With the clock ticking down until a crucial Federal Trade Commission vote over whether to sue Google for antitrust violations, the search giant’s CEO Larry Page met with federal officials in Washington, D.C., on Tuesday. The meeting, which was first reported by Bloomberg, came one day after a powerful U.S. Senator sent a letter to the FTC expressing concern about the way the agency has been conducting its investigation.
The FTC is wrapping up a nearly two-year investigation into whether Google has used its search market power to harm rival companies unfairly. Google and the FTC have been conducting negotiations for several weeks to see if a settlement is possible. If no deal is reached, the FTC will proceed in the coming days with a vote that will determine whether the commission files a lawsuit. If the FTC votes to sue Google, it would be the most dramatic antitrust action taken by the U.S. government against a major technology company since the Department of Justice sued Microsoft in the 1990s.
Google argues that its search engine is simply more useful to users than rival services, and points out that competition — including Microsoft’s Bing search engine — is just “one click away.” The company also points out that the fundamental purpose of U.S. antitrust law is to protect consumers. Most of the complaints directed against Google are coming from its competitors, not consumers.
Two weeks ago, Bloomberg reported that the FTC has delivered “an ultimatum” to Google demanding that the search giant offer a plan to settle the investigation, or face litigation. Google hopes to settle the matter without entering into a so-called “consent decree,” which is a binding legal order that would require it to make concessions in exchange for avoiding a lawsuit.
As Google has amassed roughly 70% of the Internet search market, several of its competitors have urged federal action against the tech giant. The anti-Google coalition includes the FairSearch consortium, which is composed of several of Google’s competitors, including Microsoft, which has been waging a lobbying campaign against Google for years. FairSearch argues that Google has been using its search power to harm rivals, particularly in high-traffic search categories like travel, jobs, health, and real estate. In essence, the consortium argues that Google unfairly ranks its rivals in its search-engine results in order to steer users toward Google’s own competing products.
Many experts have characterized the FairSearch campaign as sour grapes. “It’s an old D.C. adage that if you cannot win in the marketplace, try to win through political influence,” Glenn Manishin, a partner at the law firm Troutman Sanders and a leading antitrust expert, wrote in a recent blog series that is must-reading for understanding the complex legal issues surrounding this case.
On Monday, Sen. Ron Wyden, the Oregon Democrat, wrote a sharply worded letter to the FTC criticizing the way the agency has conducted its investigation. Wyden, who has been outspoken on technology issues, blasted the FTC for leaking details of its process to the press, and warned the agency against using its so-called Section 5 authority to charge Google with unfair or deceptive business practices. “For the FTC to effectively and credibly do [its] job, its actions much be viewed as fair and impartial,” Wyden wrote. “The FTC’s credibility is eroded when confidential details of internal discussions are revealed to the media, as has continually been the case in the investigation of Google.”
Last week, Bloomberg reported that federal officials have begun to “waver” on whether they can actually prove that Google’s search market power has harmed consumers. If the FTC decides it doesn’t have enough evidence to charge Google over search market antitrust violations, that would significantly curtail the scope of its probe, which also includes Google’s relationship with online publishers as well as the search giant’s use of smartphone patents in the booming mobile device market.
In his letter to the FTC, Wyden wrote that the fact that Google has “rapidly taken market share away from its competitors is not an indication that the search market is anticompetitive, but evidence that Google is better meeting consumer preferences for a search engine.” Indeed, having a monopoly in a given market is not, in itself, illegal. What’s illegal is seeking to achieve or maintain a monopoly through anticompetitive practices. Wyden concluded his letter by writing that it would be “troubling if the FTC sought to expand the use of its authority to target a company for simply being popular rather than engaging in unfair or deceptive practices that harm consumers.”
For its part, Google is trying to maintain a low profile as it conducts talks with federal regulators. “We continue to work cooperatively with the Federal Trade Commission and are happy to answer any questions they may have,” a Google spokesman said in a statement. Given what’s at stake — namely the world’s most ubiquitous search engine — federal regulators would be wise to weigh the potential consequences of a lawsuit against Google very carefully. Google faces no shortage of powerful competitors, including Apple, Facebook and Twitter — not to mention Microsoft.
Over the last two decades, the Internet has become one of the most important economic engines in the U.S., thanks in large measure to the hands-off approach taken by the federal government. At a time when the U.S. needs to unleash technological innovation to help re-boot the economy, a major federal lawsuit of dubious merit against the largest and most successful Internet company could have troubling ramifications that could reverberate throughout the tech world for years, if not decades. I don’t envy the FTC or its chairman Jon Leibowitz. This is likely the single most important policy decision of his long career in public service. I only hope that he and his colleagues are scrutinizing the evidence against Google very carefully, because the outcome of their vote — one way or the other — will surely set a precedent that lawyers, journalists, policy-makers, and the public will be dissecting for a long time to come.