If there is any doubt about the the challenging and thankless task of Economic and Financial Regulation just take a gander at the recent ruling by the FTC to approve Google’s acquisition of AdMob. The NYTimes catches much of the flavor of the decision in its reporting here. The basic problems in regulation are threefold. First, economic and technical change are occurring very rapidly both in the tech sector and more broadly in the general economies. Who would have predicted that Apple and Google would be major players in the mobile phone market just 4 years ago. Likewise economically, who would have credited China with $2trillion in US Bands and growing while completing 20 straight years of near doble digit economic growth.
Second, regulators are outfinanced and outgunned by most of the enterprises they are supposed to regulate. For example, an analyst for a private firm makes 4-10 times as much as the corresponding regulatory official. That analyst can also bring to bear on a regulatory decision a flotilla of lawyers, industry experts and lobbyists to support their arguments and raise impeding questions and ruling queries to make the small regulatory crew seem surrounded by an army of opponents.
Third, regulators are constantly under attack from within and without. One only has to look at the Wall Street Journal, Investors Business Daily, the Cato Institute, or the American Enterprise Institute for the latest story on how Washington or State regulators have failed. But even more debilitating, ther is the internecine turf warfare among the different agencies. Just contemplate the bakers dozen of agencies involved in Financial Regulation to see that. Currently the FDIC and the Fed appear to be in open warfare. Finally, under President George Bush the various regulatory agencies were systematically attacked … uhh “advised” by Bush officials on how to approach regulatory issues. Clearly nothing blatantly incriminating but agency advancements and budgets could be influenced.
So that the FTC managed to deliver a reasonable decision, even under a more regulatory favorable Obama administration is no small deal. The first factor, rapid technological change, was occurring in spades as the dynamics of the mobile industry and online advertising appear to change with every week. The FTC cited the emergence of Apple iAds as signs that no automatic move to a monopoly position for Google was assured. But the FTC could also have cited the fact that Bing has doubled Microsoft’s PC-based market share [but still badly trailing Google]. Also the recent emergence of Twitter and Facebook, both with a)dominant positions in their massive online segments and b)newly minted online advertising services both on PCs and mobiles – these major events of the past 6 months must have caused pause for a staff which just a two months before was ready not only to question the approval of the acquisition of AdMob by Google but consider broader action. But perhaps as importnat as the rapid technology change is the fact that many different players were prepared to acknowledge that Google certainly would not a)shape their strategy and b)had a nonopoly control of the market. Thus instead of being surrounded by Google big guns – a spectrum of viewpoints managed to convince FTC this time that Google+AdMob did not mean mobile ad space dominance.
This is important to Google because under the Democrats and the Obama Administration, Justice’s Antitrust Division has risen from the Bush Dead and is actively considering actions. And given Google’s dominance of PC based Search and its active thrust into other markets, there is plenty of room for watching and reviewing Google’s market dealings. The industry experts are of mixed minds – here is theAtlantic’s James Fallows who sees positives in Google attempting to stem the the flow of readership away from printed media – and here is the opposite reaction of some IT veterans on Google’s Book strategy. It appears that IT community including VCs and major vendors, having suffered thru the Microsoft monopolies in OS, Office, Browser and Exchange software are reluctant to allow any one player to become so singularly dominant again.