Google settles with the FTC

During a press conference early this afternoon, the Federal Trade Commission announced a sweeping settlement with Google that ends an ongoing antitrust investigation. But Google's legal woes aren't over. The European Union has set an imminent deadline for settlement there that otherwise will lead to sanctions. Still, on these shores, the search and information giant got a big pass today that is sure to send competitors howling (as some, Microsoft among them, did before today's agreement).

FTC Chairman Jon Leibowitz announced the settlement from the agency's Washington, D.C. headquarters. He describes the nearly 20-month investigation as "exhaustive", collecting "nine million pages of documents". The big claim against Google: That the company favors its own services over others -- so called "search bias". Leibowitz says the investigation "does not support a claim" and commissioners voted unanimously to close it. That said, Google agreed to stop scraping content from partners, such as Yelp, and to end contractual obligations that impede small businesses.

The settlement is more about preserving availability of industry standard patents, which Google obtained with its Motorola Mobility acquisition. The FTC found against Google in a four-to-one vote. "We stopped that abuse", Leibowitz says. There will be a public comment period on the patent agreement.

During today's press conference, reporters repeatedly pressed on the search issue, which is core to Google's business and still open across the Continent. To reiterate, Google got a big pass on allegations that it abuses search for self-benefit. "It does not violate American antitrust laws", Leibowitz says. "It's not a violation of the FTC Act. The facts weren't there under the laws we applied".

The voluntary settlement, or consent decree, means Google avoids direct sanctions, and the stigma and legal obligations they bring. Under US law, court-approved sanctions carry considerably more weight and are not open to interpretation. The consent decree puts Google more in control of changes to its business practices while providing leeway for any future issues. The US Justice Department isn't precluded from pursuing separate antitrust action, nor the FTC from opening future investigations. However, Leibowitz says the Justice Department is unlikely to separately go after Google. Regarding his agency's Google oversight: "There are monitoring commitments", Leibowitz says that enable the agency to enforce the agreement. There is fine of $16,000 per violation.

The specter of antitrust has haunted Google for some time. The European Union's competition commission opened its antitrust investigation in October 2010. The FTC investigation started in early summer 2011. Google's dominance is the core issue. On both continents, the company has overwhelming search share and has started to aggressively leverage this reach into other products as well as ongoing accusations that Google favors its own stuff, even over partners', negatively impacting competition.

Competition is the key and where European and US laws differ. Here, antitrust law seeks to preserve competition to protect consumers. The presumption: Consumers benefit when there is free-flowing competition and are harmed when one or more companies shut out competitors.

Competitors may complain that the agency did not find consumer harm in Google's overall search practices. Instead, FTC commissioners focused more on the harm from patent lawsuits, which could lead to injunctions blocking smartphones and tablets from shipping -- and that would cause consumer harm by hampering product choice and blindsiding innovation.

There's an important distinction to be made: Protecting competition doesn't mean protecting competitors. They can still be harmed as long as consumers aren't. Under US law. Matters are different on the Continent, where antitrust laws also more directly benefit competitors. As such, I expect Google will have a much tougher time reaching an agreement with the European Commission.

This isn't Google's first settlement with the FTC. In March 2011, the company agreed to 20 years of oversight for privacy breaches related to the now defunct Buzz service. Google also paid a $22.5 million fine for breaching Safari browser privacy controls.

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