The FTC is right, Google isn't a dangerous monopoly

The US Federal Trade Commission decision to close the Google "search bias" investigation is absolutely in the best interest of consumers. On that point, I agree with agency Chairman Jon Leibowitz, who announced the findings during a January 3 press conference. The result isn't what many Google critics or competitors hoped for, or even what some in the news media expected. Journalists repeatedly probed on the investigation's closing during yesterday's Q&A. Many people view Google to be a monopoly, perhaps dangerous one, while others regard the search giant increasingly as gatekeeper to the Internet.

In response to journalist questions, Leibowitz said that anyone in his position wants to take on the career-making case, which inference is clear: Google isn't it. "The Commission exhaustively investigated allegations that Google unfairly manipulated its search engine results to harm its competitors, a practice known as search bias", he said yesterday. "The Commission has closed this investigation by a 5-0 vote", which is unanimous, by the way. The decision fits long-standing US legal principles about competition and protecting consumers. Perhaps the government learned lessons from its monopoly case against Microsoft, which, as I previously asserted, failed to achieve its goals.

I don't mean to put a halo around Google's double ohs. The company will make voluntary changes to search that answer other concerns. "Google has also committed to stop the most troubling of its business practices related to internet search and search advertising", Leibowitz says. "Google will stop misappropriating, or scraping, the content of its rivals for use in its own specialized search results. Google will also drop contractual restrictions that impaired the ability of small businesses to advertise on competing search advertising platforms".

Stanley Cup

US antitrust law allows for lots of fair and really rough play. Winning monopoly cases is hard work. During Microsoft's antitrust trial, one antitrust lawyer used the analogy of hockey during the Stanley Cup playoffs -- referees are slow to call penalties that disrupt the flow of competition. While the core Google investigation was about search, FTC commissioners pursued what they comfortably could win -- abuse of industry-standard patents -- and what Google would easily concede. The agency wasn't ready for a knock-down monopoly case.

Google surely is dominant in search -- 67 percent share in the United States, according to comScore. But that's from an organically obtained monopoly, if the term could easily be applied. You can be sure Google would fight hard to keep the government from revealing search's secret sauce -- trade secrets. There are reasonable questions about whether a protracted legal battle would do more consumer harm than anything Google is alleged to be doing.

The Justice Department won its antitrust case against Microsoft in early 2000 -- and it was much stronger: The company had 90-plus percent operating system share on x86 computers and engaged in exclusive contracts that, according to the Feds, leveraged the existing monopoly into the adjacent browser market. The government sought in its remedy to break what lawyers called the "applications barrier to entry" posed by Office and Windows. More than a dozen years later, both products have overwhelming market share in their respective categories, which is why in September 2011 I called the case a "failure. But it succeeded in something else, which is worthy of debate particularly as Google's search monopoly comes under increasing antitrust and anticompetitive scrutiny: Stifling innovation at Microsoft".

Clearly the FTC wasn't convinced a formal filing against Google would cause more good than harm. "Google is unquestionably one of America’s great companies, innovative in fields from its core search engine to such varied ventures as driverless cars and augmented reality eyewear", Leibowitz says. "With [yesterday's] action by the FTC, Google can refocus on its business and its products, but with a clearer understanding that it, too, must do so while competing fairly".

Fair Play

As the Microsoft case also shows, capitalism did what regulators couldn't. While the Office and Windows monopolies are entrenched, their relevance declines as the so-called post-PC era advances. Surely, FTC commissioners considered the changing search landscape, particularly the push to mobile, in evaluating Google business practices.

"Many of Google’s critics, including many of its competitors, wanted the Commission to go further in this investigation and regulate the intricacies of Google’s search engine algorithm", Leibowitz says.

US 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, which may complain that the agency did not find consumer harm in Google's overall search practices. Protecting competition doesn't mean protecting competitors. They can still be harmed as long as consumers aren't.

"While not everything Google did was beneficial, on balance we did not believe that the evidence supported a FTC challenge to this aspect of Google’s business under American law", Leibowitz says. "As Chief Justice Earl Warren wrote more fifty years ago, and as the federal courts have consistently ruled since, the focus of our law is on protecting 'competition, not competitors'".

The investigation, which produced nine million documents also put Google practices in context of competitors. "Although some evidence suggested that Google was trying to eliminate competition, Google’s primary reason for changing the look and feel of its search results to highlight its own products was to improve the user experience", Leibowitz says. "Similarly, changes to Google’s algorithm that had the effect of demoting certain competing websites had some plausible connection with improving Google’s search results, especially when competitors often tried to game Google’s algorithm in ways that benefitted those firms, but not consumers looking for the best search results. Tellingly, Google’s search engine rivals engaged in many of the same product design choices that Google did, suggesting that this practice benefits consumers".

But Google's troubles aren't over. European antitrust law gives more credence to competitors, and Google still faces sanctions on the Continent if a settlement isn't soon reached. Leibowitz rightly scolds US companies: "Some may believe the Commission should have done more in this case, because they are locked in hand-to-hand combat with Google around the world and have the mistaken belief that criticizing us will influence the outcome in other jurisdictions".

Competition by litigation is one business strategy. We'd all benefit more if they would just shut up and innovate.

Photo Credit: Dariush M/Shutterstock