News surfaced yesterday that Google is facing a Federal Trade Commission antitrust investigation concerning its search practices, specifically the way it features Google products in search results ahead of competitors. Today, Google responded in a blog post, touting the company’s transparency and commitment to users.
“It’s still unclear exactly what the FTC’s concerns are, but we’re clear about where we stand. Since the beginning, we have been guided by the idea that, if we focus on the user, all else will follow.” While the details of the case are emerging, it’s clear Google is not facing a traditional antitrust case the way Microsoft did in the late 1990s. For Google, that could make all the difference.
“Less than 1 out of every 10 investigations leads to an enforcement action … There has not been a successful Section 5 litigated case since 1972.” -David Balto, former policy director for the FTC’s Bureau for Competition.
Microsoft: A Different Type of Battle
Microsoft’s legal battle with the federal government was essentially about tying Internet Explorer to its Windows operating system. At the time, Windows controlled almost the entire personal computing world, hence Internet Explorer was the de facto choice for Web browsing. In the end, Microsoft was found to be in violation of sections of the Sherman Antitrust Act, which is the statute the feds use to go after monopolies. This is not what Google is facing. Google will be investigated under the Federal Trade Commission Act’s Section 5, which deals with deceptive and unfair acts and practices.
“There has not been a successful Section 5 litigated case since 1972,” said David Balto, a senior fellow at the Center for American Progress and former policy director for the Bureau for Competition at the FTC.
What is Section 5?
Let’s take a closer look at what Section 5 entails. According to the IT Law Wiki, here is the rubric for the FTC’s “Policy of Deception:”
1. There must be a representation, omission or practice that is likely to mislead the consumer. This includes the “use of bait and switch techniques.”
2. The practice is examined from the perspective of a reasonable person in the circumstances. If the practice “is directed primarily to a particular group,” such as Internet users, “the Commission examines reasonableness from the perspective of that group.”
3. The representation, omission or practice must be a material one, i.e., it is likely to affect the consumer’s conduct or decision regarding the produce or service.
On the “unfair practices” side: “An act or practice is unfair, also in violation of the FTC Act, if it causes injury to consumers that: (1) is substantial; (2) is not outweighed by countervailing benefits to consumers and competition; and (3) consumers themselves could not reasonably have avoided,” according to the IT Law Wiki.
When Google says “we are unclear what the FTC’s concerns are,” it is probably referring to these guidelines in Section 5.
Is Google the Consumers’ “Best Friend”?
“Google is the consumers best friend when it comes to operating search,” Balto wrote in an email. “Much of what Google does is protecting consumers against sham and deceptive sites … Consumers realize they are better off with the Google cop on the beat. If these bad guys are demoted it is not an antitrust concern in any respect.”
When Balto refers to “bad guys,” he is mostly referring to sites and brands that game the Google system, such as J.C. Penny did when it was buying hidden links on websites to improve its search rating. Google caught J.C. Penny and others in this practice and lowered them in the search rankings. As Google has grown, practices like that have increased the scrutiny it receives from an growing number of industry sectors, i.e. travel referral engines such as Kayak.com and Expedia in the wake of Google’s ITA acquisition.
Baseline: Is Google Stifling Innovation and Competition?
What primarily concerns us is whether the practices of Google, or any other technology giant, government or regulatory group, stifles innovation and creativity. Search is a powerful tool that has changed the way the world gathers, tracks and assimilates knowledge and interacts with everyday life.
Are Google’s search practices stifling innovation? Are they favoring their own products over competitors? Or, is Google just the best tool for the job?
