TAP Scholars Discuss the FTC’s Announcement to End Its Investigation of Google’s Business Practices

By TAP Staff Blogger

Posted on January 4, 2013


The Federal Trade Commission (FTC) announced yesterday that it has completed a nearly two-year investigation into Google's business practices. A few key take-aways in this closely-watched case includes:

• The FTC commissioners deciding unanimously that Google was not violating any antitrust laws when it comes to search results.

• The FTC found that Google's use of some of the patents it acquired from Motorola to be anticompetitive. Google has agreed to allow competitors access to the patents, "on fair, reasonable and non-discriminatory terms" (FRAND).

Many TAP scholars with expertise in antitrust and competition policy have shared their thoughts to this much-awaited announcement. Here are excerpts from some of their blog posts.

Not with a Bang
James Grimmelmann, New York Law School

So ends the Federal Trade Commission’s long and contentious investigation into Google. Out of the four serious issues on the table, Google walks away cleanly on one (“search bias”), the FTC gets a clear victory on one (“standards-essential patents”), and Google makes mushy-mouthed “commitments” on the remaining two (“vertical opt-out” and “ad portability”). But the issue on which the FTC let Google walk—“biasing” its search results to favor its own content over competitors’—was far and away the most important. The mood over at the Googleplex has to be pretty good right now.

Ad Portability
However much Google gains from encouraging advertisers to create uniquely tailored campaigns by limiting the use of third-party tools, it has more to lose from a protracted legal battle. The only question is why Google didn’t simply delete the term earlier to make the issue go away. But today’s settlement gives the answer: a bargaining chip can only be bargained away once. Google held on to the term so it would have something to give the FTC as part of a compromise that preserved the powers Google really cares about.

Vertical Search Opt-Out
From Yelp’s point of view, Google was using Yelp’s own content to compete with it. Newspaper publishers have regularly raised the same complaint about Google’s snippets in Google News: they like the traffic Google provides but not Google’s competing product. …

Under pressure from the FTC, Google has now agreed to offer an opt-out from one of its vertical search properties. The details are interesting—and, as usual, all of the interesting details are in the footnotes. First, the opt-out only applies to “Covered Webpages,” which “have the primary purpose of connecting users with merchants.” … Thus, this rule really only applies to transactional vertical searches: ones whose goal is to find and buy something. It only really protects other organizing intermediaries, like Yelp and Expedia. Google can still strong-arm content producers, like newspapers and blog empires, to the fullest extent allowed by law.

Search Bias
The center of the investigation, and of the complaints against Google for the past four years, has been “search bias”: the accusation that Google deliberately slants its search results to favor its own sites (like its own local results and flight search) over its competitors (like Yelp and Expedia). Last year, FTC staff wrote a 100-page report that reportedly recommending suing Google to prohibit search bias. But today, the FTC by a 5-0 vote decided not to take any action against Google over search bias. According to the FTC, then, whatever bias Google has engaged in is fine.

Devils and Details
A second post from James Grimmelmann, New York Law School

There is a necessary, but necessarily tricky provision in Google’s commitment to let websites opt out of commercial search:

Exercise of this option will not … (2) be used as a signal in determining conventional search results on the google.com search results page.

Imagine… the [Google] engineers know which sites have opted out—as a class, they’ll often be easy to identify—and they look for general-purpose algorithmic tweaks that just so happen to disproportionately hurt the Yelps of the web, the sites that have opted out. There is no explicit discrimination, just intentional discrimination in effect.

If one is seriously concerned about this scenario, then every algorithmic change is potentially suspect. You need the FTC looking over Google’s shoulder constantly, and the FTC needs to be in a position to challenge any tweak it’s concerned about. But this is precisely the kind of comprehensive regulatory review of search algorithms that Google has been fighting ferociously against in the search-bias space. That’s the victory that Google won today: not to have to say “Mother may I” each time it changes its search algorithms.

