A New York federal judge dismissed the first of two antitrust lawsuits against Google filed by smaller Internet search engines that accuse the search giant of manipulating its rankings in order to punish rivals.

In a ruling on Friday, Judge Sidney Stein dismissed the complaint brought by TradeComet.com and said that the company should bring its claims in California, not in New York.

“We’re pleased that the court agreed that the Tradecomet case was filed in an improper venue,” said Google spokesman Andrew Pederson.

Tradecomet’s attorneys said the dismissal was only a minor setback.

“It’s a purely procedural ruling, and doesn’t affect the underlying claims in TradeComet’s case,” said the company’s lawyer, Jonathan Kanter, a partner at Cadwalader, Wickersham & Taft, which also represents Microsoft Corp. “We are considering all options at this point, but we intend to press forward.”

The TradeComet lawsuit, filed a year ago, was one of the first attempts by rivals to go after Google on antitrust grounds. Since the TradeComet suit, Microsoft’s lawyers at Cadwalader filed a similar case on behalf of myTriggers.com, a comparison shopping Web site, in Ohio state court. The European Commission also is looking at similar complaints filed by smaller search Web sites ejustice.fr, Foundem, and Microsoft’s Ciao!

TradeComet, which operates a business-to-business search Web site called SourceTool.com, accused Google of making the Web site’s ad rates prohibitively expensive in an effort to shut a potential competitor out of the market. The company also claimed that Google cut deals with various Web sites in order to exclude SourceTool and other potential rivals.

Google urged the judge to dismiss the complaint because TradeComet’s contract with Google required advertisers to bring any claims in a California court near Google’s headquarters.

TradeComet argued that a previous contract applied, but the judge disagreed. The company can either appeal the ruling to the 2nd Circuit Court of Appeals or file the case in California.

The Ohio suit against Google was filed last month in response to an attempt by Google to collect on $335,000 of unpaid bills. MyTriggers accused Google of changing the company’s Web site ratings, known as quality scores, in order to raise the price of its ads. Google has not yet responded to the claims.

In a recent SEC filing, Google said it competed not only with traditional search engines run by Yahoo! Inc. and Microsoft, but also with specialized search Web sites like WedMD, Kayak, Monster.com, Amazon.com, and eBay, social networks like Facebook and Twitter, and mobile applications that let users bypass search engines and access Web sites directly.

Separately, the Federal Trade Commission is examining Google’s purchase of mobile advertising platform AdMob to determine whether it violates antitrust laws. According to a person familiar with the review, Google has turned over the bulk of the documents needed for the review; in industry parlance, Google has certified that is has “substantially complied” with the FTC’s request for documents. A decision is expected in the next month.

Microsoft CEO Steve Ballmer touched on his company’s growing antitrust battles with Google at an industry conference in Santa Clara, Calif. Tuesday, telling an audience that regulators need to look at the internet search giant’s behavior. Ballmer also answered questions, posed by Danny Sullivan, who edits the trade publication Search Engine Land, about Microsoft’s involvement in other lawsuits against Google.

Microsoft CEO Steve Ballmer (Microsoft)

In recent months several smaller search engines have accused Google of punishing potential competitors, both through lawsuits in the U.S. and through complaints filed with the European Commission body that investigates antitrust violations. Some of the firms on both sides of the Atlantic have ties to Microsoft.

In responding to the accusations that Microsoft is leading the charge, Ballmer said, “We’re not being silent, we’re expressing some of the issues and frustrations we see.

“Certainly sometimes that is unsolicited, but often times it’s because we’ve been asked,” Ballmer said, according to PCWorld.

“There are a set of issues we think are worth commenting about,” he continued, according to PCWorld. “Ultimately, what’s lawful and unlawful is the purview of regulators.”

The magazine also said that Sullivan asked the audience, which included “a few hundred advertisers, marketers and consultants,” if any of them were “‘frustrated’ with Google’s behavior.’” Only one or two hands went up, according to the magazine.

