Google’s dominance draws new scrutiny from regulators

KIMIHIRO HOSHINO/AFP/GETTY IMAGES - (FILES) This April 7, 2011 file photo shows the Google logo at the Google headquarters in Mountain View, California.

Tech titan Google has built its runaway success on a promise to consumers that the firm’s almighty search engine can take the untamed jungle of sites and information on the Web and spit out exactly what people are looking for, whether it’s the cheapest shoes or the best home mortgage rates.

Now government regulators around the world are wondering whether Google is still giving consumers the best results or whether the giant, as it expands, is more interested in using its search formula to promote its products and block out competitors.

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June 24 (Bloomberg) -- New York and California are in the early stages of an antitrust investigation of Google, along with Texas and Ohio, said a person with knowledge of the matter who didn't want to be identified because the probe isn't public.

June 24 (Bloomberg) -- New York and California are in the early stages of an antitrust investigation of Google, along with Texas and Ohio, said a person with knowledge of the matter who didn't want to be identified because the probe isn't public.

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Google said Friday that it had received a subpoena this week from the Federal Trade Commission as part of a government investigation into the company’s business practices. This marks the first time the U.S. government will take a broad look at whether one of the country’s most powerful companies is harming consumers or stamping out competition, joining inquiries in progress in other countries.

The company with the motto “Don’t be evil” said it wasn’t sure what the FTC will investigate but vowed to cooperate, maintaining that it always focuses on what’s best for users.

“We respect the FTC’s process and will be working with them (as we have with other agencies) over the coming months to answer questions about Google,” wrote Amit Singhal, a Google fellow, in a company blog post. “Since the beginning, we have been guided by the idea that, if we focus on the user, all else will follow.”

The FTC is in the early stages of learning more about the company, according to people close to the investigation. The agency might conclude that the company has done nothing wrong, or it could impose sharp restrictions on Google’s behavior.

There are hints of what’s troubling the government — with parallels to the landmark case built by the Justice Department against Microsoft in the 1990s.

Being big is not itself against the law. Yet as with Microsoft and its Windows operating system, critics allege that Google is illegally leveraging a popular product, its search engine, tounfairly knock out competitors.

The company’s position as the Internet’s most popular search engine has given it immense power over the fortunes of a huge array of companies and industries, from retailers to news sites. But critics worry that with Google acting as the de facto gatekeeper for the Internet, users don’t always know what they’re missing when they hit “search.”

The business of search is multilayered. There are the broad players such as Google, Bing and Yahoo that consumers use as entry points to the Web. But there are also a plethora of specialized search sites, such as Orbitz for travel and Yelp for restaurants, that depend on Google for much of their traffic.

There is intense competition to appear high up on Google’s first page of results. Formany businesses, millions of dollars of revenue can hang in the balance depending on the outcome of Google’s algorithms.

As Google has launched its specialized services, some critics have worried that Google has been putting its products higher in its results. They point to Google’s tendency to show its Google Maps product in a large box above other results, making it tougher for competing services, such as MapQuest, to win users.

“They’re somewhat disingenuous when they say we’re trying to provide a neutral search and all we care about is our users,” said John Simpson at Consumer Watchdog. “What they really care about is selling their users to advertisers. That’s how they make their money.”

Another example cited by competitors is the firm’s product Google Places, which lists local search results for hotels, restaurants and other locations. The travel site TripAdvisor.com has complained that when users search for hotels, Google puts results from Google Places above other results, meaning that fewer rival sites with their own hotel or restaurant listings appear on the first page of searches. TripAdvisor.com has also alleged that Google is using star ratings from TripAdvisor.com’s users in its results, effectively using another company’s unique content while profiting from ads sold against it.

Sites that specialize in shopping searches have made similar allegations against Google, saying the company tends to favor the results of its price comparison service above others.

In defense, Google says it is adding these features to give consumers a better product. Also, the tech company says users are free to switch to other sites.

“Using Google is a choice — and there are lots of other choices available to you for getting information: other general-interest search engines, specialized search engines, direct navigation to Web sites, mobile applications, social networks, and more,” Singhal wrote.

In the past few years, antitrust enforcers at the FTC, the Justice Department and the European Union have been trying to learn more about the workings of the company as they have reviewed mergers and fielded complaints from competitors.

Until now, however, U.S. government officials have mostly limited their inquiries to narrow questions over whether to approve certain acquisitions. The FTC’s move this week marks the first time the U.S. government is stepping back to address bigger issues about Google’s impact on consumers and competition. The EU has launched its own broad investigation.

Scrutiny is also rising on Capitol Hill, where the Senate’s antitrust subcommittee has asked Google chief executive Larry Page and the company’s former head, Eric Schmidt, to testify at a hearing on the company’s practices. Google has been reluctant to send those executives, prompting the committee to send a letter this month threatening to subpoena them.

 
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