Google Antitrust: the FTC Folds
Frank Pasquale, Seton Hall University

Commissioner Rosch included this intriguing footnote in his concurrence/dissent:

I . . . have concerns that insofar as Google has monopoly or near-monopoly power in the search advertising market and this power is due in whole or in part to its power over searches generally, nothing in this “settlement” prevents Google from telling “half-truths”–for example, that its gathering of information about the characteristics of a consumer is done solely for the consumer’s benefit, instead of also to maintain a monopoly or near-monopoly position. . .”

Did Google ever say that it was gathering data purely for consumers’ benefit? That would seem to be an odd representation for a for-profit company to make.

The Commission’s statement says “The totality of the evidence indicates that, in the main, Google adopted [changes] improve the quality of its search results, and that any negative impact on actual or potential competitors was incidental to that purpose.” But it has not released details about the nature of that evidence, the types of tests it used, or the standards employed in them. How are other tech companies to avoid such investigations in the future if they can’t get such information?

To be sure, Google hired some of the best minds in the legal profession (and academy) to promote its position. That kind of advocacy often gets results. But until we have a better sense of the answers to the questions above, I’m afraid the bottom line is that a black box investigation exonerated a black box search engine—cold comfort for those who might worry about the power exercised by Google online.

The FTC Smartly Ends Its Imprudent Google Search Antitrust Investigation
Eric Goldman, Santa Clara University

Ending the investigation into Google’s search behavior is a smart decision by the FTC, but the FTC’s initial decision to investigate Google’s search practices was terrible. … It now turns out the FTC never had compelling evidence against Google, and its lengthy and expensive investigation came up essentially dry–despite the determined (and costly) efforts of both the FTC and legions of free-spending and very whiny Google enemies.

Antitrust Investigations Take Too Long for Technology Cycles
It took the FTC 20 months to determine its investigation was largely fruitless. 20 months is nearly a full generation of technology development in the Internet industry. A few major developments during the past 20 months that (individually and collectively) undermine the investigation’s rationale:

* Siri. Search is increasingly moving from the web to mobile, and Siri is picking up searches from mobile devices that used to go to Google.
* Pinterest. Pinterest is the fastest growing website of all time, and about 2 years ago it emerged from nowhere to become a major source of referral links. Pinterest reminds us that major Internet competitors can develop really quickly–in ways that no one, and certainly not regulators, can anticipate.
* Social Networking. Increasingly, consumers are using social networking site links (like recommendations from Facebook friends) as substitutes for keyword searches.

Antitrust Investigations Are Costly To Everyone
Putting aside Google’s costs to comply with various regulators’ disclosure demands (and ignoring any degradation of Google’s product development due to the regulators’ heightened scrutiny), Google spent millions of dollars trying to sway the FTC. Google’s economic stimulus package included a dozen DC lobbying firms (a DOZEN!), big brand-name paid influencers such as Robert Bork (recently deceased), Eugene Volokh, Marvin Ammori and many others, and multiple conferences designed to educate DC insiders (see, e.g., the 2011 and 2012 George Mason Law School conferences). Not directly tied to this investigation, Google also has invested substantially in its policy and advocacy work in other ways, as we discovered in Oracle v. Google and we’ve seen from its work in Germany.

FTC Deservedly Closes Google Antitrust Investigation Without Taking Action
Geoffrey Manne, Lewis and Clark College

Now that the investigation has concluded, we come away with two major findings. First, the online information market is dynamic, and it is a fool’s errand to identify the power or significance of any player in these markets based on data available today — data that is already out of date between the time it is collected and the time it is analyzed.

Second, each development in the market – whether offered by Google or its competitors and whether facilitated by technological change or shifting consumer preferences – has presented different, novel and shifting opportunities and challenges for companies interested in attracting eyeballs, selling ad space and data, earning revenue and obtaining market share. To say that Google dominates “search” or “online advertising” missed the mark precisely because there was simply nothing especially antitrust-relevant about either search or online advertising. Because of their own unique products, innovations, data sources, business models, entrepreneurship and organizations, all of these companies have challenged and will continue to challenge the dominant company — and the dominant paradigm — in a shifting and evolving range of markets.