Microsoft Session at Cloud Expo

Microsoft has done unto Google what Google and its CEO Eric Schmidt did unto Microsoft - in fact Eric did it at least twice - before Google he was CEO of Novell - and that's to complain to the regulators - sometimes unsolicited, sometimes because it was asked.

Google's public response to the European Commission's preliminary investigation into claims of retaliation, exclusivity and manipulation of search results to disadvantage rivals has been to downplay the exercise as unlikely to come to anything because Microsoft's behind it.

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In response Microsoft deputy general counsel Dave Heiner blogs that this is not Google's first run-in with the antitrust authorities - in late 2008 the Justice Department was ready to go to court to block Google's attempt to partner with search rival Yahoo and last year - and again the other day - the DOJ told a federal court that Google's book search plan is anticompetitive. Heinen says observers shouldn't be deceived by Google dodging behind Microsoft's skirts. The EC is likely to treat the complaints - which don't all come from Microsoft - quite seriously.

"Ultimately what's important is not who is complaining, but whether or not the challenged practices are anticompetitive."

Anyway, "complaints in competition law cases usually come from competitors," he points out. "This is the way that competition law agencies function: They look to competitors in the first instance to understand how particular markets operate, the practices of dominant firms and the competitive significance of those practices."

And Microsoft has spent a lot of time with the regulators lately to get its Google-replacing deal with Yahoo approved.

"As you might expect," Heinen writes, "the competition officials asked us a lot of questions about competition with Google - since that is the focus of the partnership. We told them what we know about how Google is doing business. A lot of that entails explaining the search advertising business, which is complex. Some of that inevitably gets into Google practices that may be harming publishers, advertisers and competition in search and online advertising."

Heiner - who ought to know since he's been at the receiving end in the past - suggests that others are going to queue up behind Ciao, the Microsoft subsidiary, Foundem and ejustice.fr, the initial complainants, and gripe to the EC - like, oh, say, the Federation of German Newspaper Publishers and the Association of German Magazine Publishers.

He says he's heard a lot of the complaints about Google himself because "many concerned companies have come to us and asked us for our reaction and even for advice. When their antitrust concerns appear to be substantial, we suggest that firms talk to the competition law agencies. (Complaining to Microsoft won't do much good.)"

Microsoft's problem with Google is ironically "lock-in."

"Our concerns relate only to Google practices that tend to lock in business partners and content (like Google Books) and exclude competitors, thereby undermining competition more broadly."

And its problem with Google search is that "search engine algorithms ‘learn' by observing how users interact with search results. Google's algorithms learn less common search terms better than others because many more people are conducting searches on these terms on Google.

"These and other network effects make it hard for competing search engines to catch up. Microsoft's well-received Bing search engine is addressing this challenge by offering innovations in areas that are less dependent on volume. But Bing needs to gain volume too, in order to increase the relevance of search results for less common search terms. That is why Microsoft and Yahoo are combining their search volumes. And that is why we are concerned about Google business practices that tend to lock in publishers and advertisers and make it harder for Microsoft to gain search volume."

See http://microsoftontheissues.com/cs/blogs/mscorp/archive/2010/02/26/competition-authorities-and-search.aspx.