Google-FTC settlement may be in the works

November 28, 2012

Google and federal officials are discussing a deal that would end nearly two years of investigation into claims of monopolistic behavior by the company without addressing the most serious charge — that it intentionally manipulates search results to harm competitors.

The ongoing talks between Federal Trade Commission Chairman Jon Leibowitz and top Google executives are focusing on less controversial issues, such as how the company uses patents and how it displays comments collected from other Internet services, said several people who were familiar with the talks and spoke on the condition of anonymity. They said that although allegations of search bias could reemerge should the talks collapse, they are not central to the discussions.

This development has angered a broad group of Google competitors and critics who have called on the FTC to engage in a high-profile legal battle against the search giant to curb its sprawling power in the digital economy, much as the Justice Department did with Microsoft in the 1990s. Some predicted that Congress or state attorneys general would pick up the issue of search bias if the FTC failed to act on it.

“The buzzards are circling for that, and there’s just going to be massive resistance if they try to do that,” said Silicon Valley attorney Gary Reback, who represents several companies that have complained about Google and also was involved in the fight against Microsoft. “If a settlement were to be proposed that didn’t include search, the institutional integrity of the FTC would be at issue.”

The FTC, which hired a prominent outside litigator to work on the case, declined to comment on the issue Wednesday.

Google spokesman Adam Kovacevich said in an e-mailed statement, “We continue to work cooperatively with the Federal Trade Commission and are happy to answer any questions they may have.”

Allegations of search bias turn on the increasingly complex way in which Google displays its results. Once focused mainly on helping users find useful links to other sites, the company’s results now feature a heavy diet of paid content that appears in shaded sections at the top of screens and along the right-hand side.

A “universal search box,” also placed above traditional search results, often carries paid links to consumer products or flights — a function that directly competes with what once was a bustling, lucrative universe of specialized search companies such as Nextag and TripAdvisor. In recent months, the search engine converted all of its shopping search links to paid results, which critics say hurts people seeking the best price or service.

“If you don’t deal with search bias, search ma­nipu­la­tion, I believe there’s no possibility of meaningful relief for consumers,” said Matthew Reilly, a former FTC litigator who now represents FairSearch.org, a coalition of Google opponents.

He called a case alleging search bias against Google “winnable.” But Leibowitz, who has told associates that he plans to leave the FTC chairmanship in the coming months, has struggled to get a majority of votes on the five-member commission for a case based on search bias.

Some legal experts say that although it would be easy to demonstrate that Google hurts some competitors, it is more difficult to show that consumers are harmed by the search engine — the key factor in antitrust law — and that it would be difficult to craft effective remedies to correct any possible damage.

“I think the commission has largely come to the same conclusion that I have, that it's not a good case,” said Geoffrey A. Manne, executive director of the International Center for Law and Economics and a critic of antitrust claims against Google.

The negotiations remain fluid, said the people familiar with the talks, with a crucial issue being whether Google will be required to sign a formal decree promising to no longer participate in practices the FTC considers anti-competitive. The company is resisting the move, although such decrees are common in negotiated settlements ending investigations.

A key concession from Google would be sharp limitations on its ability to use its vast array of what are called “standards-essential” patents to block rival companies from bringing smartphones and other competing products to market. Such patents are for widely used technologies that typically are licensed at reasonable rates among competitors.

An FTC settlement also would probably require Google to make it easier for marketers to place their ads on rival search engines and limit its ability to display excerpts of reviews of restaurants or other businesses generated by rival Internet services.

Should negotiations fail, the FTC could still file a lawsuit charging search bias. The European Union and several state attorneys general are also investigating Google on antitrust claims.

Microsoft, which operates the rival search engine Bing, said it is starting a newspaper, television and online advertising campaign criticizing Google’s recent switch to displaying only shopping search results that are paid for by advertisers. The campaign will say that consumers are being “scroogled” by Google.

Craig Timberg is a national technology reporter for The Post.
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