Read the full story, with interesting thoughts from Ballmer on the possibility of Bing beating Google and why Twitter is better off as an independent company, here.

Kudos to Main Justice competition reporter Aruna Viswanatha for her scoop — five days ago — about Microsoft Corp.’s apparent stealth war on Google Inc. on antitrust grounds.

Today, the Wall Street Journal re-packaged our story on its front page, deploying four reporters to do a job that Viswanatha managed to do all by herself. Since the WSJ didn’t give proper credit, we’ll do it ourselves.

Some excerpts from Viswanatha’s Feb. 24 article:

In January, Google filed suit against a comparison shopping site myTriggers.com in Ohio state court, hoping to collect on $335,000 in unpaid bills.

Instead of paying the bill, myTriggers enlisted the help of both Microsoft’s antitrust lawyer, Rick Rule at Cadwalader, Wickersham & Taft, and famed trial lawyer Stanley Chesley, who worked on several of the largest settlements of the past few decades including those for the Lockerbie bombing and Dow Corning’s injury-prone silicone breast implants. [...]

Rule also advises another search engine, TradeComet.com, which filed a similar suit against Google in a New York federal court last year.

Observers have questioned both lawsuits’ ties to Microsoft, but in an interview with Main Justice, Rule denied Microsoft’s interest in either matter.

“Microsoft is not involved,” he said, “our clients are only the named plaintiffs.” Rule declined to explain how his firm was hired in either case, but did say: “It is my practice to answer phone calls, and I’ve been blessed that I haven’t had to go out and elicit clients.”

And from the WSJ today:

Seeking $335,000 in unpaid advertising bills, Google Inc. filed suit against a small Internet site in Ohio in October. The complaint was so routine it was just two sentences long.

Google never expected the response it got. Last month, the small Internet site countered with a 24-page antitrust lawsuit against Google, accusing the search-engine giant of a litany of monopolistic abuses.

But what really caught Google’s attention was the Internet site’s legal counsel: It was Charles “Rick” Rule, long the chief outside counsel on competition issues for Google archrival Microsoft Corp.

The battle between Google, Inc. and Microsoft Corp. has now kicked into high gear on both sides of the Atlantic.

On Tuesday, Google acknowledged that European antitrust regulators had opened an inquiry into its business practices, at the behest of some Microsoft-connected firms. The announcement of the European probe comes after recent disclosures that German antitrust authorities were investigating similar claims.

In the U.S., Google has not had it any easier. Earlier this month, Google was hit with its second U.S. antitrust lawsuit brought by the same lawyers who have long advised Microsoft.

In January, Google filed suit against a comparison shopping site myTriggers.com in Ohio state court, hoping to collect on $335,000 in unpaid bills.

Instead of paying the bill, myTriggers enlisted the help of both Microsoft’s antitrust lawyer, Rick Rule at Cadwalader, Wickersham & Taft, and famed trial lawyer Stanley Chesley, who worked on several of the largest settlements of the past few decades including those for the Lockerbie bombing and Dow Corning’s injury-prone silicone breast implants.

(Creative Commons)

The company then filed a counterclaim earlier this month accusing the search giant of violating antitrust laws by manipulating search results to punish potential rivals.

“Google employs a variety of exclusionary acts that ensure that rivals cannot divert traffic to their own competing search websites, particularly if the effect of such diversion is substantially to compete against Google’s dominant platform,” myTriggers said in its complaint.

Rule also advises another search engine, TradeComet.com, which filed a similar suit against Google in a New York federal court last year.

Observers have questioned both lawsuits’ ties to Microsoft, but in an interview with Main Justice, Rule denied Microsoft’s interest in either matter.

“Microsoft is not involved,” he said, “our clients are only the named plaintiffs.” Rule declined to explain how his firm was hired in either case, but did say: “It is my practice to answer phone calls, and I’ve been blessed that I haven’t had to go out and elicit clients.”

