RENE TILLMANN
There's a story Google employees like to tell about company co-founder Larry Page's childhood days.
Once a year, the story goes, Mr. Page and his father, a computer-science professor, would drive all the way from the family home in Michigan to their favourite West Coast bookstore. They would stuff the car full of empty suitcases and come back from the massive bibliophilic shopping spree with the cases full.
The story is meant not only as the usual big-boss lore, but as evidence of good faith, because today Google is mired in a complex, money-draining legal fight over its plan to digitize the world's books.
Opponents maintain that it would give the Web giant a monopolistic stranglehold on the digital book market. Google, by contrast, is framing it as a vision of public service, shaped not by the potential for profit, but by all those cross-country book-shopping trips.
This battle, which has prompted supportive and opposition filings from hundreds of companies, associations and governments, is currently in the mire. A judge has set a Nov. 9 deadline for the parties to propose a new settlement after the U.S. Justice Department effectively killed the previous deal.
But for Google, this is just the most high-profile symptom of a larger challenge - convincing the world that the company whose slogan is "Don't Be Evil" really isn't.
The problem isn't just one of cosmetic perception. A decade ago, Microsoft found itself facing similar accusations of anti-competitive behaviour - which eventually turned into multibillion-dollar antitrust lawsuits across two continents, legal messes the software maker is only now closing the book on.
Earlier this year, President Barack Obama appointed Christine Varney, one of the best-known Internet-law experts in the U.S., as the top antitrust official at the Justice Department. A few months before, she had told a legal-conference audience that Microsoft was "so last century," then added: "They are not the problem. I think we are going to continually see a problem potentially with Google."
No wonder, then, that Google is launching a pre-emptive offensive to try to ward off any accusation of monopolistic behaviour. Indeed, the company's senior competition lawyer has spent much of this year telling anyone who will listen that Google actually isn't all that great.
"We've had the luxury of being No. 1 in terms of users of search for a little while now," says Dana Wagner, a former U.S. Justice Department lawyer. "But we disrupted Yahoo, and Yahoo disrupted AltaVista. People have declared victory before in this space, and it hasn't been the case."
Google, he is saying, is certainly not too big to fail.
Mr. Wagner is taking his presentation to reporters, industry associations and, most important, policy-makers. And a company with just a $2-million (U.S.) lobbying budget is about to put a lot more money into changing important people's minds.
"In a West Coast company run by engineers, I don't think there was much attention paid to being in Ottawa, being in D.C. and telling your story," Mr. Wagner says. "If you don't tell your story, other people do it for you."
And if part of that story involves reminding users that they can switch to another search engine at any time, so be it. The implications are too big to ignore, both for the company and for the millions of people who use its products.
A repeat of the Microsoft scenario could fundamentally change not only the way Google provides its services, but also whether the company can provide some of those services at all, as with the book-digitization project.
A company known for taking on audacious challenges may be facing its most difficult yet - dealing with its own success.
Google hacks itself
The Data Liberation Front is stalking Google.
From Gmail to YouTube to Blogger, DLF's Chicago-based engineers are tearing the company's services apart, making it easier for the average user to remove all their personal data from Google's products and go somewhere else.
Yet what sounds like a bunch of hackers is actually a group of Google employees. Complete with its own revolution-themed logo, DLF may look as tongue-in-cheek as so many of Google's endeavours, but its task is vital to the Web giant's argument that it encourages, rather than hinders, competition. How can a company be anti-competitive if it allows users to leave its service with all their data at any time, for free?
"We are one click away from competition," says Nikesh Arora, president of Google's global sales operations and the No.4 authority at the company, behind chief executive officer Eric Schmidt and co-founders Larry Page and Sergey Brin.
"Tomorrow morning, if you want to go search somewhere else, you can search wherever you want. We don't hold you, we don't charge you a subscription, we don't charge you a fee and say we're holding your data hostage."
Mr. Wagner, for example, points to an incident in January when an error caused Google to incorrectly label all its search results with a warning that the site may harm the user's computer. That day, he says, Yahoo's search queries instantly doubled.
"It's healthy from our perspective," he says. "You don't want to be the American auto industry - you don't want to be insulated from competition and then the markets open up and you're in trouble."
But not everyone buys the argument that Google's dominance in areas such as the search market is really under imminent threat. "When you start off [talking]that way, it destroys your entire credibility, because you are dominant," says Gary Reback, one of Silicon Valley's best-known lawyers.
Mr. Reback helped to spearhead the U.S. government's antitrust case against Microsoft a decade ago, and is now taking on Google's plan to digitize the world's books.
"They say competition is a click away - Microsoft used to say competition is two clicks away. So I guess we've gotten one click closer, but the argument is not any more credible."
