Thunderdome or hubris? Either way, it's on

[Long post, I had a lot to say. Also EDIT: I accidentally linked to my wife's alumni magazine for some reason before, so fixed by pointing to Slashdot]

Google has just announced plans for an open-source computer operating system based on the Linux kernel and its Chrome browser for personal netbook computers.

Two men enter, one man leaves... Google has decided to take the fight to Microsoft's house.

This is the stupidest thing they could ever do. Short the stock.

I won't comment on the business sense here, although there are plenty of people who have noted that Google's Chrome browser and Android mobile operating system aren't exactly taking off (including the linked WSJ story). I'll keep to the legal stuff because that's not something you'll see everywhere.

I know a thing or two about law and computer operating systems. If they were easy to make there would be more of them. I've always believed that one aspect of Linux's much-vaunted security is that it doesn't run on many target-rich environments. Yes, the many eyeballs of the open-source community allow for faster bug triaging. But that doesn't mean that grandma will be able to figure out how to patch. Microsoft has patching the consumer computer down to a fine art. And don't get me started on Apple. If more consumers used the Mac, Apple wouldn't be making fun of those security alerts in Vista because the Mac would have them too.

Now Google isn't bad at making software. In particular, they've done very well with search engines. And their own computers run on Linux. Which makes this interesting. Because an interesting thing about Linux is that large parts of it these days are developed by for-profit corporations who then give away the code. That raises a very interesting and to-date unexplored question about dumping.

By definition, giving something away for free implies that you're selling it below cost. And sales below cost are indicative of anticompetitive behavior - they're not proof positive of it, but they definitely show something interesting. The General Public License (GPL) would prohibit Google from doing the most traditional aspect of anticompetitive behavior, which would be to drive Microsoft out of business by giving away free what Microsoft charges for only to start charging later once the competitor is gone, because it's a violation of the GPL to refuse to distribute source that is derived from GPL-licensed code. Unless Google's end game is making its own kernel to replace the Linux one once they have killed off Microsoft.

That would raise some interesting IP questions: if Google writes code that integrates with GPL-licensed code and is open-source, but then replaces the GPL-licensed parts, can it change the license for the parts it wrote? I'd say yes. But the second Google does that, its anticompetitive actions would be clear.

By integrating the Chrome browser Google is raising other interesting issues of tying and bundling also. Microsoft keeps getting in trouble for having an OS with integrated browser. In the USA this is illegal if its effect is to drive a competitor out of business (Microsft made the law on this point). In Europe it's just illegal in and of itself - if there's a company out there that sells a product that you give away for free, you're breaking competition law (Microsoft made the law on this point too). It turns out that Microsoft does sell an operating system that comes with a free browser and search tools. And it turns out that the EU is trying to make Microsoft stop leveraging its OS strength by forcing them to allow users to choose their own browser and search tool. Will the EU force Google to do the reverse?

From a government affairs perspctive it's also interesting in Europe. Just like Microsoft, Google isn't European. And that's one of the biggest reasons the EU hates Microsoft. Little-known fact: one of the biggest funders for the development of open-source software throughout the early years of this millennium was the EU. Mostly-forgotten fact: the French government is funding a "European" search engine called Project Quaero (http://www.telegraph.co.uk/finance/2921407/Chirac-backs-eurocentric-search-engine.html). And the EU is constantly going after Google for perceived privacy violations. Imagine how they'd feel about another American company they can't control taking over the world of computing. It doesn't take Nostradamus to think they might go the way of Microsoft and Intel and bring very expensive complaints.

But the difference is, you don't need creative antitrust theories to get Google into court in Europe. Google is actually breaking the law in Europe right now. Google's practice of selling AdWords that are company trademarks keeps being the cause of litigation in Europe, and Google keeps losing. I don't know if they've lost every single suit, but they sure did lose most of them when last I checked. So if they integrate their search tools into the OS, they are one injunction away from not being able to sell the computers bearing their operating system in the EU.

So let's review. We have: a company that is definitely bundling a browser and an operating system (illegal in the USA if you're doing it to kill a competitor, and illegal in Europe in and of itself). This company is going to give away the product that competes with a product that's sold by its competitor. And this company is already the target of investigations for anticompetitive behavior in the USA (remember the books settlement?) and Europe, as well as breaking national laws throughout Europe.

Oh yeah, this is a smart move. How do you short stocks on Fidelity again?