THE BLOG
01/08/2013 02:46 pm ET Updated Mar 10, 2013

Google/FTC Settlement: Traditional Antitrust for New Technologies

The Federal Trade Commission spent the last 20 months conducting an investigation into some of Google's business practices. The agency was under great pressure from Google's competitors to bring a lawsuit against the company, and impose restrictive antitrust remedies as punishment for Google's alleged misdeeds. Following the FTC's announcement of the terms of that agreement last Thursday, the press reports were almost unanimous in concluding that Google had a "big win" because the FTC concluded many of Google's practices benefited consumers. James Grimmelmann, a visiting law professor at Georgetown, described the decision as a "giant middle finger" to Google's competitors, as the FTC concluded that Google was "pure of heart" and "users win when (some) websites lose." The authors of this post have advised Google throughout the investigation and we were unsurprised that the investigation ended with Google's vindication: the competitors' legal arguments were exceedingly weak. The accusations against Google lacked evidence and didn't even suggest illegal behavior.

Those competitors, however, immediately cried foul, claiming the FTC shirked its duties, and a small handful of critics seem to agree. This claim bears little relation to reality.

The investigation culminated in voluntary and enforceable commitments on the part of Google, and a separate consent agreement related to patents. Google has agreed to change how it uses content from other websites in its search products, offering sites greater control over how their content is displayed. Google will also remove some restrictions related to ad campaigns, making it easier for advertisers using the Google platform to run their campaigns on third party platforms as well.

On the matter of search bias, a core argument of Google competitors, the FTC decided in a 5-0 vote that claims of Google's "search bias" were not a violation of antitrust law. Chairman Leibowitz said that  "[t]ellingly, Google's search engine rivals engaged in many of the same product design choices that Google did, suggesting that this practice benefits consumers." This may come as a "surprise" to the New York Times, but it makes sense: antitrust law is supposed to protect consumers, not competitors, and the FTC's decision reflects that.

Google also entered into a consent agreement with the FTC over the availability and use of injunctions in asserting Standard Essential Patents (SEPs). The agreement restricts the ability of Google to seek injunctions and exclusion orders to enforce SEPs, allowing the company to do so only under a narrow set of circumstances.

With years of full-blown patent wars as a backdrop, and an emerging consensus that the current patent system may be stifling rather than encouraging innovation, the FTC's consent agreement may provide a roadmap for future SEP disputes and help stimulate patent reform more generally.

Still, Google's critics have not let up. Even though any private company harmed by Google for antitrust violations could bring a lawsuit in a court of law, Microsoft and others have encouraged the FTC (and taxpayer) to foot the bill and expend precious resources. Microsoft's Vice President and Deputy General Counsel Dave Heiner argued in a blog post that Google could not be trusted to adhere to "non-binding assurances." But, in fact, the commitments made by Google, while "voluntary," are fully enforceable by the FTC. Attorneys Neal Katyal and J. Robert Robertson point out that Section 5 of the FTC Act, which forbids "unfair or deceptive acts or practices," is the means by which the FTC can hold Google accountable for its promises.

The New York Times suggested that the FTC overlooked the "harm" posed to competitors whose listings are lowered in Google search results due to algorithm adjustments, "forcing" them to spend more on advertising to compensate. While the algorithm changes may induce some sites to modify or increase their advertising spending, that in itself is not an antitrust violation. If a public-relations firm pitches the Times to run a profile of a company, but the paper doesn't, that company may have to advertise in the Times. The fact that a company has to spend more in advertising in the Times doesn't mean the Times violated antitrust law. The paper doesn't owe anyone stories; it serves its readers. Similarly, Google (and Bing and Yahoo!) don't "owe" any company traffic. If a company has to spend more on advertising on Google, in addition to investing in search-engine-optimization, that is not a violation of any law.

Despite claims by Google competitors that the agreement with the FTC is "disappointing and premature," the agency actually deserves credit for not bringing a case against Google. I'm all in favor of the FTC investigating companies when it believes there is proper cause to do so. An investigation, however, can lead to political pressure to bring a case, even if such a case is unwarranted.

Here, the FTC faced intense lobbying from Google's competitors to conclude its investigation with a lawsuit against the company. Yet after spending 20 months listening to those critics and carefully reviewing the facts and the law, the agency unanimously decided that the case against Google on "search bias" was weak (it was) and did not merit a complaint. Rather than failing in its duties, the FTC simply did its job.

In fact, the agency has not been a shrinking violet on antitrust matters in recent years. As antitrust lawyer David Balto writes, the FTC has not been idle during the first term of President Obama, bringing an importantantitrust action against Intel back in 2009, and achieving a pro-consumer settlement in the case less than a year later.  The agency has brought other actions against pharmaceutical companies and health care companies, as well.

Now the FTC has enforceable agreements with Google, having investigated a wide range of allegations, many of which were transparently flawed or did not even harm consumers.

This record demonstrates that the current FTC leadership is not shy about taking action where it sees fit to do so. In this instance, the FTC determined that the case against Google was weak and that aggressive action was unnecessary. Indeed, as Chairman Leibowitz described the settlement, "it is good for consumers, it is good for competition, it is good for innovation, and it is the right thing to do."