Google’s Eric Schmidt faces barrage of questions from senators

tina.nguyen Contributor
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In a long-anticipated hearing before the Senate Judiciary Committee, Google Executive Chairman and former CEO Eric Schmidt insisted that the search engine company “gets it” — that is, they get that their company is facing enormous scrutiny for its business practices.

Sitting alone at the witness table in front of a skeptical panel of senators, who had threatened to subpoena him if he did not personally testify, Schmidt defended Google against growing allegations that the company not only has a monopoly over Internet searches, but also that it is actively barring competition through its search algorithm — the programming that determines which Web pages are listed first after entering a search query.

“Absolutely not,” Schmidt reiterated multiple times, adamant that Google operated in a way that Washington didn’t quite understand.

“We get it. We get the lessons of our corporate predecessors,” he said, indirectly referencing Microsoft’s antitrust case from a decade ago, when Bill Gates was brought before the same committee to answer congressional inquiries, only to be slapped with an antitrust lawsuit by the Department of Justice months later.  “We also get that it’s natural to question some of our business practices,” Schmidt added.

The hearing addressed not only the company’s practices, but also Google’s place in a world where businesses can live or die by placement on a search engine’s result page. 

Google commands up to 70 percent of all Internet searches by computers, and 95 percent of mobile searches, a fact cited by Committee Chairman Herb Kohl, Democrat of Wisconsin, who raised questions about monopolistic power. Under current regulation, such a large market share could be considered monopolistic. (RELATED: Facebook decides which posts are interesting to you)

At the same time, Google has been accused of leveraging its dominance in search to promote its own products, such as Google Maps and Gmail. Google products occupy the top of many search results, often knocking out its online competitors.  It is unclear — and a concern for antitrust enforcers and free market advocates alike — whether this is a reflection of consumer preference, or a built-in bias toward Google products.

Kohl, who has been working on antitrust issues for decades, took particular issue with Google’s claim that they were working to provide consumers answers to questions, rather than pointing them to a page containing the answer.  “Isn’t that a fundamental conflict of interest, when you own many of the services providing the answers?” asked Kohl.

“I’m not sure Google is a rational business trying to maximize its profits,” Schmidt responded.  Though he acknowledged throughout the hearing that Google needed to be responsible for its competitive practices given its market share, he denied after the hearing that Google was an outright monopoly.

Balancing the testimony was a second panel with the CEOs of two Google-dependent companies, Yelp! and Nextag. The businessmen testified that Google had been “scraping” content from their sites and using it to enhance their own competing products such as Google Places.

“Google forces review websites [like mine] to provide their content for free to benefit Google’s own competing product — not consumers,” said Jeremy Stoppelman, co-founder and CEO of the popular review site Yelp!, in written testimony.  “Google then gives its own product preferential treatment in Google search results.” 

Stoppelham spoke from experience, saying that Yelp!’s content had been used on Google Places without permission after the company rejected an acquisition bid from Google. According to Stoppelham, 75 percent of his traffic is sourced through Google “one way or another.”  Cut Yelp! off from Google and the results would be “completely devastating,” he said.

When asked if he could have started his successful online company in today’s Google-dominated landscape, Nextag CEO Jeff Katz testified that he “simply couldn’t do it with the Google that exists today.”

Nevertheless, his company grew through Google and remains dependent on it.  “We’re one of the best companies in the U.S. that no one has ever heard of because we’ve perfected our search strategy,” said Katz. “The downside is that no one has ever heard of us.”

Both Democrats and Republicans alternated between praising Google’s innovative products while sharply criticizing and inquiring into its practices.

Minnesota Democratic Sen. Al Franken, a prominent proponent of antitrust regulations, noted that he “love[s] Google,” but was “admittedly skeptical” of Google’s business model and Schmidt’s answers to the committee.  Throughout the hearing, he engaged the witnesses in depth over antitrust principles, but saved his harshest scrutiny for Google’s representatives.

“[Chairman Kohl asked,] do all your rankings reflect an unbiased algorithm?” Franken said pointedly to Schmidt.  “You said: ‘I believe so.’ That seemed like a pretty fuzzy answer to me, coming from the chairman of Google.  If you don’t know, who does?  That really bothers me.  That’s the crux of it, isn’t it?  And you don’t know.  Were trying to have a hearing here about whether you favor your own stuff and you’re asked that question, and you don’t know the answer.”

Utah Republican Sen. Mike Lee, the committee’s ranking member, meanwhile, brought out charts showing how Google’s shopping product services were consistently ranked higher than its competitors, citing an “uncanny ability to always be number three.”

“You’ve cooked it so that it’s always third,” he argued.

“Senator, let me assure you that we have not cooked anything,” Schmidt responded, explaining that Google Shopping was a direct line to products themselves, while the other sites listed were product comparison sites.  “It’s an apples to orange comparison.”

The antitrust probe is just one of Google’s problems: the company recently paid a $500 million settlement to the Department of Justice — one of the largest settlements in history, as Texas Republican Sen. John Cornyn mentioned during the hearing — after being charged with knowingly advertising illegal prescription drugs on its website.

Minnesota Democratic Sen. Amy Klobuchar at one point questioned Schmidt about Google’s position on intellectual property infringement. Searches often point users to content ripped from owners, such as television shows copied onto Megavideo. While Schmidt acknowledged that Google properties such as YouTube pull illegal content, he stood by his decision not to censor pages that may contain pirated material from searches. “We have to represent the internet as it is, rather than what it should be,” he said.

The Federal Trade Commission’s probe into Google remains the company’s largest, and most public, problem. Though he remained humble throughout, Schmidt’s answers did not satisfy lawmakers, and most left the hearing unclear on whether Google was legitimately committed to promoting competition rather than profit. Kohl promised that he would continue looking into Google’s practices, while Lee walked away dissatisfied with Schmidt’s answers.

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