Did Google Buy Its Way Out of Trouble with the Feds?
Google snuck its way out of a two-year Federal Trade Commission antitrust probe without any major scratches this week in large part because it spent $25 million on lobbying Washington to believe it wasn't, in fact, being evil.
Google snuck its way out of a two-year Federal Trade Commission antitrust probe without any major scratches this week in large part because it spent $25 million on lobbying Washington to believe it wasn't, in fact, being evil, according to numbers from Politico's Tony Romm. As the case ramped up, with Google's Eric Schmidt testifying, Google upped that spending. In the first three quarters of 2012, Google spent $13.1 million on lobbying, up from $5.9 million the previous year, according to numbers from The New York Times's Claire Cain Miller and Nick Wingfield. In addition to pouring money into its lobbying efforts, Google and its leaders also made strategic campaign contributions: Schmidt gave the maximum amount allowed, $2,400, to Senator Chuck Schumer, who sits on the committee that was investigating Google. As Thursday's FTC decision allowing Google to maintain its search stranglehold simmers throughout the tech world, the other factors leading to it are becoming more clear — and they all come down to dollars.
Google did what Microsoft didn't.
"Google had the Microsoft case as a template," Kevin Werbach, an associate professor at the Wharton School at the University of Pennsylvania, tells Miller and Wingfield. "Google just had to convince the regulators it was sufficiently different from Microsoft." Part of that involved taking Washington more seriously, which Microsoft didn't do in its landmark 1999-2001 antitrust case, at least not at first. Microsoft had a lobbying outfit, run by Jack Krumholtz. But in the years leading up to the Microsoft case it spent a fraction of what Google did. When the FTC was laying judgment on Microsoft in 1999, the Windows maker doubled its lobby spending for the year to $3.7 million, which comes out to about $4.5 million after inflation. Meanwhile, with its tens of millions, Google set records of its own this year. Microsoft did have a cushy $1.4 million PAC leading up to the 2000 election, but that was too late — the FTC concluded its investigation in 1999, with a settlement arriving in 2001. Google, meanwhile, has a history of big campaign contributions, giving big in 2008 and 2012.
Google "played nice with regulators."
Another lesson Google learned from Microsoft was to work with Washington, explain Miller and Wingfield. And, again, that takes a lot of money. Google flew people to D.C. regularly. And this year the company started giving money to both Democratic and Republic causes. It also hired the right people to make it look good, forming "strategic alliances" with — or, you know, donated money to — the Heritage Foundation, the American Enterprise Institute, and the Competitive Enterprise Institute, just to name a few of the D.C. institutions that Google's U.S. Public Policy and Government Affairs division supports. In addition, Google hired 18 lobby firms — not just individuals. Last year, the company had 93 lobbyists in D.C. That's one for every six members of Congress, according to The Huffington Post's Ryan Grim, Zach Carter, and Paul Blumenthal.
"The sense among insiders is that Google emerged victorious because its network in Washington also spanned more than the traditional lobbying community," writes Romm. Google spent "untold resources" getting buddy-buddy with the anti-trust academics it needed to prove its search practices cause no consumer harm. Take, for example, Joshua Wright, the George Mason University professor and recent Obama FTC appointee, who wrote papers like "Google and the Limits of Antitrust: The Case Against the Antitrust Case Against Google." (He had to sit out of the FTC hearing because of a conflict of interest.)
Some still argue that despite the flood of money, the FTC didn't have that strong of a case to begin with. "I think, in the end, the problem is that it’s a difficult case," Harry First, a top competition law professor at NYU, told Politico. But,it's undeniable that the pile of money it sent to D.C. helped Google prove that point.