Microsoft-related entities also appear to be going after Google on the other side of the Atlantic.

In a blog post last night, Google acknowledged that it had received word from the European Commission that it was investigating complaints filed by three companies accusing Google of manipulating its search rankings to punish other search engines and engaging in other anti-competitive conduct.

“This kind of scrutiny goes with the territory when you are a large company,” wrote Google senior competition counsel Julia Holtz,  on the company’s blog.

In her discussion of the investigation, Holtz fingered Microsoft as the unseen hand directing the complainants. One, a U.K.-based shopping search site called Foundem, is part of a Microsoft-backed organization called ICOMP, she said.  Another, a search engine called Ciao!, was bought by Microsoft in 2008. The third company is a French legal search engine, ejustice.fr.

The attacks against Google are reminiscent of similar campaigns against Microsoft over the past two decades.

“It’s not surprising that Google would start to see lawsuits, and it’s ironic that Microsoft is trying to foist upon Google the experience it had,” Andrew Gavil, a professor at Howard University’s law school, said in an interview.

But just how much Google’s experience will mirror Microsoft’s is unclear.

(Microsoft)

“In contrast to Microsoft, you don’t have a clear package of conduct that is identified as being anticompetitive,” Gavil said.  ”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.”

Industry groups that have long been a part of tech antitrust battles also said Google’s conduct did not raise as many concerns as previous investigations.

“We have for over 30 years been involved in fighting the biggest and most abusive monopolies and industry heavyweights who have abused their power,” said Edward Black, president of the Computer and Communications Industry Association, which counts both Google and Microsoft as its members. “We do not see Google’s behavior fit that pattern.”

In its lawsuit last year, TradeComet alleged that Google massaged its Web site ratings, known as quality scores, to make TradeComet’s ads prohibitively expensive once it realized the company posed a potential threat to its business.

Google says a Web site’s quality score is based on the number of users that have clicked on its link in the past, and search advertising analysts have said there usually is a strong correlation between the two.

MyTriggers’ case also accused Google of punishing its site in search rankings, but it goes further. The complaint argued that Google entered into “favorable agreements” with Shopping.com, Shopzilla.com, PriceGrabber.com, Ask.com, Aol.com and others but discriminates against other search websites.

The complaint alleged Google entered into “horizontal agreements” with some rivals to use the same quality score for certain advertisers. It further accused Google of maintaining a secret “whitelist” of firms that are blacklisted by it and the other search sites it has agreements with.

Since March 2008, according to the complaint, myTriggers rates to advertise on Google and other search sites rose between 1,000 percent and 10,000 percent.

The TradeComet complaint included accusations of one similar partnership, between Google and Business.com, but a executive from that Web site told the New York Times last year it had no special relationship with Google.

Whether such agreements violate any laws might have to play out in court. “There is nothing wrong with partnership agreements, there’s no abstract reason that these need to be illegal, but if it was tantamount to an agreement on price,” there could be a problem, said Geoffrey Manne, a former Microsoft lawyer who is now a professor at Lewis & Clark Law School in Portland, Ore.

Rule said he looked forward to his day in court. “The complaint speaks for itself. The whole point of litigation is a plaintiff’s ability to prove its case, and to be awarded damages for the violation,” Rule said. “That’s what this is about.”

Last year, Wired magazine detailed Microsoft’s efforts to tar Google’s reputation.

After presiding over a full-day hearing, and with 500 objections and thousands of pages of filings to plow through, federal Judge Denny Chin is now faced with the task of sorting through all that information and figuring out who is right about Google’s plan to digitize and sell millions of e-books.

The Internet search giant entered into a class-action settlement with authors and publishers in 2008, which was the subject of yesterday’s hearing in Chin’s court in the Southern District of New York. Chin did not indicate when to expect a ruling from him on the fairness of the settlement.

