In Major Victory, Google Dodges Federal Antitrust Lawsuit with FTC Deal

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Kim Kyung-Hoon / REUTERS

Internet search giant Google has agreed to make voluntary changes to its search business in order to avoid a major federal antitrust lawsuit after a nearly two-year government investigation. The agreement, which was expected, wraps up the Federal Trade Commission’s probe into whether Google has used its search market power to harm rivals unfairly.

“The conclusion is clear,” David Drummond, Google’s senior vice president and chief legal officer, said in a blog post. “Google’s services are good for users and good for competition.”

A group of Google’s competitors, including Microsoft and Yelp, had been lobbying the government for several years in an effort to prod federal officials to go after the search giant on antitrust grounds. Google dominates the Web search space, with about 70% market share.

Google’s agreement with the feds, which was announced Thursday, is a significant blow to its rivals, some of which were hoping the federal government would file a high-profile lawsuit against the company, as it did with Microsoft in the 1990s.

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As part of the deal, Google will make a set of voluntary commitments to change certain search practices. The company will also enter into what’s known as a consent decree — which is a binding judicial order — over allegations that it misused smartphone patents to thwart rivals.

“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,” FTC Chairman Jon Leibowitz said in a statement. “This was an incredibly thorough and careful investigation by the Commission, and the outcome is a strong and enforceable set of agreements.”

The group, which represents several Google rivals, including Microsoft, warned the FTC against moving too hastily, because the agency’s European regulatory counterparts are still crafting their plan to address Google’s search market power.

“If the FTC fails to take decisive action to end Google’s anti-competitive practices, and locks itself out of any remedies to Google’s conduct that are offered in Europe later this month, the FTC will have acted prematurely and failed in its mission of protecting America’s consumers,” wrote in a blog post Wednesday.

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In response to its critics, Google has maintained that its search engine is simply more useful than rival services, and has repeatedly argued that competition — including Bing — is just “one click away.” Google also argues that the fundamental purpose of U.S. antitrust law is to protect consumers, not the competition.

“The evidence the FTC uncovered through this intensive investigation prompted us to require significant changes in Google’s business practices,” Beth Wilkinson, the FTC’s outside counsel, said in a statement. “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.”

“Undoubtedly, Google took aggressive actions to gain advantage over rival search providers,” Wilkinson added. “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.”

In fact, some experts have suggested that the campaign amounts to 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 highly-cited blog series on the topic.

In a blog post Wednesday, Microsoft lashed out against Google for what it called “antitrust offenses” committed by the search giant. The Redmond, Wash.-based software giant alleged that Google “continues to block Microsoft from offering its customers proper access to YouTube.”

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“Hopefully, Google will wake up to a New Year with a resolution to change its ways and start to conform with the antitrust laws,” Microsoft VP and deputy general counsel Dave Heiner wrote. “If not, then 2013 hopefully will be the year when antitrust enforcers display the resolve that Google continues to lack.”

Reached by TIME late Wednesday, a Google spokesperson offered a response to Microsoft’s allegation about YouTube access.

“Contrary to Microsoft’s claims, it’s easy for consumers to view YouTube videos on Windows phones,” the Google spokesperson wrote in an emailed statement. “Windows phone users can access all the features of YouTube through our HTML5-based mobile website, including viewing high-quality video streams, finding favorite videos, seeing video ratings, and searching for video categories. In fact, we’ve worked with Microsoft for several years to help build a great YouTube experience on Windows phones.”

Note — Jan. 3 2:30 p.m. EST: This post has been updated to include statements from the FTC and Google.