Google's bid for Motorola Mobility may face regulatory hurdles

As the dust starts to settle on news of Google’s $12.5 billion bid for Motorola Mobility on Monday, the question now being asked is whether the deal will pass muster with regulators and be allowed to pass.
On the one hand, Google has said it will continue to run Motorola Mobility as a separate business unit and support its other Android handset partners like Samsung, HTC, Sony Ericsson and LG. On the other, the move could be seen as anticompetitive towards these selfsame partners should Google choose to integrate Motorola Mobility completely and close off Android to outside phone makers.
“A key element of modern consumer protection law is the need for true competition,” Professor Jonathan Ezor director of the Institute for Business, Law and Technology at Touro Law Center told RCR. “Full or partial monopolies are seen as anti-consumer, since they can eliminate the pressures on sellers to reduce pricing and improve quality.”
In order for the merger to pass in the U.S. the bid will be reviewed both by the Justice Department and the Federal Trade Commission, under the Hart-Scott-Rodino law, though this still leaves Google with the potential hurdle of other regions like the EU which has its own processes.
Ezor says that whether regulators in the U.S. or elsewhere would object to the merger as anti-competitive will depend largely on how they define the relevant market. “Is it mobile hardware? Motorola is one of many players. If, though, the market is smartphones, and regulators are concerned that Google could pull back on its Android licensing to other hardware makers and thereby reduce consumer choice, they could raise objections,” he told us.
Indeed, while Android hardware makers like HTC and Samsung have said they support Google’s move at present, they too could file objections to the deal at a later stage if they felt threatened.
Looking at statistics from IMS Research, however, Motorola Mobility holds just 4.3 percent of global smartphone market share, making it hard to see how regulators could possibly build a convincing anti-competitive case on those grounds. With U.S elections around the corner, however, and corporate political donations very much at play, regulators may take a much closer look at the deal and its implications in a wider context.
After all, Google is already under scrutiny both in the U.S. and abroad from antitrust regulators concerned that the software firm is abusing its massive power and influence online to muscle out its competition. The FCC, the Texas attorney general and the Senate Judiciary Committee all have inquiries into Google’s alleged anticompetitive behavior at home, while the EU, notorious for its antitrust rulings, has its own probe underway.
Ezor says regulators could therefore bring up the issue of constricting consumer choice over how much of their information and behavior was collected by Google from a Google-Motorola Android device.
“Google’s whole business model depends on data collection, and opting-out could be much harder if Google controlled both the hardware and the software,” Ezor told RCR adding that Google might also be able to exert more influence on cellular carriers in terms of which Android devices they carried once it controlled a major hardware source.
Then again, it is quite possible that Google’s main motivation in buying Motorola Mobility was to arm itself to the teeth and become a patent superpower, after taking a few knocks in the current copyright conflicts. If patents were the goal, Google could simply sell off the operations side of Motorola Mobility’s business, retain the IP it needed to fend off attack and remain essentially unimpeachable.
The irony of this, says Ezor, is that the patent system creates legal, powerful, 20-year monopolies, and was established in the U.S. Constitution to encourage innovation and thereby benefit the public. Instead, U.S patent laws are currently receiving serious criticism because of how they are being abused by “patent trolls” and major corporations alike, to the detriment of consumers.
“Big companies are wielding their patents to try and block competitors from the marketplace, rather than offering better products to customers,” Ezor lamented.
Another option is for Google to restructure operations or Android licensing in such a way as to better ensure (for some time, anyway) that competing companies can, in fact, compete. Ezor points to Sirius Satellite Radio and XM as an example, noting both firms agreed to certain pricing and other requirements before their combination could move forward.
“It’s not a permanent situation, though, and ultimately, the third party manufacturers that use or were considering using Android may already be considering other alternatives,” he said.
Ezor would not be drawn into saying whether he believed the acquisition would (or should) ultimately be approved, but did say he didn’t see it as a good thing for consumers’ choice overall.
“Whether or not Google’s Motorola deal goes forward, it further highlights the anti-competitive factors that may soon lead to a change in our patent laws,” he concluded.