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Google Confirms FTC Antitrust Investigation

The next move will be lots of subpoenas for documents, experts say. Google says the focus of the FTC investigation remains a bit cloudy.

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Google on Friday said that it has been notified by the Federal Trade Commission that the agency has begun a review of its search business, confirming reports published on Thursday.

In a blog post, Amit Singhal, who oversees Google's search technology, said the FTC's concerns aren't yet clear, despite the fact that Google has been trying to allay the concerns of regulators for several years now and the fact that Google has been dealing with an E.U. antitrust inquiry in Europe since late last year.

Those concerns--that Google has abused its dominance in search advertising to favor its own sites in search results--have been shaped by many of Google's competitors, most notably Microsoft, a company that has experienced the challenges of operating under antitrust remedies.

Microsoft has been advocating regulatory action against Google for several years. In 2007, Microsoft chief legal counsel Brad Smith urged the Senate antitrust subcommittee to reject Google's proposed merger with DoubleClick. In 2008, he urged the same subcommittee to disallow Google's proposed deal to partner with Yahoo.

Google returned the favor in 2009 by supporting the efforts of E.U. regulators to make the browser market more competitive, thereby winning a place on the browser Ballot Choice screen presented to Windows users in Europe.

In 2010, Microsoft joined with a number of travel and Internet companies to form FairSearch.Org, a coalition of companies opposed to Google's acquisition of ITA Software and its dominance in search. spelled out the concerns of Google's competitors in a statement published Thursday on its website. "The result of Google's anti-competitive practices is to curb innovation and investment in new technologies by other companies," the group said. "These anti-competitive practices include scraping and using other companies' content without their permission, deceptive display of search results, manipulation of search results to favor Google's products, and the acquisition of competitive threats to Google’s dominance."

Antitrust law is usually focused on harm to consumers rather than to competitors. But according to a statement issued by Geoffrey Manne, senior adjunct fellow at TechFreedom and lecturer in law at Lewis & Clark Law School, and Joshua Wright, professor of law & economics at George Mason University School of Law, the FTC has indicated that it intends to pursue its investigation of Google under Section 5 of the FTC Act, which prohibits unfair methods of competition. The two law professors worry that the FTC may attempt to address conduct that has the effect of "reducing consumer choice" without proof that such behavior harms consumers.

"Troublingly, 'reducing consumer choice' seems to be a euphemism for 'harm to competitors, not competition,' where the reduction in choice is the reduction of choice of competitors who are put out of business by pro-competitive behavior," said Manne and Wright. "The fact that Google's rivals--including Microsoft itself--are complaining about the company suggests, ironically, that Google's practices are in fact pro-competitive and thus pro-consumer."

Ted Henneberry, an antitrust and competition partner in Orrick, Herrington & Sutcliffe's Washington, D.C. office and a former trial attorney in the Justice Department's antitrust division, said in a phone interview that there's not really any difference between how the DOJ and the FTC approach such cases, apart from the fact that the FTC's compulsory processes--issuing subpoenas--is more formalized.

And the next stage in the FTC's inquiry is likely to involve plenty of subpoenas: Henneberry said the FTC will seek documents from Google and third parties as it looks for evidence of unlawful behavior.

The FTC investigation should be significantly more rigorous than regulatory merger reviews, most of which are approved. "This poses a lot more risk to the company," said Henneberry. "Think Microsoft [and its antitrust case]. And in the U.S., it can mean a lot of private litigation."

In other words, if Google is found to have violated the law, competitors will seek compensation through lawsuits.

Henneberry said he expects Google will have to make some changes in the way it does business.

"I would handicap it this way," he said. "There are a lot of complainants out there. When the agencies undertake an investigation like this, it means there are some serious issues that they have. I would say look at the ITA merger deal and the remedies [the DOJ] imposed there. They set up a mechanism for other companies to complain about search bias. That's obviously a core issue for them."

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