Google Free to Extend Web Search Lead as U.S. FTC Ends Probe

Thursday, 03 January 2013 09:07 PM

Jan. 4 (Bloomberg) -- Google Inc. is free to extend its dominance of the $50 billion Internet-search market after U.S. regulators ended an investigation into whether the company unfairly skewed search results to disadvantage competitors.

The Federal Trade Commission, after a 20-month antitrust probe, concluded Google was motivated more by wanting to improve its search results and user experience than by a desire to stifle competition, said Chairman Jon Leibowitz, who drew a distinction between dominating a market and doing so unfairly.

The FTC’s decision clears the way for Google to continue adding features that have helped it beat back Microsoft Corp. and Yahoo! Inc. to become the world’s top search provider and most valuable Internet company.

“Nothing in the decision is a serious blow to any of Google’s ambitions,” Whit Andrews, an analyst for technology research firm Gartner Inc., said in an interview. The FTC didn’t get into the question of “where the boundaries are going to get drawn” in the search business, he said.

Google, which makes money by selling advertising next to search results, should grab 76 percent of the U.S. search market this year, up from 75 percent last year. Microsoft should get 9 percent while Yahoo may land 6 percent, according to EMarketer Inc.

The global Internet search market is expected to grow to more than $50 billion this year, up 15 percent from the year-ago period, ZenithOptimedia, an advertising research unit of Paris- based Publicis Groupe SA, said in a report last year.

Google Concessions

The agency’s decision to close its probe without enforcement action is a blow to competitors including Microsoft, Yelp Inc., and Expedia Inc.. An alliance of e-commerce and Web- search companies pressed the agency to bring a lawsuit, claiming Google’s dominance of Internet search, combined with favoring its own services in answers to users’ Web queries, violates antitrust laws.

Google agreed in a letter to the FTC, which the agency said is legally enforceable, to let websites remove their content from focused search services like Google Shopping or Google Local without removing or demoting that content in the main Google search engine.

Advertisers will also be able to compare data from other search engines within third-party services that use Google’s AdWords software, Google said in a blog post yesterday.

Search-engine competitors made many of the same product- design choices Google did, “suggesting that this practice benefits consumers,” Leibowitz said at a press conference in Washington yesterday.

Standard Patents

Google agreed in a consent decree to limitations on when it can seek to bar sales of competitors’ products that rely on so- called standard-essential patents. Industry-standard technology helps ensure products such as mobile phone antennas and global- positioning system software can operate together when made by different manufacturers.

Google paid $12.4 billion to buy Motorola Mobility, an early pioneer in the mobile-phone market, in part to get access to its standard-essential patents. Motorola Mobility has been locked in licensing disputes with Microsoft and Apple Inc. in courts and at the U.S. International Trade Commission over their use of those patents in smartphones, tablets and gaming systems.

‘Hand-to-Hand Combat’

Some companies or people may think the agency should do more “because they are locked in hand-to-hand combat with Google around the world and have the mistaken belief that criticizing us will influence the outcome in other jurisdictions,” Leibowitz said.

Mac Brown, an outside spokesman for Microsoft, declined to comment.

FairSearch.org, an alliance of Google competitors including Microsoft, had urged the FTC to delay a final decision until Google submitted a detailed proposal to resolve a separate antitrust probe by the European Commission.

The FTC announcement is “maintaining the status quo,” Danny Sullivan, founder of the industry blog Search Engine Land, said in an interview. “I doubt it will result in any significant change in how consumers interact with search engines or to the market share of respective competitors.”

It’s disappointing that the FTC is relying on “simple, voluntary commitments from Google to end certain practices that a majority of commissioners found to have raised strong concerns about impeding innovation,” Patrick Leahy, a Vermont Democrat who leads the U.S. Senate’s Judiciary Committee, said in an e- mailed statement.

It’s now up to European antitrust regulators to determine whether any restrictions should be placed on Google’s search practices, said William Kovacic, a former FTC commissioner and chairman and a professor of law at George Washington University.

‘Monopolistic Behavior’

Google has agreed to offer the European Union detailed commitments on how it would resolve regulators’ concerns, including how Google’s own services are promoted above those of rivals and how it uses and displays other content on search services.

“The European framework is more amenable to enforcement than the U.S. one is,” Kovacic said. “That gives the Europeans a bigger margin to demand concessions.”

Consumer Watchdog, an advocacy group, pressed the U.S. Justice Department and state attorneys general to investigate Google’s “monopolistic behavior in search results” in the wake of the FTC announcement.

“Google clearly skews search results to favor its own products and services while portraying the results as unbiased,” John Simpson, director of Consumer Watchdog’s privacy project, said in an e-mail. “The FTC rolled over for Google.”

--With assistance from Susan Decker in Washington. Editors: Bernard Kohn, Fred Strasser

To contact the reporters on this story: Eric Engleman in Washington at eengleman1@bloomberg.net; Sara Forden in Washington at sforden@bloomberg.net; Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editors responsible for this story: Bernard Kohn at bkohn2@bloomberg.net; Michael Hytha at mhytha@bloomberg.net

© Copyright 2018 Bloomberg News. All rights reserved.

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