FTC rejects claims of antitrust violations against Google

Federal Trade CommissionJanuary3rd, 2013 Statement in matter of Google 111-0163 issued by Federal Trade Commission: “In sum, we find that the evidence presented at this time does not support the allegation that Google’s display of its own vertical content at or near the top of its search results page was a product design change undertaken without a legitimate business justification. Rather, we conclude that Google’s display of its own content could plausibly be viewed as an improvement in the overall quality of Google’s search product.

Similarly, we have not found sufficient evidence that Google manipulates its search algorithms to unfairly disadvantage vertical websites that compete with Google-owned vertical properties. Although at points in time various vertical websites have experienced demotions, we find that this was a consequence of algorithm changes that also could plausibly be viewed as an improvement in the overall quality of Google’s search results. Although our careful review of the evidence in this matter supports our decision to close this investigation, we will remain vigilant and continue to monitor Google for conduct that may harm competition and consumers”.

A British couple called “Foundem”

Some may find it hard to conceive the idea that search engines can draw so much attention to themselves. This prejudice can be softened thinking about the hidden relevance they have in a person’s life, as large amount of data is absorbed through internet.

Business, news, advertising, weather, health, food are only examples of what search engines are called to find. Far on 2006, there was an average of 6.4 billion searches per month, a rate grown as fast and diffusely as search engine act as filters of relevant information, returning with accuracy what users are looking for.

Global search engines like Google, Bing or Yahoo as well as regional search engines like Chinese Baidu or Russian Yandex, are performed by complicate algorithms programs and run their own business through commercial agreements with devices manufacturers, publishers and advertisers at first. Although most of search engines’ notoriety rests on universal, non-topic online search service, they usually provide also prices comparison, flight booking, restaurant and hotel reservations and other similar facilities.

Among them, Google is by far one of the most famous search engine when you consider that it exists a verb “to google” for “to search online with Google”.

A new “vertical” search engine

Problems arise when a British groom-and-bride couple decide to set up their own search engine, a vertical one, providing product price comparison services.

They name it “Foundem” and run it in happiness until their traffic begins to drop down.

Google is prime suspect and algorithm “Search Penalty” its lethal weapon since it is well known that it works to exclude from search results those pages supposedly not relevant for users.

A double damage for Foundem: Google not only does not show any longer Foundem among search results for “price comparison” but it also excludes it from the list of sites whose content is relevant for a highly specific search.

A lot of requests after, Google announces Foundem that this demotion must be considered a penalty for their poor of quality content and it is clearly not the answer Foundem was expecting. So much the British couple is asking for justice to be done against Google, that on the road they joined Microsoft, Kayak, Trip Advisor and various Google’s rivals concocted in Fairsearch.org before half the world courts.

How the FTC came to the Statement regarding Google's search practices

After a two-year investigation in the matter of Google Inc., the Federal Trade Commission issued a Statement on January 3rd 2013 closing the portion of investigation related to alleged Google’s search bias.

The rest of investigation was closed on December 12 with the approval of voluntary commitments issued by Google and regarding both AdWords API terms and conditions and display of third party content. Due to insufficient evidences to support probes, no formal proceeding has been opened against Google for antitrust law infringement.

Many complainants against Google

Foundem, Microsoft, Samsung Telecommunications America and Fairsearch.org mainly pressed charges of antitrust law infringement against Google pursuant to Section 5 of FTC’s Act provisions.

They were requested to submit documents by subpoena duces tecum for interest of the ongoing investigation against Google but, since FTC did not open a proceeding against Google, the complainants were not allowed to join as third-parties and external intervention was limited to participating the investigation.

The claim of “search bias”

The core claim targets the practices supposed to be “search bias”, namely the demotion of competitors’ results as an effect of “Universal Search”, a product of Google that prominently displays proprietary services in response to specific categories of searches along with the alleged alteration of Google’s algorithms to demote rival vertical websites.

Moreover, complainants address two more practices under antitrust law infringement: scraping or the misappropriation of third-party content although copyrighted, then displayed as Google’s own content and multi-homing or the demand of exclusivity for advertisers restricting their faculty to contract with Google’s competitors. Google presents its own defence rejecting charged practices as anticompetitive but declaring them as “entirely consistent with all applicable laws and regulations”.

