A Victory for Google as F.T.C. Takes No Formal Steps

By: New York Times Email
By: New York Times Email

WASHINGTON — The Federal Trade Commission on Thursday handed Google a major victory by declaring, after an investigation of nearly two years, that the company had not violated antitrust or anticompetition statutes in the way it arranges its Web search results.

By allowing Google to continue to present search results that highlight its own services, the F.T.C. decision could enable Google to further strengthen its already dominant position on the Internet.

It also enables Google to avoid a costly and lengthy legal war of attrition like the antitrust battle that Microsoft waged in the 1990s. That fight took an enormous toll on Microsoft and opened the door for competitors like Google to become the technology sector’s new leaders. Now, a weakened Microsoft was among those most vocal in complaining that Google was unfairly abusing a monopolistic position to thwart its rivals.

Google, which attracts 70 percent of all search queries in the United States, has used its search business, which generates billions of dollars in profit annually from advertising, to expand into businesses that include maps, restaurant reviews and travel bookings. Competitors worry that the F.T.C.’s decision will allow Google to continue to make inroads at their expense.

The decision sets up a potential conflict with European officials, who are working with Google to resolve similar concerns about the way the company operates its search engine in Europe, where it is even more dominant than in the United States.

Web search has become vital to the success of many businesses. Being ranked higher in search results can mean a great deal more traffic and revenue; being ranked lower can hurt both. Google has long claimed that it uses a neutral algorithm for search queries, something that competitors disputed.

But Jon Leibowitz, chairman of the F.T.C., said that “While not everything Google did was beneficial, on balance we did not believe that the evidence supported an F.T.C. challenge to this aspect of Google’s business under American law.”

The five-member commission voted unanimously to close its investigation without bringing charges, although some staff members argued vigorously that Google should face sanctions for using online search results to draw consumer traffic to its own services. The F.T.C. said it had found that Google’s practices improved its search results for the benefit of users and that “any negative impact on actual or perceived competitors was incidental to that purpose.”

Google did agree to make some minor changes to its search practices related to search advertising. The F.T.C. said those commitments were enforceable if the company violated them, but the agreement avoided a formal consent decree or litigation, weapons that the F.T.C. had available.

One F.T.C. commissioner, J. Thomas Rosch, said in a partial dissent that the commission would not be able to hold Google to its promises in any meaningful way, as it might do through a contempt proceeding or a fine.

Competitors said the war was not over. Fairsearch.org, a group of Google rivals including Microsoft, said Thursday’s action left the F.T.C. “without a major role in the final resolution to the investigations of Google’s anticompetitive practices by state attorneys general and the European Commission. The F.T.C.’s inaction on the core question of search bias will only embolden Google to act more aggressively to misuse its monopoly power to harm other innovators.”

In a less-watched part of the investigation, which will have a less direct impact on consumers, the commission found that Google had misused its broad patents on cellphone technology, and it ordered Google to make that technology available to rivals. That order may benefit phone manufacturers that use either Google’s Android operating system or competing systems. Some F.T.C. officials said that in the long run, the sanctions could be a bigger victory for consumers, encouraging the development of more innovative devices.

But the broadest impact of the F.T.C.’s action is to present more competitive challenges to companies that do specialty searches, for things like travel or shopping. Consumers will continue to see what has now become familiar on Google — the presence of results that link to Google’s other businesses. When a consumer searches for “airfare to Los Angeles,” for example, the most prominent results are generated by Google’s own travel business, rather than by the likes of Expedia, Priceline or Kayak.

On the company’s Web site, David Drummond, a senior vice president at Google and its chief legal officer, wrote, “The conclusion is clear: Google’s services are good for users and good for competition.”

Mr. Leibowitz, the F.T.C. chairman, called Google’s lifting of content from other Web sites “the most troubling of its business practices related to search and search advertising.” The company agreed to stop taking its rivals’ content, particularly reviews of things like restaurants or consumer products, for use in its own specialized search results.

Yelp, a consumer review site, complained that Google took parts of its reviews and placed them in its own results. When competitors objected, Google threatened to remove them entirely from results, something Mr. Leibowitz said “is clearly problematic and potentially harmful to competition because it might harm incentives to innovate.”

Google also agreed to stop contractual restrictions that prevented small businesses from advertising on competing search platforms.

Last year, some F.T.C. staff members pushed hard in reports to the commission that the company’s actions constituted “unfair methods of competition,” an area that, like that of antitrust, is policed by the F.T.C. But the trade commission faced a struggle in proving malicious intent — that Google changes its search algorithm to purposely harm competitors and favor itself.

Antitrust lawyers say anticompetitive behavior cannot be proved simply by showing that a change in the algorithm affects other Web sites and causes sites to show up lower in results, even though studies have shown that users rarely look beyond the first page of search results.

Read more from New York Times


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