoo (YHOO) was still an online juggernaut, and Microsoft (MSFT) was facing a level of regulatory and consumer outcry the industry hadn’t yet seen. That scrutiny was ultimately damaging to Microsoft. The company and its executives were forced into court to argue against claims that the software giant was a monopoly and should be broken up. Google, meanwhile, was surging. Prior to its 2004 IPO, the company famously explained in a Securities and Exchange Commission filing its view on good and evil. “Don’t be evil,” Page and Brin wrote in what has since been called the “Don’t Be Evil” Manifesto. “We believe strongly that in the long-term, we will be better served — as shareholders and in all other ways — by a company that does good things for the world even if we forgo some short-term gains.”
The comment was a thinly veiled shot over Microsoft’s bow. Google and its co-founders made it clear that they were the good guys, and the big corporations with boatloads of cash weren’t. But now, the slogan is being thrown back in Google’s face. Across Europe, the U.S., and even India, the company is facing intense regulatory pressure over its practices, and charges that it is limiting competition in the marketplace.
Nowhere are the calls for change louder than in the European Union. European Competition Commissioner Joaquin Almunia last month gave the search company just weeks to address four concerns his office has cited related to the way in which Google displays search results, handles competitors’ search listings, and uses AdWords. Almunia, who said in a statement last month that Google’s alleged practices “may be considered as abuses of dominance,” will launch formal antitrust proceedings against the company if it can’t settle with his office.
The U.S. Federal Trade Commission has also gotten into the act with its launch last year of an antitrust investigation into Google’s practices. The organization has recently bulked up its litigation team with a host of big guns, including former Department of Justice prosecutor Beth Wilkinson, indicating a trial might be coming. Even Texas Attorney General Greg Abbott joined the fray, claiming last week that Google was withholding an unknown number of documents related to his office’s two-year antitrust probe into the company — a claim the company has denied.
Google has done a mixed job of keeping the focus off of its regulatory woes, telling anyone that’ll listen that it’ll cooperate with investigators. The company has also established a question-and-answer page addressing charges that it’s limiting competition in the search space. “On the Internet, competition is one click away,” the company writes on the page. “Users aren’t locked in to using Google search, and the cost of switching to a different search engine is zero.”
But it might not be enough. When the company decided recently to convert its many privacy policies into one, thus allowing it to more easily transfer user data around, privacy advocates pounced. And unlike so many issues from years past, consumers took notice.
The search giant has also watched its brand equity drop. For a number of years, including 2010, Google ranked at the top of Millward Brown’s annual BrandZ Most Valuable Global Brands study, measuring, among other things, consumer opinion. Last year, Google fell to second place, and this year dropped to third. It’s not a major slide, but still telling.
So, perhaps there is a burgeoning, albeit small, vulnerability developing in Google’s vaunted armor. The company might still be generating boatloads of cash in advertising, its search might be dominant, and Android might lead the mobile space for years to come, but as Microsoft proved, success means nothing in the face of regulatory woes. And when too many issues pile up and too many government organizations take aim, not even the biggest and most successful companies can keep their hero’s charm.