A high-end investigation: FTC scanned over 9 million pages

On January 3rd 2013 the US FTC closes investigation n. 111-1063 against Google’s alleged anticompetitive practices under Section 5 of the Federal Commission Act, 15 USC par. 45 provisions about unfair methods of competition and under Section 2 of the Sherman Act limited to a monopoly situation.

After a long investigation, where large numbers of papers, sheets, documents and interviews have been processed by FTC’s staff and attorneys have interviewed stakeholders and competing companies, the FTC unanimously concludes that Google is not liable of unfairly preferring its own content while selectively demoting competitors’ one, having not found sufficient evidences supporting charges beside the offering of plausible procompetitive justifications.

Effects of “competition on the merits” over antitrust policies

By favoring its own content Google improves user experience and stimulates its competitors to get better products. As to the reported adverse effect of demotion suffered by competitors, it should be referred to a “competition on the merits” that is encouraged rather than threatened by law.

The practice under consideration is not motivated by an exclusionary intent, as the FTC states, because Google changes its page design to promote the most relevant information even if turns out to promote its own content demoting competitors.

Such a conclusion comes from the assessment of different elements. First, the assessment of click-through data: test shows that after design changed, results returned more focused products and shopping comparison enhancing user experience. Then, as competing search engines are adopting the same features of Google’s objected ones, it can only mean that they are effective and useful for the search engine itself too.

Last, even if competing vertical search engines suffered sales lost from demotion consequent to design changes, individual merchant pages are pushed up in the search results page offering users a wide range of choose.

In sum, Google’s practices are viewed by FTC as an “improvement in the overall quality of Google’s search product”, on the contrary, should they be prevented by an antitrust law enforcement, users would be afflicted being deprived of products they are demonstrated to prefer.

FTC closes investigation about scraping and multi-homing too

To the extent that they are parts of interest in the same investigation, in the two additional claims the FTC found elements of exclusionary and unfair competition acts.

Rather than filing an action against Google, FTC approved on 27th December 2012 Google’s voluntary commitments where the search engine addresses the Federal Trade Commission’s concerns.

It agrees to consent website an opt-out from Google’s vertical search results remaining into the organic ones and to let AdWords advertisers free to coordinate different advertising campaign across multiple platforms. As voluntary commitment not enforceable in a contempt proceeding, a material violation of the related provisions would be actionable by the FTC under Section 5 of the FTC Act, 15 U.S.C. §45.

Valuable aspects of the decision

Deeply examined by economists and politician, the FTC’s decision has many interesting and valuable aspects.

One of the most discussed point regards the convenience of the FTC’s acceptance of non-binding voluntary commitments without entering a Consent Order providing penalties in case of non-compliance, although antitrust concerns arose from Google’s two of three scrutinized practices.

Furthermore, the decision is an interesting example how the concept of competition on the merit can justify competitors’ demotion. As to this last point, Federal Trade Commission’s decision is consistent with US antitrust law purpose to protect competition and not competitor so that whenever an undertaking’s success is based on users’ favor, its success cannot be presumed grounded on exclusionary acts.

Another circumstance often recalled when it comes to this decision, is the role that economics played, since the FTC’s investigation was supported by attorneys, economists and even the Bureau of Economics. What is argued is whether the economic perspective influenced the FTC’s decision over Universal Search’s effects, valued under its innovation and improvement feature rather than under a form of anticompetitive practice.

Then, scholars have questioned themselves how far innovation technology can challenge antitrust law, to safeguard competition without abuse of dominance risk.

Addressing antitrust concerns with voluntary commitments again

Prior to introducing its claim to FTC, Foundem filed a claim before UK Court against Google and it was joined by the same other companies we find as complainants in the FTC’s investigation plus eJustice.fr, Ciao! and other Europe based search engines.

Likewise FTC’s case, on 2016 Google addressed concerns about antitrust violation for alleged search bias and abuse of dominant position before EU Commission, regarding practices in the European Economic Area, and before the Canada Competition Bureau, closing both investigation without opening formal proceeding, with binding voluntary commitments.

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