By Paresh Dave
OAKLAND, Calif. (Reuters) – The U.S. government’s antitrust suit against Alphabet Inc’s Google on Tuesday could deliver a huge opportunity for Microsoft Corp to increase usage of its Bing search engine, an unexpected epilogue years after it abandoned a long campaign for legal relief.
From at least 2007 through 2015, Microsoft lobbied lawmakers, funded private lawsuits, commissioned opposition research and academic papers and even ran TV commercials, all with the aim of getting regulators to bar what it viewed as anticompetitive practices by Google.
Codenamed “Appendix A” inside Microsoft, the campaign failed to change Google’s behavior or boost Bing’s market share, according to current and former Microsoft officials involved in the effort. Satya Nadella killed Appendix A by cutting funding and staff when he took over as chief executive in 2015, the sources said.
Yet, the concerns once expressed by Microsoft underlie the Justice Department’s new case.
Google cornered the web search and search ads markets by paying billions of dollars to smartphone makers, wireless carriers and browser makers to promote its search engine and penalizing them for showcasing rivals, the government alleges.
Google denied the claims in the lawsuit and called it “deeply flawed.”
The complaint quotes a Google executive as saying without the “really important” penalties, Bing could have stolen away the widespread promotion Google enjoyed. Another Google staffer is quoted as noting Google’s promotional deals with browsers are “a good way to keep [a browser] away from Bing.”
About 80% of U.S. web searches go through distribution points that Google now owns or controls, leaving Bing with about 7% of the market as the closest competitor, the lawsuit says.
Though Google said it is prepared to fight the lawsuit for years, the filing of the complaint is likely to motivate its search engine rivals to newly invest in improving their technology and challenging Google’s various restrictions to gain greater distribution, technology and legal experts said.
And if Microsoft’s response to a government antitrust lawsuit twenty years ago is any guide, Google may move more cautiously against rivals while the case plays out.
“Markets work better when firms know there is a sheriff in town,” said Chris Sagers, law professor at Cleveland State University.
Sridhar Ramaswamy, a former Google executive who now runs Neeva, which is developing a paid, privacy-focused search engine, said that “we hope the DOJ’s actions will create a more equal playing field for search apps like Neeva that want to create real options for customers.”
Microsoft declined to comment for this story. It has answered questions about Google from investigators in several countries over the last two years, according to public records, but has not been proactively bashing Google, two academics and two attorneys once retained for anti-Google work said.
APPENDIX A
The Appendix A effort dated back to Microsoft’s frustration with Google’s 2007 acquisition of online advertising company DoubleClick for $3.1 billion, or less than what Microsoft had offered, one source said.
Then-CEO Steve Ballmer organized a handful of people to understand Google’s strategy and fight the deal, which regulators approved over Microsoft’s objections.
The codename, according to sources, referred to the section within a paper written by Google’s co-founders in which they said “advertising funded search engines will be inherently biased towards the advertisers and away from the needs of the consumers.”
Microsoft tried to make a case to regulators and the public that Google hurt consumers by blocking them from alternatives and instead ironically providing low-quality search results because they were packed with ads.
Microsoft funded and managed anti-Google groups including FairSearch and Icomp, bringing on board other Google foes including Expedia Group Inc, Yelp Inc, News Corp and Oracle Corp, sources said.
Microsoft-backed websites, such as SafeCloud.org, promoted articles raising concerns about the security of Google cloud services, one source said. One Microsoft staffer focused on bonding with small business aggrieved by Google, two other sources said, with some of the operations subsisting off Microsoft funding.
Political campaign strategist Mark Penn later joined in 2012 to produce the widely viewed “Scroogled” advertising campaign that criticized Google’s privacy practices and its ad-heavy product searches.
But when Nadella took Microsoft’s reins, he expressed concern that fighting the industry darling that was Google had hurt his company’s ability to hire, partner and attract new business, according to sources involved in the discussions. Nadella decommissioned the Appendix A team, cleared the air with Google, and began using Google-owned software to power Microsoft’s internet browser and some mobile devices.
Bing’s ad salespeople are among those inside that have agitated to renew anti-Google lobbying, sources said.
Meanwhile, Oracle and those other Google critics picked up where Microsoft left off, and have focused over the last five years on Google’s control over advertising technology used by publishers – a subject mostly left out of Tuesday’s complaint.
The Justice Department could introduce allegations related to Google’s advertising technology as soon as next month, again benefitting Microsoft, according to sources briefed on the investigation.
