How the FTC Could Address Its Concerns About Google Without a Lawsuit

It looks like the Federal Trade Commission is coming after Google with a wide-ranging antitrust complaint about its business practices, and will do it before the end of this year. That’s the lead of a Reuters report that moved Friday, citing unnamed sources familiar with the agency’s plans.

The story doesn’t identify which four of the commission’s five members have concluded, after a year of investigation, that Google used its overwhelming command of the Internet search market to hurt rivals in the travel, shopping and entertainment sectors, and to benefit itself. They’re also concerned about Google’s handling of certain patents related to smartphones.

Meanwhile, FTC chairman Jon Leibowitz, pictured from his June appearance at D: All Things Digital, has said he wants to see a decision by the commission before the end of the year.

If the FTC brings the case, Google has two fundamental courses of action: Settle or fight. If it settles, the result will be a negotiated order that applies to Google, and Google only. The same will happen at the end of a lawsuit, assuming the FTC wins, which isn’t exactly certain.

There is another course of action the FTC could take, and has been known to take before: Issue guidelines. During the week, I talked with David Balto, a former FTC litigator during the Clinton Administration who has long been my go-to guy on antitrust law. He says enforcement actions can be messy, and even when they’re successful they only apply to the target, not to anyone else.

“Antitrust law is a really narrow tool,” he told me. “It doesn’t really fit in a lot of situations.”

The commission issued guidelines in 2002 in relation to Internet search companies, in an attempt to address practices that many companies were engaging in. Obviously, things have changed a lot in 10 years, so these guidelines would necessarily have to be updated substantially, and probably adjusted again within another two or three years.

Let’s say, for the sake of argument, that Google opts not to settle, but to fight. The result, Balto says, will be a complicated lawsuit that could take years, cost both sides million, and in the end, the FTC could lose. It has happened before. In 2003, the commission brought an enforcement action against chip interface designers Rambus. The FTC argued that Rambus had played fast and loose with the rules of an industry body that set standards for the memory chip industry when after leaving that body it tried to enforce patents against several memory companies.

After almost seven years of costly litigation, an appeals court sided with Rambus, saying that the commission hadn’t proved a violation had occurred in the first place. After all that, the FTC has started to hold hearings on the process of setting standards.

Guidelines would apply to everyone and would set ground rules for every participant in the market, including Google, Microsoft, Yahoo and whoever else might be affected. And all parties would benefit from participating in the dialogue leading up to the crafting of the guidelines: In the end, there would be a more informed consensus, and everyone involved will know the rules of the road.

It would be more complex and would take longer than it did 10 years ago, Balto says, but in the end, the FTC’s mission is to protect consumer welfare, not bring big and costly lawsuits.