Was The FTC Too Easy On Google? Too Hard?

    January 6, 2013
    Chris Crum

On Thursday, the FTC finally made an announcement regarding its investigation of Google for alleged anticompetitive conduct. The investigation is now closed. The Commission will not be pursing antitrust litigation, and Google escaped without fines, and will make some minor voluntary changes regarding its search business. Many think Google got off to light, while others think even these changes were more than Google should have to make. Either way, for the time being, Google has the FTC off its back (though it still has the European Commission to worry about).

Do you think Google got off to easy? Was the FTC too hard on Google? Let us know what you think.

Google has agreed to change some of the business practices to resolve the FTC’s concerns including those related to patents and what the FTC alls its “misuse of patent protection to prevent competition.”

“We stopped that abuse,” said FTC Chairman Jon Leibowitz at a press conference.

“The changes Google has agreed to make will ensure that consumers continue to reap the benefits of competition in the online marketplace and in the market for innovative wireless devices they enjoy,” said Leibowitz. “This was an incredibly thorough and careful investigation by the Commission, and the outcome is a strong and enforceable set of agreements.”

“We are especially glad to see that Google will live up to its commitments to license its standard-essential patents, which will ensure that companies willing to license these patents can compete in the market for wireless devices,” Leibowitz added. “This decision strengthens the standard-setting process that is at the heart of innovation in today’s technology markets.”

On search, Leibowitz said, “It doesn’t violate the American antitrust laws,” so the FTC has decided not to take action on search allegations, though Google had agreed to make a couple of adjustments.

“The evidence the FTC uncovered through this intensive investigation prompted us to require significant changes in Google’s business practices. However, regarding the specific allegations that the company biased its search results to hurt competition, the evidence collected to date did not justify legal action by the Commission,” said Beth Wilkinson, outside counsel to the Commission. “Undoubtedly, Google took aggressive actions to gain advantage over rival search providers. However, the FTC’s mission is to protect competition, and not individual competitors. The evidence did not demonstrate that Google’s actions in this area stifled competition in violation of U.S. law.”

Regarding search bias, the FTC says in a press release:

The FTC conducted an extensive investigation into allegations that Google had manipulated its search algorithms to harm vertical websites and unfairly promote its own competing vertical properties, a practice commonly known as “search bias.” In particular, the FTC evaluated Google’s introduction of “Universal Search” – a product that prominently displays targeted Google properties in response to specific categories of searches, such as shopping and local – to determine whether Google used that product to reduce or eliminate a nascent competitive threat. Similarly, the investigation focused on the allegation that Google altered its search algorithms to demote certain vertical websites in an effort to reduce or eliminate a nascent competitive threat. According to the Commission statement, however, the FTC concluded that the introduction of Universal Search, as well as additional changes made to Google’s search algorithms – even those that may have had the effect of harming individual competitors – could be plausibly justified as innovations that improved Google’s product and the experience of its users. It therefore has chosen to close the investigation.

Google addressed the close of the investigation in a post on its Public Policy Blog, where Chief Legal Officer David Drummond writes, “Larry and Sergey founded Google because they believed that building a great search experience would improve people’s lives. And in the decade-plus that’s followed, Google has worked hard to make it quicker and easier for users to find what they need. In the early days you would type in a query, we’d return 10 blue links and you’d have to click on them individually to find what you wanted. Today we can save you the hassle by providing direct answers to your questions, as well as links to other sites. So if you type in [weather san francisco], or [tom hanks movies], we now give you the answer right from the results page—because truly great search is all about turning your needs into actions in the blink of an eye.”

Drummond wrote a letter (pdf) to the FTC discussing two specific product changes. In the post, he summarizes them: “Websites can already opt out of Google Search, and they can now remove content (for example reviews) from specialized search results pages, such as local, travel and shopping,” and, “Advertisers can already export their ad campaigns from Google AdWords. They will now be able to mix and copy ad campaign data within third-party services that use our AdWords API.”

“We’ve always accepted that with success comes regulatory scrutiny,” says Drummond. “But we’re pleased that the FTC and the other authorities that have looked at Google’s business practices—including the U.S. Department of Justice (in its ITA Software review), the U.S. courts (in the SearchKing and Kinderstart cases), and the Brazilian courts (in a case last year)—have concluded that we should be free to combine direct answers with web results. So we head into 2013 excited about our ability to innovate for the benefit of users everywhere.”

Leibowitz said Google will stop scraping content of its rivals for use in its own specialized search results, and has made “legally enforceable commitments” including reporting requirements that will allow it to be monitored.

The decision to close the search investigation was reached with a unanimous vote. Leibowitz did acknowledge that they can always reopen investigation if they think they need to.

He also acknowledged that “some evidence” suggested that Google was trying to eliminate competition, but changes to the algorithm that the FTC looked at were deemed to have “plausible connection with improving search results,” especially when competitors tried to “game” the algorithm.

He also noted that Google’s search engine rivals engage in “many of the same product design choices” Google does. While not everything Google did was beneifcial, he said, “on balance,” the evidence did not support an FTC challenge to Google’s practices.

He went on to call Google “one of America’s great companies,” and mentioned the driverless cars and “augmented reality eyewear”.

Now, he said, Google can refocus on its business and products while understanding that it must compete fairly.

Shortly after the announcement, FairSearch released a statement about it. Here’s a sampling from that:

“The FTC’s decision to close its investigation with only voluntary commitments from Google is disappointing and premature, coming just weeks before the company is expected to make a formal and detailed proposal to resolve the four abuses of dominance identified by the European Commission, first among them biased display of its own properties in search results,” says the group made up of Google competitors (which includes a number of travel sites, as well as Microsoft and Oracle).

“The FTC’s settlement is by no means the last word in this case, leaving the FTC without a major role in the final resolution to the investigations of Google’s anti-competitive practices by state attorneys general and the European Commission,” FairSearch says. “The FTC’s inaction on the core question of search bias will only embolden Google to act more aggressively to misuse its monopoly power to harm other innovators.”

“State attorneys general who reportedly disagreed with today’s announcement by the FTC have an important role to play in ensuring both that Google is not allowed to continue practices that hurt every American business through artificially high advertising costs, and to demand that whatever changes Google is forced to make in Europe also apply for U.S. consumers who risk losing innovation because of Google’s aggressive abuse of its dominance,” the group continues.

Consumer Watchdog also weighed in on the decision. The group says the settlement fails to end Google’s “most anticompetitive practice,” and has called upon the Department of Justice and state attorneys general to “press forward to end the Internet giant’s monopolistic behavior in search results,” something the FTC found to not be violating U.S. antitrust laws.

“Google clearly skews search results to favor its own products and services while portraying the results as unbiased. That undermines competition and hurts consumers,” said John M. Simpson , director of the group’s Privacy Project. “The FTC rolled over for Google. They’ve accepted Google executives’ promises that they will change two practices without even requiring a consent agreement, but Google has a track record of broken promises. Don’t forget, this fall the FTC fined Google $22.5 million for violating its most recent consent agreement. Why would the FTC take Google at its word?”

Inc.com suggests that life will pretty much go on as normal for small businesses because of the decision, but that, “You can expect software and services to emerge that will let you more easily manage an online advertising campaign across multiple ad platforms.”

What do you think of the FTC’s decision? Let us know in the comments.


Chris Crum
Chris Crum has been a part of the WebProNews team and the iEntry Network of B2B Publications since 2003. Follow Chris on Twitter, on StumbleUpon, on Pinterest and/or on Google: +Chris Crum.