Google’s book plans have unleashed torrents of criticism from rivals, library and consumer groups, other academics and authors, and the Justice Department.

Based on a review of the transcript, it is evident both sides dug in their heels at the New York hearing. Google clashed with critics of the settlement on who was included, why they were included, how far the settlement went, what benefits it would give Google, and even how many books were included in the deal.

That number would be 174 million, argued Gary Reback, the antitrust lawyer leading the charge for critics with the Open Book Alliance: “We didn’t end up with a single seller for those 174 million books, just by chance. We didn’t end up there through some pro-competitive initiative by Google. We got there through concealment and misdirection,” he said.

Google, in contrast, estimated that the settlement touches only about 10 million works, around half of which are part of the out-of-print category that has sparked so much controversy.

One issue at the heart of the hearing was why Google and the parties to the settlement didn’t set up a process that would allow authors to opt-in to the settlement, instead of the current arrangement that authors are required to opt-out of. The Justice Department has suggested such a move could fix the bulk of the settlement’s problems as far as it is concerned.

Google’s lawyer, Daralyn Durie, argued that there could be no settlement without an opt-out class because finding and negotiating with individual rights-holders was prohibitively expensive. ”There is no other way to create a market for these out of print works so that they can become available and so that their rights-holders can be located,” Durie said.

“We know it doesn’t work because if it worked, someone would have done it already. Microsoft abandoned its scanning project, so have others. They couldn’t figure out a way to make it commercially viable,” she said.

Judge Chin seemed disinclined to approve the settlement as is, and likened the release from copyright liability it would provide to Google to a release from future claims of discrimination. “You’re getting a general release from absent participants, from people who haven’t shown up yet,” he told a lawyer for the authors in the settlement.

Google’s argued the two were different, because discrimination is illegal, while distributing copyrighted works is not. Copyright law is designed to encourage the production of works and protect the economic interests of rights-holders, both of which the settlement does, Durie argued.

“[Rights holders] can come forward a year from now, they can come forward two years from now, they can come forward five years from now and say I want this to stop. All that will have happened to them in the interim is if people have purchased their works, money will be sitting and waiting for them. That’s it,” she said.

Many critics at yesterday’s hearing expressed concern about the authors who were covered by the settlement,  but who did not know about it. The parties argued that between 80 and 90 percent of all rights-holders are eventually found. Last year, the New York Times documented the extensive search the parties undertook to find missing authors.

Microsoft Corp. and Yahoo! Inc. received approval for their advertising pact from both the Justice Department and the European Commission today, the companies announced.

Main Justice reported earlier today the Justice Department had closed its investigation into the deal and was set to approve it. Through a listing provided by the Federal Trade Commission this afternoon, the DOJ also said it signed off on the deal.

The partnership was announced last July, but the details took several more months to work out. Under the terms of the agreement, Microsoft’s Bing will be the search engine for Yahoo sites, and Yahoo will handle search advertising sales for both companies.

The deal has been through several iterations. It began in January 2008, when Microsoft announced a $44.6 billion hostile bid for Yahoo. Yahoo rejected the bid and struck a search partnership with Google, but the Justice Department threatened to block the deal in November 2008 and the companies abandoned it.

The less formal alliance between Microsoft and Yahoo is an attempt to build a viable competitor to the Google search juggernaut.

In its investigation into the Google-Yahoo deal, the Justice Department found that Google had more than 70 percent of the market in both Internet search advertising and in the market for handling searches on other Web sites.

In assessing whether the Microsoft-Yahoo pact raises antitrust concerns, regulators look both at the structure of the whole market, which Google dominates, and also at what competition between the two companies the deal would eliminate.

In clearing the deal without conditions, the Justice Department concluded that the parties don’t compete head-to-head much either for advertisers, or for publishers that use search engines on their own sites.

