Regulation

The FTC Gives Google a Free Pass


Google CEO Larry Page approaches the federal building in San Francisco, on April 18, 2012

Photograph by Eric Risberg/AP Photo

Google CEO Larry Page approaches the federal building in San Francisco, on April 18, 2012

That sound you hear today—that’s the sound of Google’s knuckles being rapped, every so lightly, by the Federal Trade Commission. The agency settled its lengthy antitrust investigation into the Web’s dominant search service, and the results, announced today, pretty much completely exonerate the company and require it to make only a few relatively minor changes to the way it conducts itself. Among other things, Google agreed to limit its annotation of content from other websites and to give advertisers more control over their ad campaigns. Separately, it agreed to license certain mobile phone patents that it acquired in its purchase of Motorola Mobility.

But rest assured you won’t notice any of that in your daily Web searches. In the most significant question investigators asked, whether Google improperly biased its search results and harmed consumers by favoring its own content, the FTC declined to press charges, concluding that Google’s search techniques provided an overall benefit to consumers. While changes to Google’s search results “may have had the effect of harming individual competitors,” the FTC wrote in its statement, they “could be plausibly justified as innovations that improved Google’s product and the experience of its users.”

The FTC “had to find evidence of bad behavior and a reason why we could care,” says Eric Goldman, a professor of Internet law at Santa Clara University. “They couldn’t. The FTC position is that they couldn’t find any customer harm.” Added Carl Shapiro, a professor of business at the University of California, Berkeley, and a former Deputy Assistant Attorney General in the Antitrust Division of the Justice Department: “Google got the imprimatur of the Federal Trade Commission that what they are doing is totally legitimate.”

Thus a two-year investigation, into a company that controls two-thirds of the searches on the Web and a far greater percentage of online search advertising revenue, has amounted to very little. On its corporate blog, Google is justifiably crowing about the result. “The conclusion is clear: Google’s services are good for users and good for competition,” writes David Drummond, Google’s chief lawyer. “We’re pleased that the FTC and the other authorities that have looked at Google’s business practices … have concluded that we should be free to combine direct answers with Web results.”

Meanwhile, competitors who expended a good deal of their own resources trying to brand Google the evil monopolist of the Web are seething. A statement by FairSearch, a firm backed by a consortium of Google rivals such as Travelocity and Microsoft, called the settlement “disappointing and premature” and pointed hopefully to a similar investigation by the European Commission, which is also expected to conclude shortly. Scott Cleland, a Washington (D.C.) consultant whose firm, Precursor, is backed in part by Microsoft, said that “Google won this when they got it to the FTC. The FTC tipped Google’s monopoly by approving its purchase of DoubleClick and extended their monopoly to mobile with the purchase of AdMob. They didn’t see anything wrong with facilitating their monopoly in the first place, so I guess they wouldn’t be able to see their creation do anything wrong.”

David Wales, who oversaw the FTC’s Bureau of Competition from 2008 to 2009, says the FTC likely felt some time pressure and wanted to conclude the 19-month investigation. “They can’t investigate this forever,” Wales says. “The FTC is not a regulator, it’s supposed to be a law enforcer. Maybe they could have investigated longer and tried to be more aggressive, but in the end they were trying to get some type of settlement and remedy now, rather than litigate and wait forever.”

The European Commission is likely to come down harder on Google, which would require it to distinguish its services further in Europe and in the U.S. Some state attorneys general could also make a new run at the search company. But with the FTC weighing in so straightforwardly on Google’s behalf, a few central facts have been newly established (or reestablished). The editorial decisions made by search engines naturally create winners (content that ranks highly) and losers (content that does not). As long as arbiters like Google manage the experience in the best interests of its users, they appear to be on safe legal ground, at least in the U.S. On the Web, customers always have alternatives, and if they don’t like Google’s increasingly audacious tendency to route users, for example, to its own social network, Google+, Microsoft’s Bing search engine is always one click away.

According to the decades-old Sherman Antitrust Act, there’s nothing inherently wrong with being a monopolist. The law is more concerned with how companies wield that market power. “Even if one is a monopolist, there is a long legal precedent: If you are improving your product, it’s tough luck for competitors who lose share or are edged out,” says Shapiro. “That is a legitimate activity.”

Stone_190
Stone is a senior writer for Bloomberg Businessweek in San Francisco. He is the author of The Everything Store: Jeff Bezos and the Age of Amazon (Little, Brown; October 2013). Follow him on Twitter @BradStone.

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