Judge Moves Antitrust Suit Against Google Forward
By Aruna Viswanatha | March 23, 2010 7:15 pm

An Ohio state judge on Tuesday denied Google Inc.’s request to hold off on discovery in an antitrust suit filed by a small comparison shopping Web site, myTriggers.com, putting the dispute on track to potentially go to trial next spring.

The lawsuit began last October as a collection action, when Google sought to recoup $335,000 in unpaid bills. MyTriggers filed its own counterclaims, accusing Google of making the company’s ads prohibitively expensive in an effort to starve it of Internet traffic and push it out of business. The company operates several vertical Internet search sites, which lets users shop and compare prices.

According to the complaint, Google raised the minimum bid myTriggers would have to make on its key words between 1,000 and 10,000 percent in March, 2008.

Joseph Bial (Cadwalader)

“We look forward to moving the case along, including initiating discovery immediately and gathering the documents and evidence to prove the claims that are alleged in the complaint against Google,”  myTriggers attorney Joseph Bial, who is special counsel at Cadwalader, Wickersham & Taft LLP, told Main Justice.

Google is expected to file an answer to the claims next month. A Google spokesman declined to comment Tuesday.

The company has argued it sets rates based on the quality of the Web site and considers how many users click on a link to measure how relevant the ad is. Google maintains that if it does not use such rankings, advertisers unrelated to the search terms would often buy up the display space.

In addition to Bial, MyTriggers.com is represented by Cadwalader partners Rick Rule and Jonathan Kanter, both of whom have previously worked for Microsoft.

James Wilson (Vorys, Sater, Seymour and Pease)

Google is represented by Jim Wilson, a partner at the Ohio firm Vorys, Sater, Seymour and Pease LLP. Wilson is a former head of the American Bar Association’s antitrust section.

Similar Lawsuit

Earlier this month, a federal judge in New York dismissed a similar suit against Google filed by Cadwalader on behalf of another vertical search operator, TradeComet.com. In that case, the judge ruled that a contract required the company to bring its claims in California, and not in New York.

Bial said TradeComet has filed notice that it will appeal the ruling to the New York-based 2nd Circuit Court of Appeals.

The two lawsuits, along with separate complaints filed with European regulators, argue that Google is using its muscle in the online search market to restrict competition and shut out potential rivals.

Broader Implications

U.S. regulators appear to be considering similar arguments.

In a little-noticed speech in January at a telecom conference at the University of Colorado, FTC economics bureau deputy director Howard Shelanski used a thinly veiled example to argue that a giant in online search could potentially hurt competition.

“I think we need to think more broadly on keeping an eye on possible anti-competitive discrimination … within the applications market,” Shelanski said.

A key policy question for tech antitrust regulators is how to encourage developers to continue creating new products online. That debate has largely focused on so-called network neutrality. Its proponents have argued that cable and telecom companies that pipe Internet into homes present the key potential bottleneck. If the people that make the software and content rely on Internet service providers to distribute their products to consumers, and those providers have the power to block some content, some have argued the government should prevent those networks from discriminating against any applications.

In his speech, Shelanski said this view might be too narrow to understand how competition in the market for Internet applications works. He used a “hypothetical” search giant as his example.

“If there is a hypothetical search engine, that because of various scale and network economy issues, becomes a must-have application for consumers,” Shelanski said, “then the locus of possible bottleneck discrimination possibly shifts upstream within the applications market itself.”

“So we need to think more broadly than network neutrality is currently conceived,” he said.

His argument essentially boils down to this: If a consumer would rather switch to a different Internet provider than lose access to an application like Google, the provider cannot dump Google off its network. If the provider loses that leverage, the real power lies with Google, which finds itself in a position to decide how to treat smaller applications and content providers.

“It can make marginal decisions about how it lists various further upstream applications or content on the Internet, how it promotes them, whether it promotes them at all,” Shelanski said. “It’s not the downstream network that has bottleneck control, it’s the upstream network.”

Shelanski’s example is essentially the same argument that the smaller search Web sites myTriggers and TradeComet are making in their lawsuits against Google.

Critics of Google’s bid for mobile advertising platform Admob also argue that Google is trying to buy its way into this kind of leverage in the mobile advertising market. The FTC is currently reviewing the deal, and recent reports have suggested the agency will potentially challenge the acquisition.

Google has said the mobile advertising market is dynamic and growing, with a dozen providers.

“If one of these hypothetical upstream applications providers can dump the most populous nation on earth, it can dump you as an applications provider,” Shelanski said, referring to Google’s recent move to pull its search engine out of China.

Observers have downplayed such criticism and said Google doesn’t appear to be on the same path that led tech giants like Microsoft and IBM to tangle with antitrust regulators in the past.

“In contrast to Microsoft, you don’t have a clear package of conduct that is identified as being anticompetitive,” Andrew Gavil, a professor at Howard University’s law school told Main Justice last month.  “For all the discussion on Google, no one can point to the core group of anti-competitive conduct. Individual firms are complaining about practices particular to them, but there is no broad based attack on the market.”

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