“Most customers view Google as posing the most significant competitive constraint on both Microsoft and Yahoo!, and the competitive focus of both Microsoft and Yahoo! is predominately on Google and not on each other,” the Justice Department said in a statement announcing its decision.

According to a person familiar with the investigation, the Justice Department’s Antitrust Division had largely signed off on the matter several months ago, before Microsoft and Yahoo filed their formal paperwork on the deal. The notice released today by the FTC signals that Justice officials approved the pact without opening an extended review after the companies sought formal approval.

updated at 6:35 p.m.

The chief executive of one of the world’s largest mobile phone operators told an audience at a telecommunications industry conference in Spain yesterday that regulators should pay close attention to competition in the mobile telephone industry, and suggested that Google should be a focus of heightened scrutiny, according to news reports about the event.

Speaking at the Mobile World Congress in Barcelona, Vodafone chief executive Vittorio Colao, according to a story in Business Week, urged regulators to “look at Google’s hold over search advertising on mobile phones,” and to “boost competition in the industry ‘before it’s too late.’”

In his speech, Vodafone’s Colao drew attention to the idea that  ”80 percent of the advertising online goes down one funnel,” according to a story in the Wall Street Journal.

In his speech, according to the reports, Colao discussed providers in different parts of the mobile industry, and singled out search advertising as an area that lacked competition.

According to the reports, Google CEO Eric Schmidt, who also was in attendance at the Barcelona gathering, said he would privately discuss the issue with Colao. Schmidt did tell reporters, according to Business Week: “As long as we’re pro-consumer we’ll be fine.”

Vodafone is the world’s second largest wireless carrier. Google is trying to bulk up its mobile advertising capability with a $750 million bid for Ad Mob. The deal is currently being reviewed by the Federal Trade Commission.

Google is also making inroads into other parts of the mobile industry, with its own operating system, Android, and its own phone, Nexus One.

The Justice Department and the Federal Trade Commission share responsibilities as the nation’s top two antitrust regulators, and they largely split mergers based on industry expertise.

But sometimes, both agencies want a crack at cutting-edge deals that don’t fall neatly into one industry.

Their tussles over cases have become legendary and, according to many insiders, passionate to the point of leaving bruised feelings.

The agencies guard the process like a state secret. But if both agencies want to review a deal, they sometimes resort to a kind of children’s schoolyard rules, insiders say: They simply take turns.

According to officials and lawyers close to the process, for several years, the two agencies have had an informal agreement to alternate review of mergers relating to Internet advertising services.

The agreement came about after the two agencies clashed over reviewing Google Inc.’s 2007 deal to buy online ad technology firm DoubleClick, according to three people familiar with the process. The two agencies then set up an informal agreement. Any reviews related to Internet advertising services would alternate between the Justice Department and the FTC.

Justice Department spokeswoman Gina Talamona said that “every clearance decision is based on expertise” and the agencies “work to ensure the best allocation of government resources.” FTC spokesman, Mitchell Katz, declined to comment, and both declined to explain what happens when both agencies assert expertise.

In a recent interview with Main Justice, former Assistant Attorney General for Antitrust Thomas Barnett declined to comment on specific arrangements between the agencies, but did say that, in rare instances,  Justice and the FTC would take turns on close calls.

Former Antitrust Division chief Tom Barnett said on rare instances the agencies take turns on reviews. (Getty Images)

“To the best of our abilities we generally tried to address each matter on the merits,” Barnett said. “Was there some element at one time or the other of, this is a close one, it’s going to go this way, the next one will go our way? Sure. That’s a reasonable thing to do. But that was relatively rare.”

Neither Justice nor the FTC will publicly explain how the process works, since the merger review process is confidential, and to do so would highlight inter-agency bickering. Disclosure could also potentially provide an opening for companies to try to game the system to ensure their deal lands at their agency of choice.

