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How an antitrust suit against Google could forever change the company, no matter the outcome

The US Federal Trade Commission is threatening to bring an antitrust suit against Google, one that would go after Google’s extremely dominant position in the search engine market, accusing the company of using its massive weight and influence to keep other rival search engines like Bing and Yahoo down. Whether or not this holds any water may not stop the suit from forever changing Google and changing Google’s position across its many products.

Dan Lyons of the Daily Beast argues that even if the FTC has a weak case, just the suit alone, with millions spent by Google and years fighting the charges could leave it in the same weakened position that it left Microsoft in the late 90s. Microsoft came out of that fairly unscathed from a legal perspective, but it made Microsoft too timid to compete, opening the doors wide for Google, Apple and Facebook and leaving Microsoft behind on a variety of fronts.

Leave aside for the moment whether Google deserves to be sued, or whether the government ends up winning any kind of concessions from the Internet search giant.

The point is, the suit itself will be devastating to Google’s business. Just the distraction that this kind of case creates can hobble even the most successful, well-run company. The endless depositions, the court hearings, the subpoenas, the PR nightmare every time yet another embarrassing old email gets dug up out of the archives—it’s a nightmare.

Think Google is too powerful? You only need to look back to Microsoft circa 1998 to see what happens. That year, the Department of Justice filed an antitrust lawsuit against the software giant, and brought in renowned attorney David Boies to make its case that Microsoft had abused its monopoly power in the personal-computer market.

The case dragged on for years and ended with relatively toothless settlement terms, but by then the damage was done. Microsoft had become timid, slow, afraid to compete. The stain of the allegations had tarnished its reputation. The distraction of fighting the court battle caused Microsoft to lose focus, and guess what? By 2004, when the dust finally settled, the world had moved on, and Microsoft had missed all the big trends: Internet search went to Google; online music and media went to Apple, which parlayed those strongholds into its current dominant position in mobile phones and now tablets; and social networking was just being invented by Facebook.

Microsoft, meanwhile, has never recovered.

So on what basis will the FTC go after Google? In a nutshell, the government will argue that Google controls two thirds of U.S. Internet searches, and that it has rigged its search results in ways that hurt its competitors.

Antitrust cases are notoriously tricky to prove, and could be especially so in this case. Simply establishing that a company holds a monopoly in a particular market can be difficult, especially in the dynamic, fast-changing world of the Internet, where even defining the market is a challenge, let alone establishing that a company holds a monopoly in one.

But even if the government can do that, it’s not enough. Just having a monopoly isn’t a problem. The government must also prove that Google abused its monopoly power.

When US antitrust regulations came into being, there definitely was a problem with large corporations involved in industries such as railroads and newspapers using heavy handed, anti-free market techniques to squash any competition. But these days, it’s not quite as black and white. I’m not a big fan of Microsoft, but I didn’t think they deserved to get raked over the coals by the FTC over the whole Internet Explorer thing. Yes, Microsoft had and still has the majority of the PC market as well as the internet browser market, but I didn’t see the problem with Microsoft packaging IE in Windows as the default browser. It’s Microsoft’s product— they should be allowed to do that, because they’re not preventing people from getting other browsers.

And it’s the same thing with Google. Yes, Google has the lion’s share of the search engine market, but it’s because they have a vastly superior product over the likes of Microsoft and Yahoo, and it’s the product that’s always been at the core of their business. Are they using their leverage unfairly? I would say not, but I’m not a lawyer involved in any of this. But will the antitrust suit leave Google in a vulnerable position? Probably.

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