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Google and the Price of Success

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US regulators are reportedly poised to hit the search giant with accusations of unfair competition.

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MINYANVILLE ORIGINAL Google (NASDAQ:GOOG) reports its quarterly earnings on Thursday, with analysts expecting revenue to come in at $11.98 billion and earnings per share of $10.56. In their forecasts, they probably will not mention the costs they anticipate for hiring a squad of extremely expensive lawyers with strong ties to Washington, but you can bet they're thinking about it.

Reuters was first with the news on Friday that "the majority of top decision-makers" at the Federal Trade Commission have agreed that an antitrust case should be brought against Google.

A vote by three of the five commissioners is needed, so here we go again.

Microsoft (NASDAQ:MSFT) spent 21 years in the throes of an antitrust case that the US government launched in 1998, primarily on the grounds that it was crippling potential software competitors by giving its own products priority in the design and marketing of its ubiquitous Windows operating system. By the time the case ground to a halt, just last year, the poster child for that case, the Internet browser company Netscape, was long dead. And although Windows still ruled in PCs, any monopoly Microsoft had once had was long lost, as other companies-including Google-proved more nimble in creating operating systems tailored for a mobile computing world. Adding insult to injury, the Web and its users grew ever more sophisticated, to the point that any attempt to dictate the choice of a browser became silly.

But here's the bottom line, as the Seattle Times noted when reporting the end of the case last year: When the settlement was proposed on November 2, 2001, Microsoft stock traded at $27.63. In May 2011, when the restrictions of its consent decree expired, it closed at $25.36.

There's a good name for this syndrome, and it is "shadow effect." Albert A. Foer, president of the American Antitrust Institute, which has not taken a position on the Google case, told the New York Times that "there is a shadow effect to public and government scrutiny that has an impact in and of itself. And in a dynamic industry that might not be so bad."

He wasn't talking about stock prices, of course. He was talking about the inhibitions, second guessing, and general attack of the jimjams that such scrutiny creates inside a company.
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Position in MSFT.
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