Google Faces Fresh U.S. Scrutiny Over Market Power

Google is said to be facing a new antitrust probe, this time into its dominant position in the market for online display advertising

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Andrew Kelly / Reuters

Google's logo is seen at the company's New York City office.

Google just can’t seem to keep “the man” off its back.

It’s only been a few months since Google walked away from a multiyear federal antitrust investigation into its search practices with the legal equivalent of a slap on the wrist. Now Google is said to be facing another antitrust probe, this time into its dominant position in the market for online display advertising. The Federal Trade Commission has launched a preliminary inquiry into whether Google is unfairly using its display-ad market power to curb competition and push companies toward using its other products and services, according to multiple reports.

The new FTC inquiry, which is in its early stages and may not result in a formal probe, is focused on Google’s giant DoubleClick unit, which it purchased in 2008 for $3.1 billion. DoubleClick offers marketers and publishers tools to help them place and track display and video ads. Google’s YouTube video service is also a major force in display advertising. In the first quarter of 2013, Google accounted for 24.1% of the display-ad market, up 3 points from a year earlier, according to data from market-research firm IDC. Yahoo and Facebook accounted for 9.9% and 9.2%, respectively.

(MORE: What Google’s FTC Deal Means for the Patent Wars)

Google’s text-based search ads are well known to consumers because they are present on most Google search-result pages. But the company also has number of advertising products that aren’t consumer-facing, but are designed for online marketers and publishers. These include the DoubleClick Ad Exchange, which is an advertising marketplace that generates revenue for Google, as well as DoubleClick for Publishers, which allows websites to track ad performance. If Google is using its market power to push companies to use these or other company products — or is bundling its products together in a practice known as tying — Google could run afoul of federal antirust laws.

Google’s DoubleClick purchase was controversial and was subject to a lengthy FTC review that concluded in December 2007, paving the way for the deal. Ultimately, the FTC decided that “Google’s proposed acquisition of DoubleClick is unlikely to substantially lessen competition.” However, the agency emphasized that it planned to “closely watch these markets and, should Google engage in unlawful tying or other anticompetitive conduct, the Commission intends to act quickly.” A Google representative declined to comment on the reports of a new probe.

The FTC’s inquiry comes just months after Google agreed to make voluntary changes to its search business in order to avoid a major federal antitrust lawsuit into whether it uses its search-market power to harm rivals. Several of Google’s competitors, including Microsoft and Yelp, had argued that Google unfairly demoted rivals in its search-engine results in order to steer users toward Google’s competing products.

(MORE: Google’s Federal Antitrust Deal Cheered by Some, Jeered by Others)

But the FTC ruled unanimously that it lacked sufficient evidence to charge Google with antitrust violations. Under the terms of the deal, Google agreed to make relatively modest, voluntary changes to its search engine. Compared with the prospect of a major federal lawsuit — which would have been the most significant federal antitrust case against a tech company since the U.S. went after Microsoft in the late 1990s — these voluntary changes amounted to a slap on the wrist.

Google’s deal represented a bitter blow to the search giant’s rivals, including Microsoft, which lashed out at the settlement. In a blog post, Microsoft VP and deputy general counsel Dave Heiner wrote that “2013 hopefully will be the year when antitrust enforcers display the resolve that Google continues to lack.” 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.”

Given that the latest probe into Google over its display-ad practices is reportedly still in the preliminary stages, it’s too early to tell whether the inquiry could evolve into another multiyear investigation. There’s little doubt, however, that that’s precisely what some of Google’s rivals would like to see. At this point, given Google’s dominance in the Internet ad market, regulatory scrutiny is to be expected. When you’re No. 1, having a target on your back comes with the territory.

9 comments
hogsatthetrough
hogsatthetrough

After wasting millions in taxpayer funds and almost 2 years, "the FTC ruled unanimously that it lacked sufficient evidence to charge Google with antitrust violations." Now the FTC is off on another government-sponsored shakedown of Google--what a cool way to siphon millions off Google for DC lawyers, lobbyists (don't forget the revolving door at the FTC!). I guess the FTC has completely abandoned its mission to protect consumers in favor of feeding all the "hogs at the trough" in Washington.


HollyKick
HollyKick

i would say google has grown too big and it is basically no longer competitive, its big and eating companies .. i think thats what microsoft was and it was called anti-competitive. What has google done that is competitive ? copying facebook ?

rheulitt
rheulitt

When did it become illegal to be the best at something. Laissez Faire!!!

forgottenlord
forgottenlord

@rheulitt 

The dumb part is this isn't even close to Rockefeller - which anti-trust laws were created specifically for.  Rockefeller bought all of the competitors until he had a market position where he could completely control the price of oil and nobody could stop him - they weren't big enough or would get beaten up by him - specifically, he'd undersell them in the local market and when they went away, he'd bring his prices back up to the gouging levels they were at before - not unlike what WalMart does in small towns.

Google's competitors have a reasonable market share and their complaint is that Google is underselling them to kick them out of the market when in reality, Google is underselling them simply because it has a superior product.  Google's competitors are gigantic entities who, especially in Microsoft's case, can out-muscle Google if absolutely need be.  The field Google's in is such that it could never kill off small competitors - the ability for me to transition from Google to some upstart is easy because location is irrelevant.  If Google tries to undersell them, fine, but as soon as Google tries to raise the price, somebody else will come along so Google has no ability to permanently alter the market.

Plus, you still have options.  The anti-trust issues with Microsoft tended towards the forced purchase of licenses for their other products.  The complaints here is that Google gives you a better deal for optionally purchasing their other products.

retiredvet
retiredvet

@rheulitt  It's not illegal. So Google's competition say that it's unfair to be the best? No it's not even unfair. I smell sour grapes.