“Both agencies do apply the merger guidelines, so there shouldn’t be a significant difference on how the two agencies come out on a merger,” said Maurice Stucke, a professor at the University of Tennessee who worked as a trial attorney in the Antitrust Division. “Any differences should be at the margins as the agencies are structured differently.”

On most big transactions, including on the Comcast-NBC deal, observers expect some behind-the-scenes maneuvering on the part of each agency to get the deal.

In areas where neither agency has a clear advantage in expertise, the decision goes up the chain of command and the two agency bosses — the head of the Justice Department’s Antitrust Division and the chairman of the FTC — sometimes duke it out.

One of the last big clearance fights to make its way to the top was the settlement between authors, publishers and Google over the search giant’s plan to distribute digital copies of books online, according to two people with knowledge of the process. (Assistant Attorney General Christine Varney won that round, since the Justice Department weighed in on the settlement.)

Similar disputes date back decades. When both agencies wanted a crack at the now failed merger between AOL and Time Warner in 1999, then FTC chairman Robert Pitofsky promised then-AAG Joel Klein that the commission’s work on the deal wouldn’t count as expertise for future requests.

In a filing late yesterday in federal district court in New York, Google took several swipes at rivals and asked a federal judge to approve its plan to create a massive digital library of out-of-print books. A hearing on the agreement is set for next Thursday.

The Internet search giant entered into a class-action settlement with authors and publishers in 2008, but revised it after critics, including the Justice Department, complained that it violated antitrust and copyright law.

“No one seriously disputes that approval of the settlement will open the virtual doors to the greatest library in history, without costing authors a dime they now receive or are likely to receive if the settlement is not approved,” Google said in its filing.

The Justice Department took issue with the revised agreement last week, and said that by trying to use a class action settlement to secure a business deal, Google’s proposal still suffered from the same “core problem” as the original settlement.

“Despite [its] worthy goal, the United States has reluctantly concluded that use of the class action mechanism in the manner proposed by the [revised agreement] is a bridge too far,” Justice said in its filing.

Google pushed back in its filing yesterday, arguing that courts have previously approved similar settlements that went beyond the original complaint, including cases that involved players in the NBA and the NFL.

“The Department of Justice asserts that the [settlement] “attempt[s] to use the class action mechanism to implement forward-looking business arrangements that go far beyond the dispute before the Court in this litigation.” But it cites no case disapproving a settlement on that ground. Nor does any other objector,” Google said in its filing.

Google also rejected the DOJ argument that the agreement would give Google control over parts of the digital book market. The agreement “is strictly non-exclusive,” and “does not increase (and if anything reduces) the entry barriers to other firms that wish to provide the same services,” Google said.

The company took a swipe at its rivals who have been vocal critics of the agreement.  ”Competitors such as Amazon raise anxieties about Google’s potential market position, but ignore their own entrenched market dominance,” Google said. “Google is a new entrant and currently has 0 percent share in any book market. It does not have monopoly power and there is no “dangerous probability” that it will acquire such power.”

The company also dismissed the Justice Department’s suggestion that it revise the agreement to ask authors and publishers to opt-in to the settlement, rather than the current mechanism. which would force them to opt-out if they choose to.

“The opt-out feature of the settlement is of vital importance because that feature makes it possible for the plaintiffs and Google to establish a market for out-of-print books that otherwise simply could not exist in light of the prohibitive transaction costs of identifying and locating individual rights-holders of these largely older, out-of-print books,” Google said.

Some of the major opponents of Google’s book project – a group called the Open Book Alliance, which includes Microsoft, Yahoo! and Amazon as members — issued a statement yesterday criticizing Google’s filing.  ”The arguments it now offers to defend the amended settlement are the same arguments that have been rejected by the Department of Justice -– twice,” the group said in a statement.

“Despite the spin from Google’s attorneys, the amended settlement will still offer the search and online advertising giant exclusive access to books it has illegally scanned to the detriment of consumers, authors and competition.”