Yet Google has yet to face anything like Microsoft's antitrust debacle. Even Ms. Varney, the top antitrust cop, has never accused Google of achieving its market position through illegitimate means. And Justice Department officials and Mr. Reback alike concede that, if done properly, the book-digitization project could be a huge contribution to society.
"Is it possible to get a settlement approved? Yes," Mr. Reback says. "Hopefully they will, but I'm not holding my breath."
Google's first taste of the kind of legal and regulatory opposition it now faces came when the company tried to acquire Doubleclick, an Internet display-advertising firm, two years ago. Competitors argued that the purchase would give Google an unfair advantage in the ad market by taking out another player.
Company executives were eventually called before a U.S. Senate panel investigating the proposed purchase, and the Federal Trade Commission investigated the deal for months before finally approving it.
"I think the regulatory process and how that acquisition was greeted ... really took people by surprise within the company," Mr. Wagner says. "At that point, we knew that if we did anything big, there was going to be lots of attention."
(Indeed, Google's proposed search-advertising deal with Yahoo, a year later, didn't go nearly as well. It was abandoned when it became clear the Justice Department would try to block it.)
Building a case
Google quickly took lessons from other tech firms. Executives from eBay, for example, made the case in Washington that rather than being a monopolistic entity in the online-auction industry, the company was a platform for entrepreneurial growth - and showed politicians exactly how much money it was making for their constituents.
Today, Google makes a very similar case for its AdSense program, which places ads on various websites, to which it paid out $5.2-billion last year. Indeed, many of the company's top employees now use the same buzz phrase when describing the purpose of several new Google product launches - "opening up the ecosystem."
Google's argument against accusations of anti-competitive behaviour rests on three pillars.
The first is size: Firms such as Microsoft and IBM dwarf Google in virtually every category, from market capitalization to lobbying budgets, Mr. Wagner contends.
While he readily admits a company that went from zero dollars of revenue to $20-billion in less than a decade is anything but small, he insists: "We're definitely not the big kid on the block."
Extend that thinking to Google's place in the online-search market. Surveys consistently show the firm has the lion's share. But Mr. Wagner argues that the Internet's true search space is actually much larger.
For example, he says, someone looking for hotels in Vancouver may not use a traditional search engine but a site such as Expedia or Travelocity; someone looking for products may go to Amazon or eBay; someone looking for a band may look up videos on Hulu or YouTube (which Google already owns).
Expanding the definition of search sites this way makes Google look a lot less dominant. Still, the argument is perhaps Google's weakest.
"I would say that most people looking at Google in the marketplace - and the search marketplace in particular - would consider that they are a very, very powerful company, and would clearly have some market power in that area," says Sheridan Scott, a partner with law firm Bennett Jones who served as Canada's Commissioner of Competition from 2004 to 2009. She was charged with investigating Google's abortive advertising deal with Yahoo last year.
"Of course they should be paying attention to this and they shouldn't let themselves be caught unawares - lots of people are interested in Google right now."
Enter Google's second pillar: Regardless of how big the company is, it's behaviour that really matters.
"We're past the days of Alcoa, where if you're just really large, that's a reason to be broken up," Mr. Wagner says. "You have to be very large and you have to abuse that in various ways."
And if the company is indeed abusing its market position, they say, there's nothing stopping clients from going somewhere else.
That's the point of a project such as the Data Liberation Front - to quash any perception that Google is holding anyone's data hostage.
Fluid Dynamics
But the case also rests on the question of whether the Internet itself is a "dynamic" industry - one in which a market leader can be replaced overnight.
Critics counter that in reality change doesn't happen all that quickly in Google's market, in large part because of "network effects" - forces that tend to reinforce dominance and ensure that the more powerful a company is, the more powerful it becomes.
For example, Web publishers will flock to a certain company because it connects them to the most advertisers. Advertisers will flock to the same company because it connects them to the most publishers. The cycle is self-perpetuating.
"If you charge too much for potatoes, for example, people just won't buy from you," Mr. Reback says. "But that's not the way it works in these kinds of markets."
Ultimately, it's that question - whether the Internet tends to reinforce or destabilize a market leader's dominance - that may have the biggest impact on the future of business in the digital age.
If regulators agree that the next big thing may come along at any minute and displace Google atop the online heap, then the Web giant will be largely free to pursue its ambitious mandate of collecting and organizing the world's information, relatively unhindered by the regulatory and legal mess that ensnared Microsoft for a full decade.
"We want to be Santa Claus," Mr. Wagner says. "We want to make lots of toys that people like playing with. But if you don't want to play with our toys, you've got us.
"We can't really do evil things very easily - and if we did, you would leave."