Bloomberg News

Google Is Target for ShopCity Antitrust Complaint to FTC

November 16, 2011

(Updates with FTC comment in sixth paragraph.)

Nov. 14 (Bloomberg) -- Google Inc., the subject of antitrust probes in the U.S. and Europe, is the target of another complaint by a rival company alleging it stifles competition in the Internet industry.

As the owner of the world’s most popular search engine, Google unfairly used its control of search results to damage ShopCity.com, a website that helps local businesses sell products, and favored its own competing service, according to a complaint ShopCity made Nov. 11 to the U.S. Federal Trade Commission.

“From the day ShopCity launched its network, the upstart competitor faced the full measure of Google’s anticompetitive tactics,” Gary Reback, an antitrust lawyer at Carr & Ferrell LLP in Menlo Park, California, wrote to Richard Feinstein, director of the agency’s Bureau of Competition.

The FTC and European Commission are focusing separate probes on whether Google abused its Internet search dominance to push down competitors in search results and promote its own services, said a person familiar with the investigations who wasn’t authorized to speak about them publicly. Several states, including Texas, also have opened investigations into the Mountain View, California-based company.

“This company was violating Google’s guidelines against duplicate and auto-generated content -- which our users tell us they don’t like,” said Google spokesman Adam Kovacevich in an e-mail. “We twice offered the company advice on how to improve their websites.”

FTC spokeswoman Claudia Bourne Farrell said the agency received the complaint, declining to comment further.

8,000 Domains

Closely held ShopCity, also based in Mountain View, launched its network of local shopping websites in 2009. The 18- employee company bought 8,000 domains for cities around the U.S., and operates sites such as ShopPaloAlto.com and ShopCorona.com, Colin Pape, the president and co-founder, said in an e-mail.

Initially, ShopCity purchased business profiles from a national database company, according to Reback. Subsequently, ShopCity struck partnerships with municipalities, newspapers and chambers of commerce to create more detailed content for the sites, he said in the complaint letter.

ShopCity is the latest in a growing list of Google rivals to file formal complaints. Microsoft Corp., the world’s largest software maker, and Foundem, a U.K.-based shopping-comparison website, have filed complaints against Google in the European Union. Foundem also presented its grievances to the FTC, Chief Executive Officer Shivaun Raff said in an e-mail.

Anticompetitive Behavior

To highlight what its members call Google’s anticompetitive behavior, FairSearch.org was formed in October, 2010. The group includes companies such as Redmond, Washington- based Microsoft, Foundem and Bellevue, Washington-based Expedia Inc., an online travel service.

Google Chairman Eric Schmidt told the Senate antitrust subcommittee on Sept. 21 that the company’s search results are calculated to give users the best answer, not to handicap competitors.

In written responses to senators’ questions, Schmidt said on Nov. 4 that Google’s shopping and review features aren’t separate services and were added to the company’s search engine in response to users’ desire for more immediate answers than links to other websites. Google had 66.2 percent of the Internet search market in October, according to comScore.com, a Reston, Virginia-based market research firm.

Reback said in his letter that ShopCity first noticed in 2009 Google had pushed its websites down to the fifth page of results for searches, “where few users would ever find them.”

‘High Quality Content’

ShopCity attempted to add more “high quality content” in response to Google’s complaints, yet failed to win higher placement in search results, he said.

Regardless of the relevance of ShopCity’s websites to a user’s query, “Google placed its own results, keyed to a map, at the top of the results,” according to the letter.

While ShopCity was being ranked lower, Google forged agreements with businesses to build up Google Places, its own local-business website, Reback said.

Google allowed ShopCity sites to rank higher shortly after Google said in June it had received a subpoena from the FTC for information about its search and advertising practices as part of a broad antitrust investigation, Reback said. Since then Google has caused ShoptCity sites to rise and fall in rankings without adequate justifications, Reback alleged.

Reback is co-founder of the OpenBook Alliance, which opposed Google’s effort to create the world’s biggest digital library and includes libraries, authors and publishers as well as Microsoft, Amazon.com Inc. and Yahoo! Inc.

Google Competitors

He also has represented other Google competitors, including Foundem and San Mateo, California-based Nextag Inc.

In his letter, Reback said the FTC hasn’t formally requested documents from companies that operate market-specific websites competing with Google almost three months after the agency learned of ShopCity’s allegations.

Microsoft confirmed in September it had been subpoenaed by the FTC as part of its antitrust probe of Google. The agency expanded its investigation by issuing civil investigative demands, which are similar to subpoenas, to other, unspecified, high-tech companies, according to two people familiar with the matter who declined to speak publicly because they weren’t authorized to discuss it.

--Editors: Fred Strasser, Justin Blum

To contact the reporters on this story: Sara Forden in Washington at sforden@bloomberg.net; Jeff Bliss in Washington at jbliss@bloomberg.net.

To contact the editors responsible for this story: Michael Hytha at mhytha@bloomberg.net; Mark Silva at msilva34@bloomberg.net.


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