HOWZAT

Competition law, which regulates companies against wielding a disproportionate and harmful influence over a market (it is known as “antitrust” in the US), has proven to be an important balance in weighing innovation against power in our converging world. Look at how antitrust and competition regulators in the US and Europe pursued IBM and Microsoft, the respective poster children of their generations. The parallels are striking.

In 1969, when the IBM System/360 computer was hugely successful, the US Department of Justice (DoJ), after a few initial antitrust skirmishes, accused the computer giant of antitrust violations in the business computer market. IBM fiercely contested the case but it was only in January 1982 that the DoJ admitted the Government's charges were "without merit". The EU had started similar proceedings in Europe that were settled in 1984. By that time, the PC age had dawned and IBM, partly because of the chastening impact the long-running legal battle had on its corporate culture, was left behind.

In 1998, when Microsoft’s Windows 3.0 was hugely successful, the DoJ, after a few initial antitrust skirmishes, accused the software company of antitrust violations in the operating system market. Microsoft fiercely contested the case, which ended with a judicially approved settlement in June 2004. The European Commission had weighed in with a decision of its own a few months earlier, fining Microsoft 497 million euros — a decision that last month was upheld by the Court of First Instance. The clash with competition regulators played a part in Microsoft's transormation from the dynamic, glittering star of the technology sector to being perceived as mature and conservative.

Two months after the settlement with the DoJ in June 2004, a new kid sprang onto the block with a multi-billion-dollar IPO -- Google. Are they now headed down a similar path to Microsoft and IBM? Good question.

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The search engine giant has been heavily criticised for its approach to privacy. It has been accused of flouting copyright laws through its video sharing site YouTube. This year, it attracted the attention of the US Government and the EU with its purchase of DoubleClick, the online advertising company, for $3.1 billion. Critics claim the deal will give will give Google too much control over internet display advertising. In September, The Times reported that an investigation by EU competition authorities would delay the takeover up by months.

Is this the first skirmish? Or will Google escape the distraction of protracted legal attention?

As history shows, the law catches up in the end. Those riding the crest of the current technology wave would be unwise to ignore its lessons.

Richard Kemp is senior partner at specialist technology law firm Kemp Little

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