Google’s Federal Antitrust Deal Cheered by Some, Jeered by Others

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U.S. Federal Trade Commission chairman Jon Leibowitz speaks during a news conference at the FTC headquarters in Washington on Jan. 3, 2013, regarding the agency's 21-month-long investigation of Google.

The U.S. government’s decision not to file an antitrust lawsuit against Google is a major victory for the search giant, which has been under investigation by the Federal Trade Commission for nearly two years. After what FTC chairman Jon Leibowitz described as “an incredibly thorough and careful investigation,” the five commissioners concluded unanimously that they lacked sufficient evidence to charge Google with antitrust violations, in a vindication for legal experts and industry observers who argued repeatedly that the FTC’s case was weak.

The settlement between Google and the FTC, announced Thursday, represents a bitter blow to several of the search giant’s rivals, including Microsoft, that have been urging government action against the search titan for several years.

There is no doubt that Google is dominant. The Web titan based in Mountain View, Calif., accounted for 74.5% of all U.S. search advertising revenues in 2012, according to research firm eMarketer. By contrast, Microsoft’s share of U.S. search advertising revenues reached just 8% in 2012. Google’s critics have alleged that the company unfairly demotes rivals in its search-engine results in order to steer users toward Google’s own competing products.

But as legal experts have observed, a monopoly in a given market is not, by itself, illegal. What’s illegal is seeking to achieve or maintain a monopoly through anticompetitive practices. And after a long and in-depth investigation — the FTC reviewed more than 9 million pages of documents — federal regulators charged with policing antitrust abuses concluded that Google has not violated U.S. antitrust law.

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Reasonable people can and do disagree about whether Google’s conduct has been anticompetitive, especially with respect to its effort to leverage its Web dominance to make inroads in search verticals such as travel, dining and shopping. And the debate over Google’s search market power will no doubt continue for years. But as a matter of federal law and policy, this issue is over, at least for now.

“Even though people would like us to bring a big search-bias case, the facts aren’t there under the law,” Leibowitz said at a press conference on Thursday announcing the deal. “At this agency, we really do follow the facts where they lead.” He added, “The American antitrust laws protect competition, not competitors.”

That is precisely what many legal experts and industry observers, including yours truly, have been arguing for months. At a time when many federal agencies often feel the need to take strong action — perhaps if only to justify their own existence — the FTC displayed laudable restraint by resisting the impulse to behave like a bull in a china shop and throw its weight around in the rapidly evolving and highly dynamic Internet market.

“Anyone who is in the business of being the chairman of an antitrust enforcement agency would like to bring the big case,” Leibowitz said. “That’s something you want to try to do. But more important than that is to faithfully execute the law. And we found unanimously that they hadn’t engaged in illegal monopolization and hadn’t violated the FTC Act.”

Not surprisingly, Google officials were jubilant. “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.”

Writing in the Wall Street Journal, James C. Miller III, who served as chairman of the FTC from 1981–85 and has done consulting work for Google, blasted the search giant’s rivals for their “shameless attempt at rent-seeking,” an economic term that refers to companies that seek to gain advantage through political means rather than in the marketplace. “The legal case against Google was always weak,” Miller wrote. “Despite the rhetoric of Google’s antagonists, they failed to convince the FTC that the company’s policies harmed consumers.”

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New York Law School professor James Grimmelmann, a prominent tech-policy expert, described the FTC’s decision as “a giant middle finger extended in the direction of the Google critics, like FairSearch, who have been calling for stringent FTC action on search bias.”

Others greeted the FTC’s decision warmly, including Ryan Radia, an associate director of technology studies at the Competitive Enterprise Institute, who said in a statement:

America’s antitrust laws are designed not to punish companies for growing too big or too unpopular, but to ensure no company stifles competition itself … The thriving Internet sector — a bright spot in America’s otherwise lackluster economy — shows no signs of suffering from too little competition.

Michael Mandel, chief economic strategist at the Progressive Policy Institute, said the FTC has demonstrated how regulators can police potential antitrust abuses while still protecting innovation. “Given the importance of innovation for American job growth and competitiveness, the FTC is setting a great example for other agencies,” Mandel said in a statement.

Under the terms of the settlement, Google agreed to make relatively modest, voluntary changes to its search engine. First, rival companies now have the ability to remove pieces of content known as “snippets” from Google’s search-results pages that relate to areas like travel and shopping. Google had been accused of scraping content from companies, including online review service Yelp, for use on its own website. Second, Google is giving advertisers more flexibility to manage their data for use on rival search engines like Microsoft’s Bing. Compared with the prospect of a major federal lawsuit, these voluntary changes amount to a slap on the wrist.

In a separate component of the FTC’s probe, Google entered into a legally binding consent decree affirming its intention to allow its competitors access — “on fair, reasonable, and non-discriminatory terms” — to patents on standardized technologies used in smart phones, laptops, tablet computers and gaming consoles. These “standard essential patents,” which Google obtained when it purchased Motorola Mobility, cover widely used technologies that are important in ensuring that wireless mobile devices can work together.

Meanwhile, critics of Google reacted with fury to news of Thursday’s agreement and lashed out at the search giant and federal regulators.  “Google clearly skews search results to favor its own products and services while portraying the results as unbiased,” John M. Simpson, director of Consumer Watchdog’s Privacy Project, said in a statement. “That undermines competition and hurts consumers. The FTC rolled over for Google.”

(MOREU.S. Google Antitrust Probe Spurs Internet-Regulation Debate)

Steve Pociask, president of the American Consumer Institute Center for Citizen Research, said in a sharply worded statement that federal regulators “failed to use their authority for the betterment of the marketplace and to the advantage of consumers.” He added, “Letting Google off with a letter promising not to do it again is like believing Lindsay Lohan will stay out of trouble this time.”

FairSearch, an anti-Google consortium, issued a statement calling the FTC’s decision “disappointing and premature” and said it would “continue work with authorities in the U.S., Europe and elsewhere who are investigating Google.” And Yelp, a longtime Google critic, blasted regulators, saying the FTC’s decision “represents a missed opportunity to protect innovation in the Internet economy, and the consumers and businesses that rely upon it.”

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