Liz Gannes

Recent Posts by Liz Gannes

AllThingsDC: Is There Now “Blood in the Water” for Google Versus FTC?

It’s hard to find people in Silicon Valley talking about Google’s imminent antitrust battle with the United States Federal Trade Commission.

It’s much less difficult in Washington.

In fact, as one D.C. person familiar with the ongoing FTC probe aimed at slapping Google for its worrisome dominance of search and other markets put it most colorfully:

“There’s now blood in the water. All these people who have wanted to kill Google, this is their chance. They will never have a better opportunity than the next 30 days.”

And that’s why I’m in the nation’s capital for the next few days, sussing out the current status of the impending potential battle between Google and regulators.

The timing is tight. While there might have been a pause while the election played out, FTC Chairman Jon Leibowitz’s desire to step down and get back to the private sector is widely known.

There is also the increasing pressure for him to act soon, especially since Leibowitz pushed hard to get the case in an intra-governmental tussle with the Department of Justice.

Still, until now, it’s been a funny pace of sprinting fast and jogging slow, following a more than 18-month-long investigation of Google’s search business, in order to file a formal complaint for what would surely be a battle over a much longer time frame.

After FTC staffers recommended that the agency had enough material from interviews and internal documents for a case, commissioners have over the last two months been talking to the players themselves.

Google has been engaged in ongoing talks to settle with the FTC, although as Bloomberg reported, the company is now facing an ultimatum after failing to propose a reasonable remedy.

That appears to be the case: Leibowitz told Google on Friday that he planned to call for a vote within the next couple of weeks, sources said.

Thus, the clock is now clearly ticking for what some people are describing as Google’s “Microsoft moment,” referring to the devastating antitrust trial from the 1990s in which the government was able to label the software giant as a “monopolist.”

Such an outcome could be equally damaging to Google, of course, if the case moves forward.

At that point, once a complaint is filed, the spotlight would move to a top litigator, Beth Wilkinson, whom the FTC brought on in April.

The well-respected attorney, who is a partner at Paul, Weiss, Rifkind, Wharton & Garrison, is also a former prosecutor for the Justice Department. Hired on a part-time contract for one year, Wilkinson is best known for her work on the Oklahoma City bombing case against Timothy McVeigh.

The Google case is nowhere as dramatic or tragic, but Wilkinson’s involvement shows the seriousness of the matter. Seen through a Google-tinted lens, that’s the point — to make the threat of litigation seem very serious indeed.

There are many added complications to the basic case, including how U.S. regulators will line up with their equivalents in the European Commission, which has also been investigating Google’s business practices. And, no surprise, there’s also the likelihood that some publicity-seeking state attorneys general will want to pile on — oops — participate.

In Washington, lawyers and lobbyists like to talk about what section of antitrust law the FTC will use to charge Google. Leibowitz has indicated he might want to push on a less-used power to regulate businesses for “unfair methods of competition.” There’s also the question of whether it’s better for the FTC to file in an administrative court or a federal court, both now and for later appeals.

If a majority of commissioners do approve moving the case forward, most expect that Google will likely face multiple areas of inquiry.

They include:

  • Search entry points, around Google’s history of exclusive search syndication deals with Web portals and publications, in browsers and on phones
  • Google’s policies of exclusivity in search advertising APIs, where customers and competitors are inhibited from sharing data between various advertising options from different companies
  • Various issues related to discrimination and scraping of vertical search competitors, as Google became more involved in areas such as travel and local
  • Possibly, policies around its Android mobile operating system that give Google search exclusivity on partner phones

So, what can Google do to prevent the legal onslaught? It could agree to accept various behavioral changes such as opening up its search advertising APIs. It could be subject to more structural changes, including separating its advertising out from other products, and vertical search out from core search. It could give up exclusivity on its search deals.

What seems clear at this point is that better labeling and transparency — which Google would prefer as a remedy — won’t be enough to satisfy regulators and competitors.

More to the point, the foes of Google now include a panoply of companies across a wide range of industries — this is now not just a Microsoft-fueled effort — many of whom are expecting some sort of legal challenge.

So why should Silicon Valley care?

While many in the tech industry love to hate on Google these days, it is still very unclear if its search dominance has really reached Microsoft operating system proportions of days past. In addition, there is the question of whether regulators should be cracking down on technology that is now changing more quickly than ever.

Still, as one insider put it: “They should care because an uncontained Google is bad for all of them.”

Stay tuned to see if the FTC can actually prove just how bad that is.

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