Microsoft Slams 'Weak' Google FTC Settlement

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Microsoft says the Federal Trade Commission's settlement with Google is "weak" and questioned the agency's finding that Google Search benefits consumers despite evidence the company uses its search system to promote its other products.

"We find it troubling that the agency did not adhere to its own standard procedures that call for the agency to obtain industry input on proposed relief and secure it through an enforceable consent decree," said Dave Heiner, Microsoft VP and deputy general counsel, in a blog post. "The FTC's overall resolution of this matter is weak and -- frankly -- unusual."

On Thursday, the FTC announced that it had concluded its 19-month inquiry into Google's business practices. As part of the settlement, Google has agreed to honor prior commitments to license industry-standard patents on fair terms rather than using them to try to ban competing products from the marketplace.

Although Google also made two voluntary concessions -- to allow companies to prevent Google from using scraped content to enhance its search offerings and to lift ad data API restrictions -- it emerged from the U.S. regulatory gauntlet more or less unscathed.

[ For more background on Thursday's settlement, read Google Settles FTC Antitrust Inquiry. ]

Microsoft is crying foul both because it believes Google is being held to a different standard than it has been and because it believes further intervention is necessary.

Heiner says the settlement allows Google to use its industry-standard patents to seek an injunction if it believes that patent claims against Google are also based on industry-standard patents.

"Since it is often hard to tell which patents are standard essential, the risk of injunction lawsuits from Google may dissuade firms from seeking to enforce their non-standard essential patents against the company," Heiner says, noting that Microsoft's patent licensing arrangements do not include that option.

Microsoft also complains that the FTC has done nothing to prevent Google from blocking Microsoft's effort to build a YouTube app for Windows Phone and that the agency failed to address claims of search bias.

Google did not immediately respond to a request for comment. Politico attributes Google's escape from substantive penalties to some $25 million spent by the company on lobbying.

David Wales, who formerly headed the FTC's Bureau of Competition and is presently a partner at Jones Day, disagrees with Microsoft's assessment. "The settlement really is the product of the FTC continuing to push the enforcement envelope against allegedly dominant companies like Google," he said in a phone interview. "When people say this is a weak settlement, facts and evidence matter, but you have to take into consideration the litigation risks."

The FTC, Wales said, would have had to litigate claims against Google in court and win to impose a remedy. The risk of failure and the cost of litigation thus makes a settlement preferable to an uncertain court battle.

Wales also noted that the Department of Justice's antitrust case against Microsoft posed the challenge of coming up with a meaningful remedy years after the conduct in question, at a time when the market conditions had changed. Were the FTC to take Google to court and win, there's no guarantee that it could come up with a suitable remedy years from now to address conduct found to be unlawful.

Wales said that rather than relying on the FTC, companies with grievances might wish to pursue their claims on their own.

Microsoft in 2011 filed an antitrust complaint against Google in the E.U. The fact that it has not chosen to sue Google directly in the U.S. suggests that its claims under U.S. law might be too weak to risk a court battle, the very situation confronted by the FTC. However, as Microsoft notes, the European Commission's investigation of Google's conduct continues.

Wales observed that in announcing its decision before European authorities rather than in tandem with them, the FTC might be signaling a divergence with regulators abroad. "That could mean more onerous remedies against Google," he said, even as he acknowledged that FTC chairman Jon Leibowitz might have just wanted to conclude the case before leaving the agency.

UPDATE:
After this story was filed, Google offered the following response to Microsoft's claim that Google was blocking Microsoft's effort to make a YouTube app for Windows Phone. The response does not actually address the question as to whether Google was using technical or legal rules to deny Microsoft's programmers the ability to create a YouTube app for Windows Phone.

"Contrary to Microsoft's claims, it's easy for consumers to view YouTube videos on Windows phones," a Google spokeswoman said in an email. "Windows phone users can access all the features of YouTube through our HTML5-based mobile website, including viewing high-quality video streams, finding favorite videos, seeing video ratings, and searching for video categories. In fact, we've worked with Microsoft for several years to help build a great YouTube experience on Windows phones."