Google Expects A Black Eye At Today’s Senate Antitrust Hearing

We’re apparently not going to hear anything new at today’s Senate subcommittee hearing on Google and competition. (Danny Sullivan and Gary Price will attend and blog the live testimony.) What we’re likely going to get are very polarized views of Google and how it operates: Google the benign promoter of consumer-centric content and Google the self-interested destroyer of competition.

List of Speakers

However most of what we’ll hear will be critical testimony from Google’s competitors or their representatives. Here’s the list of those who will testify:

• Eric Schmidt, Google
• Jeff Katz, CEO, Nextag
• Jeremy Stoppelman, CEO, Yelp
• Thomas O. Barnett, Attorney, Covington & Burling LLP (also a former Asst. Attorney General for Antitrust)
• Susan A. Creighton, Attorney, Wilson Sonsini Goodrich & Rosati, PC

No Neutral Parties

No one on this list, unfortunately, is “neutral” or a detached industry observer. And there are no advertisers or search marketing firms to lend a “third party” perspective.

Schmidt and Creighton will probably repeat familiar statements about helping consumers and creating economic value (Wilson Sonsini represents Google). By contrast, Yelp, Nextag and attorney Barnett will argue that Google is highly anti-competitive and should be restrained.

Barnett has represented parties in the FairSearch.org coalition, which has been aggressive in promoting the idea that Google is an anti-competitive monopoly. The group was formed to oppose the acquisition of travel-software company ITA.

The Wall Street Journal previews testimony from Nextag CEO Jeff Katz, which will argue that Google seeks to punish or unfairly hinder competitors. One specific argument will apparently be: Nextag doesn’t have access to Google’s Product Listing Ads and its ads are only allowed to appear in secondary positions on a SERP:

Jeff Katz said Google also prevents his company’s site from bidding on the prominent ads that show up next to search results for products such as running shoes. Instead, he said, because Google sees his company as a threat, Nextag can only bid to appear in text ads lower down on the results page, limiting its exposure to consumers.

Yelp’s Testimony May Be Most Damaging

Yelp has published a link to CEO Jeremy Stoppelman’s expected testimony on its blog. I was previously wondering how aggressive Yelp was going to be in saying that Google was favoring its own content or “building its local business on the backs of others’ content.” The statements are going to be pretty strong it appears:

In 2010, Google appointed a new executive to lead Google Local, and they launched a series of anticompetitive initiatives designed to shore up the threat posed by partial substitutes like Yelp . . .

In 2010, Google began incorporating the content that it indexed from its competitors into Google Local without permission. . . In some instances, Google even presented this content to its users as if it were its own . . .

In response to our objections, Google informed us that it would cease the practice only if we agreed to be removed from Google’s web search index, thereby preventing Yelp from appearing anywhere in Google web search results.

These claims are well documented and we’ve reported numerous times in the past on the dispute between Yelp and Google over reviews: Yelp: Google Told Us “Our Way Or The Highway. If it were on the list one would expect TripAdvisor to make similar statements.

Google has since complied with Yelp’s request and purged all third party reviews from Google Places, resulting in the necessary acquisition of Zagat Ratings for a reported $125 million.

The idea that Google gave Yelp a kind of “all or nothing” ultimatum is a highly problematic piece of testimony for Google and may be the most damaging thing that comes out today. Stay tuned.

More Theater Than Fact Finding

Indeed, Google is very conscious of the probability that most of the testimony today will be heavily weighted against it. Accordingly the company released its own guide to the Senate judiciary hearing yesterday to try and get out in front of some of the criticism. This morning it also sought to rebut the most inflammatory elements of Nextag, Yelp and Barnett’s anticipated testimony with a “claim” and “response” blog post that lays out each argument and Google’s position.

Unfortunately the fact that the subcommittee didn’t include any third party analysts, observers, advertisers or search marketing agencies to testify — in other words (relatively) disinterested parties — is a critical flaw in the design of these hearings. Accordingly they emerge as a kind of theater and not so much a fact-finding inquiry.

Postscript: In related news out this morning, the FTC is reportedly investigating whether Google “illegally increased advertising rates 50-fold for rival Microsoft Corp.”

Postscript II: Below is Google Executive Chairman Eric Schmidt’s written testimony to be delivered today before the committee.

Eric Schmidt Testimony

Related Entries:

• Google Releases A Guide to the Senate Judiciary Hearing
• Google, Yelp, Others To Appear At Antitrust Hearing Wednesday
• US Senate Schedules Hearing On ‘The Power Of Google’
• Google’s Schmidt Agrees To Testify Before Senate Committee About Search Competition
• EU Antitrust Complaints Against Google Grow To Nine
• French Company Seeks $421M From Google For “Blacklisting”
• Update: The Shoe Drops: Google Receives Formal Notification Of Review By FTC
• Googleopoly: The Definitive Guide To Antitrust Investigations Against Google