FTC: Google did not break antitrust law with search practices
By Craig Timberg,
Google emerged from nearly two years of intense federal scrutiny Thursday by convincing the Federal Trade Commission that even though rivals may suffer as the company continually refines its search engine, consumers often win through better, faster, more valuable answers to their queries.
But despite the unanimous FTC decision to close its antitrust investigation, U.S. regulators long have struggled to determine what’s best for consumers — and what can be successfully addressed with laws written long before anyone imagined the economic role that today’s technologies would play.
The murky standards for establishing consumer harm ultimately undermined the case for forceful action on the most serious charges — that Google was manipulating search results to benefit its own products while hurting competitors and limiting choice.
That drained energy from what once appeared to be an aggressive FTC push against Google, leading to modest concessions that are unlikely to be noticed by most of the search engine’s hundreds of millions of users. Consumer groups, Google’s rivals and some legal analysts say the company now will be emboldened to enhance the visibility of its own products for travel, shopping and other lucrative services in ways that will make it harder for people to find other offerings and will lead to higher prices.
But the FTC was unpersuaded by the evidence at hand. “The American antitrust laws protect competition, not competitors,” said Chairman Jon Leibowitz.
Establishing whether consumers have suffered — or are likely to suffer in the future — has long been the quicksand in the middle of U.S. antitrust cases. Wait too long to rein in monopolists, and the damage might be irrevocable. Move too fast, and the evidence of consumer harm might lack the clarity necessary to survive a court challenge.
“It has been the single issue that the antitrust system has had trouble dealing with since 1890,” said George Washington University law professor William Kovacic, a former FTC chairman. “That’s because the consumer impacts typically are mixed.”
That is even more true in the digital age, when rapid innovation creates and destroys monopolies far more quickly than when railroads and steel manufacturers took commanding market positions that lasted for decades. The speed of change has challenged Washington’s ability to act forcefully against technology companies that are increasingly battling one another in overlapping markets.
In a statement posted to Google’s company blog Thursday, chief legal officer David Drummond wrote that the FTC’s actions affirm that Google’s products are “good for users and good for competition.”
The company’s many critics, however, said that the Google that once evangelized about producing unbiased search results and speeding users off to other sites had been transformed into a predatory company more concerned with driving traffic to its own products than serving users’ needs.
FairSearch.org, a coalition of Google rivals, including Microsoft and Kayak, that lobbied for tough action by the FTC, said it would turn its attention to the European Union, where a parallel investigation is reaching a critical stage, and to the several state attorneys general probing the company. “FairSearch will continue to fight to restore truly competitive conditions to the market for search and related online services,” the group said in a statement. “No less than the future of innovation and small business on the Internet is at stake.”
Google has gradually changed its search algorithm and how it displays results. Much more space has been devoted in recent years to various forms of advertising — to the point that all results on shopping queries, such as for cameras or soccer balls, come from companies that pay for the listings.
A decade ago, a person searching for flights or steakhouses would see a long list of links to different Web sites. Now, the most visible results often direct users to Google’s own services or links sponsored by advertisers.
Other companies that built their businesses by directing Internet users to popular travel services or bargains on consumer goods have seen dramatic declines in their traffic — and profits. They argued to the FTC that the faltering ecosystem of alternative search options would inevitably mean worse deals for consumers.
The FTC eagerly sought the investigation in 2011, elbowing aside the antitrust division of the Justice Department and hiring a high-profile litigator to prepare a case against Google. But all five commissioners voted Thursday to close the case, though they first negotiated concessions on two related matters: Google agreed to make it easier for marketers to move their ads to rival services, and the company agreed to sharply limit its use of “snippets” of reviews for travel services or restaurants created by other Web sites, such as Yelp.
The FTC said it could sue Google for deceiving consumers if it reneges on either concession, but the deal fell short of the kind of legally binding decrees typically required to end investigations.
“Google clearly skews search results to favor its own products and services while portraying the results as unbiased,” John M. Simpson of Consumer Watchdog said in a statement. “The FTC rolled over for Google.”
There was more meat to the resolution of a separate matter also announced Thursday, in which Google signed a legally binding consent decree requiring it to license patents at reasonable rates when they are part of agreed industry standards. The move protects the ability of different mobile devices to communicate with one another and cuts the value of Motorola Mobility, which Google acquired for $12.5 billion, in part for its patent portfolio.
Leibowitz said the FTC got the best possible deal for consumers but also acknowledged the limits of a case that once seemed headed for a landmark showdown, reminiscent of the Justice Department’s challenge to Microsoft in the 1990s.
“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 sort of something you want to try to do. But more important than that is to faithfully execute the law. And, you know, we found unanimously that . . . they hadn’t engaged in illegal monopolization and hadn’t violated the FTC Act.”
But the agency struggled with the optics of an announcement that fell far short of expectations it had helped create.
Even retiring Commissioner J. Thomas Rosch, a Republican former antitrust litigator who supported the decision to close the case against Google, chided his rivals for the nature of the settlement and the early hype over the case. “After promising an elephant more than a year ago, the commission has instead brought forth a couple of mice.”
Hayley Tsukayama contributed to this report.
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