FTC Faces Big Burden of Proof vs. Google

 
 
By Clint Boulton  |  Posted 2011-06-27
 
 
 

Now that the Federal Trade Commission has formally launched in antitrust investigation of Google's (NASDAQ:GOOG) search business, it will have to prove the leading search engine harmed consumers, not just the companies lobbing allegations that Google impinges competition.

The FTC June 24 informed the search engine it has opened an inquiry into the company's business practices after fielding complaints from Microsoft (NASDQ:MSFT), Expedia (NASDAQ:EXPE), TripAdvisor, Yelp and others that Google promotes its own Web services above their own in its search results. These gripes echo those made by Foundem, eJustice.fr and Microsoft's Ciao in Europe.

FairSearch.org, which includes Microsoft, Expedia and others, has argued that Google uses other companies' content without their permission, engages in "deceptive display of search results," manipulates search results to favor Google's products, and buys companies that impede its dominance online.

Google will be investigated under the FTC's Section 5 rule that deals with deceptive and unfair acts and practices, which includes "bait and switch" tactics.

Proving that Google's actions harm consumers will be easier said than done, according to David Balto, a Washington, D.C., attorney who has practiced antitrust law for the FTC, as well as the antitrust division of the Department of Justice.

"To succeed in an antitrust case, you have to look at a federal court judge and say consumers are hurt because they pay more or they have fewer choices," Balto said. The first argument may not work because Google search and other Web services are free. The second is simply tough to prove.

Balto believes Google would prevail in an antitrust case brought by the FTC because it has the consumers' best interest foremost in its mind: to provide accurate and timely results to their queries.

Noting that Google's conduct is largely precompetitive, he pointed to how Google protects consumers against deceptive Website operators. For example, Google discovered that J.C. Penney had gamed Google's search engine to push up its Website in search rankings last holiday season. The company manually dropped the retailer in its rankings.

Balto further noted that this case springs from complaints embittered companies are making that Google won't let them compete in the search market. Consumers, he argued, don't care where these companies are placed or that their advertising opportunities suffer from appearing far down on search results pages. They care about finding the results they want.

"I love antitrust and I love to go after large companies," Balto told eWEEK. "But I have a lot of doubt an investigation on search will lead to much. I think this is a dog that won't bark. It will take them awhile to walk it around the block, but I think that's what they're going to find out."

Geoffrey Manne, senior adjunct fellow at TechFreedom and lecturer in law at Lewis & Clark Law School, and Joshua Wright, professor of law & economics at George Mason University School of Law, added that "reducing consumer choice" seems to be a euphemism for "harm to competitors, not competition," where the reduction in choice is the reduction of choice of competitors who are put out of business by pro-competitive behavior.

"The fact that Google's rivals--including Microsoft itself--are complaining about the company suggests, ironically, that Google's practices are in fact pro-competitive and thus pro-consumer," Manne and Wright wrote. 

However, Melissa Maxman, co-chair of the antitrust department at law firm Cozen O'Connor, wonders if there isn't a little something of the where-there's-smoke-there's-fire adage at play here; her firm has clients who are complaining about Google's search practices.

Maxman said she believes there's no question Google has earned its monopoly status, but added that obtaining a monopoly is not illegal if its earned.

"Why is [Microsoft] Bing not gaining?" Maxman told eWEEK via e-mail. "Is it because Google is gaming results? It could be very similar to what Microsoft did with the Internet browser."

In truth, Bing is gaining search share, albeit incrementally and certainly not at the expense of Google. Bing launched two years ago and has grown from 8 percent share to about 13 percent share. However, Bing's gains have come at the expense of Yahoo. Google has maintained its 65 percent share for the last few years, according to comScore.

Meanwhile, Balto noted that even though the FTC may be putting Google under the microscope, less than 1 out of every 10 investigations leads to an enforcement action. There has not been a successful Section 5 litigated case since 1972, he added.

 

 
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