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The Antitrust Regulators Are Circling Google


In the U.S. and Europe, the FTC and others are questioning whether its search dominance squeezes out rivals

Back in January, Google (GOOG) Chief Executive Officer Eric Schmidt said he needed to spend more time talking to regulators in Washington. He may need to step it up: The same kind of antitrust problems dogging the company in Europe are flaring up at home.

J. Thomas Rosch, one of two Republicans on the five-member Federal Trade Commission, tells Bloomberg News he favors a review of the search industry. Google has a 66 percent share of the market, and Microsoft's (MSFT) Bing and Yahoo! (YHOO) together have about 29 percent, according to researcher ComScore (SCOR). "I'm not afraid to take a look" at Google's role, Rosch says. "The big danger is that you're going to have markets" controlled by "monopolists or near-monopolists."

Google's dominance in search gives it a big role in determining where consumers do business on the Internet. Its share in search advertising will exceed 75 percent this year, according to estimates by eMarketer. In November the European Commission started looking into whether Google has abused its position by directing users of its search engine to websites it owns or is affiliated with, rather than to those of rivals. The EC is also investigating whether Google has stopped websites from accepting competitors' ads. In the U.S., the Justice Dept. is reviewing Google's proposed acquisition of travel data firm ITA Software. Texas Attorney General Greg Abbott has requested Google's formula for setting advertising rates as he conducts his own investigation.

Rosch, careful not to name Google as a probe target, says the commission should use a 1914 law that allows it to challenge "unfair or deceptive" practices as justification for looking into the search industry. "We ought to dust it off, think about how we can apply it sensibly," Rosch says. The four other commissioners have not said where they stand on a review.

Google disputes that its size poses antitrust problems. "Consumers always have the ability to choose, and they vote with their clicks," Google spokesman Adam Kovacevich said in an e-mail. In January, Schmidt said improving communications with regulators had become "part of our core strategy." Google in February hired Stewart Jeffries, the former Republican antitrust counsel on the House Judiciary Committee. He joins in-house lawyer Kevin Yingling and Kovacevich, who is now focused full-time on competition issues.

The Justice Dept. has been reviewing Google's foray into the online travel business since July. ITA's software powers travel sites owned by Orbitz Worldwide (OWW), Hotwire, and Kayak. Some sites say they fear being squeezed out if the $700 million acquisition goes through. Microsoft and several other companies have formed an advocacy group, FairSearch.org, to oppose the deal.

Challenged by Google before the yearend holidays to make up their minds, department lawyers canceled vacations and prepared to sue, according to people familiar with the matter. Since then, lawyers from both sides have discussed a possible settlement, the people say.

Google also wants to find a way to resolve the antitrust dispute in Europe, where it controls 80 percent of the search market. In February, Schmidt told The Sunday Telegraph that Google is cooperating with the European investigation and wants to avoid a drawn-out legal battle.

The bottom line: As Google signals a willingness to resolve an antitrust investigation in Europe, it could face new antitrust challenges stateside.

With Brian Womack and Aoife White. Bliss and Forden are reporters for Bloomberg News.

Steve Ballmer, Power Forward
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