FTC says 'Happy New Year!' to Google-We Shall See Just How Happy

By Peter Bernstein January 04, 2013

If you are alive and well on this first Friday in January 2013 and are in the tech industry you have probably already read several articles and seen various TV reports and web videos concerning the U.S. Federal Trade Commission (FTC) decision to end its almost two year investigation into Google’s alleged antitrust abuses of its dominant position in search with a wrist slap. You likely also noticed that Google has also started the New Year by agreeing to meet prior commitments to license key parts of its Motorola patent portfolio to competitors on fair, non-discriminatory (aka FRND) terms.  

Turns out this was a great day for Google, a hopefully decent on for device competitors, and a day of sour grapes for the likes of Microsoft and others who feel that search is the way Google amongst varies doomsday scenarios monopolizes the Internet and/or stifles competition and innovation. News from Europe is that the European Union Competition Commission which is conducting its own probe into Google practices, according to a statement from a spokesman, “taken note of the FTC decision." He added that the FTC’s ruling "has any direct implication for our investigation."

Where things stand

Since the news here has been widely covered by TMC and a slew of others, I will not go into all of the details but a few salient points are worth looking at in the context of “we shall see.”

A good place to start is with the aforementioned settlement on FRND for the Motorola patents . The reason for the “we shall see” on this one is that following its purchase of Motorola, Google actually threatened injunctions against competitors through the International Trade Commission despite promises by Motorola to license the relevant patents. The problem here is that, as we have all seen in various courts and regulatory jurisdictions around the world, one company’s FRND is another’s “are you kidding?”

FTC chairman Jon Leibowitz  in comments about the settlement said it was intended to send a signal to the market that companies must live up to their patent licensing commitments. The goal is to get the various contending parties competing more in the market than before judges and regulators so that rather than make transfer payments to their lawyers they can invest innovation and stop hoarding patents for defensive purposes. 

This is a nice thought, but given valuations on company’s intellectual property and the competitive advantage an aggressive defense/offense of it can translate into in terms of market share and profits, it is hard to see 2013 as a year for the industry changing its behavior on this front. Google did not pay all of those billions for Motorola because it was enthralled with the Motorola product line short or long-term.

Second, while Google got off without a fine, but with a finding that it had in essence played very hard but fair and square when it came to potentially abusing its leverage with search, Google did say it will change business practices for five years in important ways. Google has agreed to:

1.       Allow websites to prevent Google from scraping content and displaying that content on Google's own Web properties.

2.       Drop its API restrictions that prevented advertisers from writing code that automated the export of ad-campaign data for use in third-party ad-campaign management systems.  

3.       Provide all websites the option to keep their content out of Google's vertical search offerings, while still having them appear in Google's general, or "organic," web search results.

Again, all of this sounds somewhat reasonable. However, in the context of the company’s dominance in search and the likelihood of its continued domination as its Android-centric ecosystem continues to put distance between itself and Apple and leave a Microsoft very upset, this looks like table scraps. 

In fact, what should not be lost here is that the FTC voted unanimously to close the investigation which means Google is free (a funny term but true) to use it algorithms and change them in ways that it feels will improve the user experience. This validates Google’s long held stance that the antitrust laws are designed to protect competition and not competitors and that all it is doing is finding ways to compete that people like.

Where to next?     

While all of the above is certainly a victory, whether the company fairs as well with the European regulators is almost impossible to predict. Let’s just say that history shows that not only are European antitrust laws a bit different than those in the U.S., but sensibilities and sensitivities as to what constitutes bad behavior also have shown that the cultural divide can be as wide as the Atlantic Ocean. 

Indeed, left unaddressed by the FTC because this was an antitrust action that impacted competitors, was the downstream impact Google’s domination of search can have in all markets. When Google makes changes, as virtually any IT professional for any enterprise can attest, it can be time-consuming and very costly to adapt to get the rankings back to pre-change levels even when such changes are extremely well-intentioned and in many instances are designed to stop certain entities from gaming the system.  

In fact, I want to emphasize that this is not to ascribe nefarious motives to Google. Rather it is to point out that Microsoft for all of its outrage raises a point about diminishing the competitiveness of the Internet for everyone and not just Google’s direct competitors which is something the European’s may well put some weight on.  As noted at the top, a happy New Year for Google for the moment but we shall see.

Edited by Amanda Ciccatelli
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