On Jan. 3, 2013, the U.S. Federal Trade Commission (FTC) and Google reached a series of agreements that closed the FTC’s investigation into several of Google’s business practices, in return for Google’s agreement to modify those practices. The investigation looked into practices in three primary areas: that Google misused patent protection laws to prevent competition, that Google misappropriated content from rivals’ websites in providing specialized search results and provided biased search results, and that Google imposed contract restrictions in it search advertising agreements that limited the ability of small businesses to advertise on competing platforms. While the wide-ranging settlement would seem to end the immediate threat of an antitrust lawsuit by the federal government against Google, Google and its business practices continue to be investigated by other agencies.
The FTC is charged with investigating “anticompetitive business practices” such as violations of federal trade practices and consumer protections laws, and it is empowered to take action in response to those violations. In June 2011, the FTC initiated an investigation of Google’s business practices with the initial focus on Google’s search and advertising activities. Google’s 2012 purchase of Motorola’s smartphone and mobile device business, and its accompanying portfolio of more than 24,000 patents and patent applications led to an expansion of the investigation. Many of these patents support core industry standards for wireless and internet technology and platforms such as smartphones and tablets, and as such, they are essential for the basic operation of these products and services.
The agreement outlines several steps that Google agreed to take to resolve the concerns that triggered the investigations. It should be noted that neither the investigations nor the settlement constitute a finding that Google violated any law or admitted guilt. Google indicated that it agreed to take the steps “in response to the agency’s concerns.” The FTC, however, indicated that it will enforce some of those steps through a consent order, which has the force of law and can be enforced by the FTC or the courts.
As noted, the agreement focuses on three areas; search bias and appropriated content, competitive restrictions in search advertising agreements, and restrictions on the use of the Motorola portfolio.
In investigating Google’s search activities, the FTC focused on Google’s Universal Search product, a service that combines content from news, images, blogs, and other web content, as well as Google’s own products such as shopping and local services. The allegation was the Google had adjusted its search algorithms specifically to “demote” competitive websites. The FTC found that while there was some evidence suggesting that Google was “trying to eliminate competition,” the investigation found that the Google’s primary goal behind Universal Search was to “improve the user experience” and that the demotion of competing websites had a “plausible connection” to improved search results. The FTC noted that these practices were not unique to Google and that other search engine services engaged in similar actions.
Google also agreed to stop appropriating, or scraping, content from other websites for use in its search results. One cited example of this practice was in user reviews or local restaurants available through Yelp. Allegedly, Google would scrape the reviews and remove the references to Yelp, creating the impression that the reviewers were generated by Google users. Google also allegedly threatened to remove websites that complained about these practices from the Google search results. Google’s agreement to stop this practice will be monitored and enforced by the FTC.
Google also agreed to eliminate restrictions on a search advertising practice known as “multi-homing.” Multi-homing permits businesses to run advertising campaigns on multiple and competing advertising platforms, gathering data about advertising effectiveness through application programming interfaces (APIs) with each platform. The FTC raised concerns that Google’s contracts with advertisers had conditions on the use of Google’s API that hampered advertisers’ abilities to gather data from other platforms.
In some respects, the bulk of the agreement between the FTC and Google dealt with the patent portfolio that Google acquired from Motorola in 2012. Because many of the patents are essential components of wireless and internet technologies and devices, Motorola had committed to allow other technology and devise manufacturers to obtain “fair and reasonable” licenses to use the patents. Motorola reportedly reneged on these commitments and used litigation and injunctions against manufacturers, a practice continued by Google and known as a “patent hold-up.” Google agreed that it will no longer seek injunctions against manufacturers that are willing to obtain and pay for a fair and reasonable license. Significantly, Google also agreed to withdraw existing claims for injunctions not only in the U.S. but also worldwide.
Reaction to the settlement has been mixed. The New York Times declared the settlement as a “big victory for the search giant.” CNN declared it a “win” that “dodges (a) major antitrust bullet.” At a recent conference of law professors, several commentators pointed out that Google has more competitors and competition in the search and search advertising marketplaces, including Amazon and Facebook. This would decrease the likelihood that Google has a monopoly on search and search marketing. They also pointed out the Google has a free speech right to select or deselect content to reach its desired audience.
The settlement also has its critics. At the same law professors’ conference, other speakers criticized Google’s continuing lack of candor about its own links, calling it “stealth marketing.” The public interest organization Consumer Watchdog called for further investigation of Google’s search practices. The group argues that Google continues to “skew ... search results to favor its own products and services while portraying the results as unbiased.” The group called on the Department of Justice’s Antitrust Division to conduct its own investigation. At least two members of Congress also expressed concerns that the agreement may not have gone far enough and vowed to monitor Google’s continued practices under the FTC agreements.
Google is not completely off the hook. Within the European Union, Google is under investigation for both its search practices and its patent restrictions. Joaquin Almunia, the European Union’s competition chief, was recently quoted in the Financial Times as saying that he feared that Google’s practice of highlighting its own services was “an abuse of (Google’s) dominant position.” Speaking to reporters after the FTC announcement, Almunia went on to say that the EU is also continuing to investigate Google’s patent practices and is reportedly looking into Google’s Android operating system. In addition, several state attorneys general are also investigating Google for violations of state laws. These states include Texas, California, and New York. These investigations remain ongoing and could yet spell trouble for or further changes to Google’s search, advertising, and patent practices.