Resolving the FTC’s Investigation of Google: A Good Deal for Consumers
By Stephen D. Houck | December 31, 2012 11:52 am

Editor’s note: The Federal Trade Commission closed its probe on Jan. 3.

It has been widely reported that the FTC has concluded its long-running investigation of Google with a determination that it could not bring a case based upon so-called search bias (manipulation of search results) because of the difficulty of proving consumer harm – a critical element of any antitrust case. Recent media stories suggest that the FTC continues to negotiate with Google the terms upon which the investigation will be concluded.

The reported resolution relates to Google’s display of third-party review ”snippets” (which had been a major complaint of Yelp, TripAdvisor and other Google competitors); the portability of Google AdWords data to rival platforms (which also had been the subject of a complaint by Microsoft); and the past use of standard essential patents (SEPs) acquired by Google from Motorola Mobility.

Google’s competitors, however, continue to lobby the FTC to file a lawsuit. But the FTC’s responsibility is to protect consumers, not to bestow unearned benefits on competitors.  Moreover, Google’s  competitors do not need the FTC to fight their battles.  They can sue Google on their own, but would rather have the FTC do their work for them so that the costs of litigation, financial and otherwise, are borne by Google alone.

Stephen D. Houck

Google’s competitors have claimed that the FTC’s reported resolution will not be enforceable.  That simply is not so.  If Google fails to abide by its public commitments, the FTC can file an action under Section 5 of the FTC Act, as it does when other companies fail to live up to their public commitments.

Google’s competitors clearly have their own interests at heart – not those of consumers or the FTC. Pursuing a thin legal case would be fraught with peril for the FTC and bad for consumers because there is, in fact, no consumer harm to be remedied.  Google does not charge for search and, although its product innovations make life more difficult for its competitors, they make search quicker, easier and more productive for
consumers. Consumers who don’t like Google’s search results can choose from many readily available alternatives, including general search engines like Bing and vertical search engines like Yelp and Travelocity.

Not content to lobby the FTC, Google’s competitors also have sought a regulatory “do-over” from the Department of Justice.  That will not happen. Nor should any state let itself be used a stalking horse by Google’s competitors.  A settlement by the FTC will protect consumers throughout the country. The current FTC is one of the most aggressive in recent memory.  If it determines, after a lengthy investigation involving close scrutiny of millions of pages of documents, that it cannot win an antitrust action, on what basis can a state conclude otherwise?  Courts rightly would be skeptical.  And the state’s citizens would be justified in questioning such an unwise expenditure of taxpayer dollars and misallocation of scarce antitrust enforcement resources.

Google’s competitors have not sued Google because they no doubt have concluded that such an action would be unsuccessful.  Any antitrust plaintiff, including the FTC or other enforcement agency, will have enormous difficulty establishing either of the two required elements of a Sherman Act Section 2 monopolization case – 1) durable monopoly power and 2) exclusionary acts that harm competition without benefitting consumers. Google’s market share is below the minimum monopoly power threshold of 70 percent and its search engine, far from excluding competitors, sends an enormous number of customers their way.

The purpose of any government investigation is to uncover facts to determine whether they support an enforcement action. Stubbornly forging ahead at the conclusion of an investigation without the necessary evidence would be both improper and foolhardy. Ill-advised litigation risks creating bad precedent and squanders scarce enforcement resources better employed elsewhere. And the timing could not be worse from the FTC’s institutional perspective, which will soon lose two commissioners, including its current chairman.

Against this background, the rumored settlement with Google on the SEP investigation consolidates the precedent established in its recent Bosch/SPX proceeding, discourages wasteful patent litigation, encourages smartphone innovation, and clarifies a contentious issue at the boundaries of antitrust and patent law. Google’s public commitments on snippets and AdWords also provide concrete resolution with regard to two of the principal complaints made by their competitors, on content usage and ad campaign portability.

The benefits of closing this investigation with a settlement are of even greater value for having been achieved without protracted litigation. The technology sector moves quickly, and the subject of litigation today may be irrelevant by the time it is finally resolved. As European Competition Commissioner Almunia has observed, “speed is of the essence in the resolution of cases in fast moving markets.” If the reports are true, the FTC may demonstrate that fast, flexible antitrust enforcement can work in high-tech industries.

The resolution to this investigation would allow Google the freedom to continue to innovate and improve its products, address issues of concern to Google’s competitors and advance the FTC’s agenda on one of its top enforcement priorities, the use of SEPs. And it preserves a free and open marketplace in search that will continue to yield enormous benefits for consumers.

Mr. Houck is currently of counsel to Menaker & Herrmann and advises Google. He was formerly Chief of New York State’s Antitrust Bureau and represented the plaintiff states in the Microsoft litigation.

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