Liz Gannes

Recent Posts by Liz Gannes

Will the FTC Blink on the Google Antitrust Case?

It may be Turkey Day on Thursday, but nobody wants to look like one.

When everyone gets back from this week’s Thanksgiving break, many observers are expecting there to be some progress on the U.S. Federal Trade Commission’s investigation of Google’s alleged anti-competitive activities.

The crucial issue right now is whether the FTC decides to legally challenge Google on “search manipulation” — that is, whether Google manipulates its search rankings to give preference to its own sites, while also pushing down competitors’ rankings.

But, according to people intimately involved in the case, the FTC is hesitating on whether it is willing to go to bat on that particular and critical point, as Google has persuasively argued to some of the FTC commissioners — specifically Tom Rosch — that search is shifting from delivering text links to other Web sites to delivering robust and helpful information on the spot.

For example, when someone searches for an address, instead of providing a list of links to pages on various mapping sites, such as for AOL’s MapQuest, Google surfaces a clickable image of the map itself from its own mapping service.

The company is asserting that this is a better experience for consumers, even if it disadvantages other sites. The center of its argument is that it is doing what’s best for users — and it just so happens that it’s also good for Google properties.

While that might be selfish, it might not be illegal, and it is a difficult legal task for the FTC to prove otherwise, especially since damages to consumers are not clear.

What’s clear is that competitors from a wide range of companies are upset that they don’t get more prominence, but the question centers on whether Google — under antitrust law — might not be compelled to help them.

Said one lawyer close to the situation: “Coca-Cola does not have to carry Pepsi in its gas-station coolers.”

Therefore, the FTC would need solid proof that Google specifically tried to hurt a competitor who had better information in order to push its own properties.

And while there are other issues in play, too — such as advertising data portability, exclusive search agreements on sites and phones and perhaps even issues involving standards essential patents — evidence of abuse of search dominance is at the dead center of the potential battle.

Without it, the FTC might be stymied.

Bloomberg reported the same thing earlier today, saying the FTC is unsure it has enough evidence to prove that Google’s activities harmed consumers. That’s a major change from a series of previous leaks to Washington reporters in recent months that indicated the FTC was proceeding with a strong case.

As one source familiar with the negotiations told me: “There’s a sense the FTC has been outmaneuvered by Google once again.”

After a highly publicized investigation of Google, if the FTC were to drop the search ranking aspect of the case, it could still be taken up by the Department of Justice, which had originally wanted purview over the issue. (Please note: That’s actually what happened a decade ago with the Microsoft antitrust case.)

But to drop the search part of the case would be a massive blink by the FTC that would have implications for further government regulation of technology companies. “They’ll never bring for many years a case against a high-tech company if they don’t bring it here,” said another D.C. insider today.

That doesn’t mean tech companies would all be happy about Google effectively winning. For Google to go unchallenged on antitrust violations could be seen as a green light for the company to pursue whatever form of competition it wants.

Take FairSearch, a coalition of companies including Microsoft, Expedia and TripAdvisor, that is squaring off against Google with a list of demands.

Spokesperson Ben Hammer said via email today: “The members of FairSearch would view any resolution to the antitrust investigations of Google, whether through litigation or a settlement, as incomplete if it does not end Google’s preferencing of its own products ahead of natural search results.”

The FTC had previously given Google a couple of weeks to talk about a settlement before its five commissioners voted on a formal complaint. But sources said Google is trying to call the FTC’s bluff, and it may be working.

Google is in negotiations with the tougher European Commission over antitrust as well, where search manipulation has been at the center of the case, so a timid move by the FTC would also look weak by comparison to the EC — which, in fact, is nothing new.

The background for all this is whether the FTC under Chairman Jon Leibowitz — who is expected to leave soon after serving eight years at the agency — has seemingly been “outmaneuvered” by Google in recent years.

First, the agency let Google’s controversial AdMob acquisition through, with the shaky reasoning that Apple’s purchase of rival Quattro made the mobile search ad market balanced.

Then it dropped its investigation of Google’s Wi-Fi spying. And, most recently, after it got Google to agree to a privacy consent decree over Google Buzz, the company promptly broke it with its Safari cookie workaround — and was fined a piddling $22.5 million (which was just upheld last week).

So, borking this case, which many consider to be the one true shot at restraining Google’s power, would really not look good.


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