Google Cleared By FTC Over Search Charges

Google has been cleared in connection to charges of anticompetitive behaviour against its rivals, and has reached a voluntary agreement with the Federal Trade Commission (FTC) to change some of its business practices.

Google also won a separate and large part of the multipronged battle as the FTC voted to close its longtime investigation into allegations that Google has been manipulating its search algorithms to favor Google’s results over competitors. Instead, the FTC found that there was not enough evidence to prove such allegations.

Google Agreement

Both decisions were announced 3 January in an FTC conference call that caps a 19-month investigation into Google’s search practices and patent portfolios in the smartphone, tablet and gaming device markets.

“Today’s action delivers more relief for American consumers faster than any other option available to the commission, and protects competition and consumers in a number of crucial markets central to the daily lives of hundreds of millions of American consumers and businesses,” Jon Leibowitz, chairman of the FTC, said during the call. “It ensures Americans continued access to smartphones, tablet computers and computer gaming systems as well as continued competition in Internet search and search advertising. Today’s commission action follows an exhaustive investigation into Google’s business practices.”

Among the key parts of the FTC agreement with Google is that the search company will end some past business practices that could stifle competition in the markets for popular devices such as smartphones, tablets and gaming consoles, as well as the market for online search advertising, according to the agency. Under a binding settlement with the FTC, Google will allow competitors access “on fair, reasonable, and non-discriminatory terms to patents on critical standardised technologies needed to make popular devices such as smartphones, laptop and tablet computers, and gaming consoles,” the FTC reported.

As part of that agreement, Google will not seek court injunctions to block competitors from using Google-owned patents that are essential to key technologies used in products developed and sold by competitors, according to the FTC. Many of those patents came from the company’s acquisition of Motorola Mobility in May 2012 for more than $12 billion (£7.4bn), which included a large patent portfolio for technologies related to mobile and other consumer and business devices.

“We are especially glad to see that Google will live up to its commitments to license its standard-essential patents, which will ensure that companies willing to license these patents can compete in the market for wireless devices,” said Leibowitz. “This decision strengthens the standard-setting process that is at the heart of innovation in today’s technology markets.”

No Manipulation

Google escaped FTC enforcement scenarios when it came to one of the biggest parts of the agency’s 19-month-long investigation into the company’s conduct – the allegations by competitors that the company had manipulated its search algorithms to harm vertical Websites and unfairly promote its own competing vertical properties.

Many business rivals, including Microsoft, have loudly complained about this alleged practice for several years, but Leibowitz said that not enough evidence was found to make such a case.

“Many of Google’s critics – including many of its competitors – wanted the commission to go further in this investigation and regulate the intricacies of Google’s search engine algorithm,” he said. “Although some evidence suggested that Google was trying to eliminate competition, Google’s primary reason for changing the look and feel of its search results to highlight its own products was to improve the user experience. Similarly, changes to Google’s algorithm that had the effect of demoting certain competing Websites had some plausible connection with improving Google’s search results, especially when competitors often tried to game Google’s algorithm in ways that benefitted those firms, but not consumers looking for the best search results. Tellingly, Google’s search engine rivals engaged in many of the same product design choices that Google did, suggesting that this practice benefits consumers.”

Overall, the FTC “did not believe that the evidence supported a FTC challenge to this aspect of Google’s business under American law,” Leibowitz said.

Competitors who don’t agree with the FTC’s actions can still file their own lawsuits, he said, and take Google to court over the matter.

In the meantime, Google has entered into enforceable agreements with the FTC to change its behaviour, he said. “If they stop complying … the actions are enforceable. There are monitoring requirements. If they are scraping content of rivals we will know that, [competitors] will come to the FTC, and many of them did. We’ll know, let me assure you.”

Google Reaction

In a statement on the Official Google Blog Page, David Drummond, senior vice president and chief legal officer for Google, wrote that the company is fully prepared to voluntarily implement the changes that have been laid out for it.

“As we made clear when the FTC started its investigation, we’ve always been open to improvements that would create a better experience,” wrote Drummond.

“We’ve always accepted that with success comes regulatory scrutiny. But we’re pleased that the FTC and the other authorities that have looked at Google’s business practices – including the US Department of Justice (in its ITA Software review), the US courts (in the SearchKing and Kinderstart cases) and the Brazilian courts (in a case last year) – have concluded that we should be free to combine direct answers with Web results. So we head into 2013 excited about our ability to innovate for the benefit of users everywhere,” he wrote.

Analyst Views

Several IT analysts say the FTC probe’s conclusions are sensible. Dan Maycock, an IT analyst with Slalom Consulting, called the case “Google’s coming of age.”

“You get a company starting up in Silicon Valley, and it grows up and prospers, but to be a real company in America, you have to eventually have your day in court,” Maycock told eWEEK. “So Google gets to a point where they are innovating, and at the same time being potentially anticompetitive and like any large company, they eventually have their day.”