The biggest threat to Google isn't Apple, Microsoft or Amazon -- it's the U.S. government. Within the next several months, the U.S. Federal Trade Commission may sue Google for antitrust violations. If it does, Google will most likely end up like Microsoft after the government filed suit against it in the 1990s -- distracted and unable to plan for the future.
The biggest potential antitrust issue is whether Google unfairly manipulates its search results to point at its own services rather than competitors'. So, for example, the suit might charge that Google manipulates search results to direct consumers to Google Places rather than Yelp or to Google Shopping rather than Pricegrabber or Shopzilla. Another potential issue is whether Google's AdWords marketplace discriminates against ads from services that compete with Google's services.
The New York Times notes that the Nextag shopping comparison site has already been interviewed by FTC staff. The Times reports that company executives contend that as Google has strengthened its shopping comparison site over the last two years, traffic to Nextag has plummeted.
Keep in mind that it's not illegal to have a monopoly in a market, so Google isn't facing potential legal action over the mere fact of search engine domination. It is, however, illegal to use monopolistic power to unfairly harm competition or extend monopoly into other areas. That's the core of the potential suits against Google in these cases.
Making things more difficult for Google is that it's facing potential antitrust action overseas as well. The European Union is investigating Google for the same antitrust action. And the attorneys general of six states are also taking a look at Google's practices.
If that weren't enough, the FTC staff has already recommended that Google be sued for antitrust violations in the smartphone market, according to Bloomberg News, because of Google's attempts to block Microsoft and Apple products that it claims infringe on Motorola Mobility patents (now owned by Google).
These suits, no matter the eventual legal outcome, could cripple Google's ability to innovate and expand. To see why, you only need look back at what happened to Microsoft when the federal Department of Justice launched an antitrust suit against it in 1998. The core of the issue back then was similar to what Google faces now. The issue wasn't whether Windows was a monopoly (it was); it was whether Microsoft used its monopoly power to harm its competitors and dominate new markets such as browsers.
Eventually, Microsoft wasn't given much more than a slap on the wrist, but by the time that happened in 2004, the company had been embroiled in the suit for six years. During that period, it spent an immense amount of time and resources fighting the suit, and it wasn't sure which newly contemplated business actions might be deemed illegal.
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