Microsoft Slams Google in EU Privacy Comments

Microsoft objects to Google's search-related business practices because Google locks in publishers and makes it hard for competing search engines to gain market share, not because of its popularity and competitive power, Microsoft said Friday.

Dave Heiner, vice president and deputy general counsel at Microsoft, released a blog post this afternoon in which he discussed the EU's decision to look into Google's search result rankings. He slammed Google for what he considered to be finger pointing at Microsoft over the investigation.

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"Google's public response to this growing regulatory concern has been to point elsewhere--at Microsoft," Heiner wrote. "Google is telling reporters that antitrust concerns about search are not real because some of the complaints come from one of its last remaining search competitors."

On Tuesday night, Google announced that European antitrust regulators are investigating whether Google intentionally buries search results that might promote its competitors. Three companies - Foundem, ejustice.fr, and Ciao from Bing - filed complaints with the EU over Google's rankings, said Julia Holtz, Google's senior competition counsel.

Foundem, which Google said is partly funded by Microsoft, and ejustice.fr are arguing that Google's algorithms demote their search results because they are a vertical search engine and, therefore, competitive with Google, Holtz said.

In regards to the third company, Ciao, Google suggested that the problems with them started after Microsoft acquired the company in 2008. Prior to that, Ciao was "a long-time AdSense partner of Google's, with whom we always had a good relationship," Holtz said. After Microsoft bought Ciao and re-branded it Ciao from Bing, Google "started receiving complaints about our standard terms and conditions."

In his blog post, Heiner did not address Microsoft's connection to the three companies, referring to them only as "upstart innovators."

UPDATE: A Microsoft spokesman e-mailed to say that the company does not directly fund Foundem. Microsoft partly funds the Initiative for a Competitive Online Marketplace (ICOMP), of which Foundem is a member, Microsoft said.

The real issue, Heiner said, is "whether Google's response really addresses the concerns that have been raised [because] complaints in competition law cases usually come from competitors."

Microsoft did not admit to being directly involved in filing the complaints against Google. Microsoft has heard complaints about Google over the years, Heiner said, and when those "antitrust concerns appear to be substantial, we suggest that firms talk to the competition law agencies."

Heiner acknowledged that Microsoft has talked with European investigators and the Department of Justice about Google, but only in the context of Microsoft's recently approved search deal with Yahoo.

"We told them what we know about how Google is doing business," Heiner wrote. "A lot of that entails explaining the search advertising business, which is complex. Some of that inevitably gets into Google practices that may be harming publishers, advertisers and competition in search and online advertising."

Specifically, Microsoft is concerned that "search and online advertising are increasingly controlled by a single firm, Google," Heiner said. "These and other network effects make it hard for competing search engines to catch up."

This is why Microsoft and Yahoo are combining their efforts, Heiner said. "And that is why we are concerned about Google business practices that tend to lock in publishers and advertisers and make it harder for Microsoft to gain search volume."

Heiner concluded by saying that "leading firms should not be punished for their success [or] because a particular business practice may harm a rival." They should face scrutiny, however, for practices that "exclude competitors, thereby undermining competition more broadly," he said.

Update: Russian Spy Worked at Microsoft

Microsoft has confirmed that one of the Russian spies rounded up was an employee for a short time, but did not have access to the company's source code.

Bloomberg originally reported that Alexey Karetnikov worked as a software tester at Microsoft for nine months, then was deported on or around June 8 as part of a sting that nabbed nine others.

A Microsoft spokesman confirmed the report on Wednesday, stating that Karetnikov was employed from October 2009 until June 2010. He would not confirm why Karetnikov left the company.

All ten defendants who are in custody were initially charged with conspiring to act as unregistered agents of a foreign government, and eight were also charged with conspiring to commit money laundering, The New York Times reported. The ten were later swapped for four men held in Russian prisons.

So far, Karetnikov has not been implicated in the theft of any company secrets, although it was unclear what products he came in contact with in his role as a software tester. But a spokesman said that he simply applied automated testing tools to Microsoft's products, and did not have access to Microsoft source code.

"We reviewed his activities and are confident that he did not compromise Microsoft software, our internal network, and our customers," the Microsoft spokesman said.

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Microsoft maintains a 75-person team of antipiracy investigators, whose job is to use forensic procedures to block and track down software pirates. But the Microsoft spokesman said he couldn't confirm the number of employees dedicated to internal security, although he confirmed such teams existed.

Bloomberg reported that other members of the ring apparently had software development experience. Andrey Bezrukov, another of the ten spies, tried to pass himself as "Donald Heathfield," and contacted Stratfor in a bid to sell or license the company a software program. "Heathfield" held five meetings with an employee of Stratfor, an intelligence and political consultancy, in an effort to get the firm to use his program, Stratfor CEO George Friedman told Bloomberg.