Hands off software, Samuel

Nothing gets you more attention than picking on the cool kid at school.

The Australian Competition and Consumer Commission is arguing that Google is responsible for the content of the advertisements that accompany its search results, and that it is not sufficiently obvious that they are ads.

The ACCC alleges that ads that appear to link to one firm, but in fact link to another firm, are in violation of trade practices law.

But Google already has its own dispute resolution process that adequately resolves these problems.  This machinery is not there because it wants to satisfy regulatory authorities;  it's there because it is part of the search engine's commercial attraction to ensure its links and advertisements are credible and not likely to mislead searchers.

Google's reputation rides on the integrity of its search results.  The company may seem like it owns the internet, but the history of software and computing shows us that such domination is easy to lose.  Users will migrate if they stop trusting Google.

The ACCC's second contention has more important implications.  The regulator argues that Google's ads are inadequately distinguishable from its search results.  Again, this argument is easily dispensed with.  Not only does Google highlight and separate ads from search results, it also clearly labels them as sponsored links.

Furthermore, it is easy to tell where links are directed -- Google publishes the full address to help its users navigate their searches.

This is in addition to the status bar visible at bottom of modern web browsers, which also indicates the destination of any given link.

Internet users are fairly sophisticated at determining the validity of individual sites.  They have to be -- the deluge of email spam has made computer literacy a requirement.

Even so, if a search engine wanted to pepper its results with ads, it should not be against the law to do so.  Publications mix paid advertisements and editorial content shamelessly, but do not find themselves the target of high-profile ACCC lawsuits and media releases.

The biggest challenge modern software companies have is developing business models that can actually turn a profit.  Reckless regulatory intervention will limit the ability for firms to experiment with ad-based revenue models.

The action against Google is a symptom of a deeper struggle that government and regulators are having with the implications of digital technology and the internet.  Rather than seeing the paradigm shifting opportunities of online services, they are merely being seen as a further opportunity to expand the turf of the regulator.

ACCC chairman Graeme Samuel has repeatedly argued that online sporting content provided exclusively to Telstra BigPond subscribers could constitute a monopolistic bottleneck to competition.  Never mind that this is a whole new service developed entrepreneurially by Telstra, and the rights to provide this content to subscribers had been ascertained by fair competition on the open market.  Nor that Optus and other service providers are also seeking to provide unique content of their own.

The regulator has announced that this is the first action of its type internationally.  But this is not entirely the case.  By arguing that Google is responsible for the content of its ads, the ACCC joins individuals and firms who sue the search engine for merely linking to objectionable material.

Such activity is becoming common internationally -- rather than suing the site or sponsor of the offending material, litigants target the much higher-profile Google.  This ensures publicity and targets an entity that is wealthy enough to pay should the suit be successful.

There is a further worrying implication of this action.  The software industry used to be clearly separate from the regulatory morass that rules other industries.  The industry moves astonishingly fast, has no entry barriers and is characterised by the sort of innovation and entrepreneurial action that renders regulatory oversight redundant.

But in Europe and the United States, the potential expansion of regulation to online services has forced tech companies to set up lobbying divisions in Brussels and Washington staffed with lawyers and government relations specialists.

The last thing the industry needs is to compel software engineers to sit down with regulators before they can offer new services.  To do so would be to invite the same regulatory stagnation that has enveloped telecommunications.