FTC Ends Investigations of Google – A Departure?

On January 3, the Federal Trade Commission (FTC) ended its investigation into Google’s practices related to its search engine. In ending its investigation, the FTC determined that Google’s practice of favoring its own content at the expense of other content providers, rather than being an unfair method of competition, actually benefited the users of Google’s search engine and spurred Google’s competitors to make further improvements to their offerings. The Commission determined that while some of Google’s competitors may have lost advertising sales, and even though that was Google’s intention, “these types of adverse effects on particular competitors from vigorous rivalry are a common byproduct of ‘competition on the merits’ and the competitive process that the law encourages.”1

The Commission also investigated two additional practices: First, Google allegedly misappropriated other companies’ content, which was then passed off as Google’s own content. When those companies protested this practice, Google allegedly threatened to suppress or delist their content. Second, Google allegedly demanded exclusivity from some advertisers, restricting them from advertising with Google competitors. The Commission found that these practices posed a considerable risk of exclusionary acts, amounting to unfair competition. Importantly, rather than filing an action against Google, the Commission accepted Google’s voluntary commitment to end these practices, including a commitment to allow the FTC to monitor and enforce the changes to its practices.

Regarding Google’s alleged promotion of its own content to the exclusion of its competitors’ content, the Commission’s analysis focused on whether Google’s conduct was “exclusionary” or simply motivated by a desire to enhance the experience and search results of individual users. The Commission determined that Google made its changes primarily to introduce and promote the most relevant information, such as online and local shopping comparison pages. Although this may have resulted in competing shopping comparison sites being pushed lower in the search results, which could take business from those competitors, the Commission concluded that the evidence was that consumers benefited in two ways from Google’s practices. First, “click-through” data suggested that consumers benefited from these changes to Google’s search results, most likely by quickly focusing on the products and shopping comparisons that these consumers were looking for. Second, for shopping searches, the demotion of rival shopping comparisons had the effect of elevating individual merchant pages in the search results, providing consumers with a greater variety of merchant websites to choose from.2 The Commission noted that competing search engines adopted many of the same design features, suggesting that consumers preferred this format when searching for these types of products. The Commission also found that Google’s algorithm changes, which demoted some competing websites, may have been motivated by those same competitors trying to game Google’s algorithm to promote those sites, rather than to provide consumers the best search results.3

Notably, the Commission found that “challenging Google’s product design decisions in this case would require the Commission – or a court – to second-guess a firm’s product design decisions where plausible procompetitive justifications have been offered.”4 The FTC found that the evidence did not support a finding that Google’s product design to promote its own content was “undertaken without a legitimate business justification,” and that Google’s promotion of its content “could plausibly be viewed as an improvement in the overall quality of Google’s search product.”5 The Commission re-affirmed its commitment to enforcing antitrust law in a way that protects “competition, not competitors.” A contrary result, enforcing the antitrust laws against Google for introducing products and features beneficial to consumers, would have protected competing websites while preventing Google from introducing and refining products preferred by its users.

The Commission also reviewed Google’s alleged practices of appropriating other companies’ content for its own search results and of restricting some companies from advertising on competing platforms. The Commission found that these practices posed a risk of exclusion and, therefore, unfair competition. However, the Commission accepted Google’s voluntary commitments to end these practices and allow monitoring to ensure continued compliance with their commitment.

Did the Commission break new ground? Yes and no. The decision to end the investigation on the search algorithms is consistent with the notion that antitrust law protects competition and not competitors. The Commission thought it important not to stifle innovation in a fast-paced industry and not to handicap the leader simply because it is the leader. For example, if consumers favored the Google search engine over Microsoft’s Bing, Google’s success could not be attributed to unlawful exclusionary acts. As to this aspect of the case, though opinions may differ (especially from Google rivals), we see no departure from existing antitrust law.

At the same time, the acceptance by the Commission of a voluntary commitment from Google on practices that the FTC found to be potentially exclusionary is not consistent with the FTC’s standard practice. Commission practice has been to enter a Consent Order with penalties for noncompliance. For this reason, Commissioner Rosch dissented, noting in part the possible perception that Google’s “clout” may have granted it benefits before the Commission that other companies may not be able to get.6 It is possible that the Commission wanted more future flexibility in an industry that moves so rapidly and dramatically, but the Google decision may put the Commission under pressure in the future to allow voluntary commitments without consent decrees, or face claims that Google received preferential treatment from the Commission. It remains to be seen whether the FTC staff will accede to this pressure.

Endnotes    (↵ returns to text)
  1. January 3, 2013, “Statement of the Federal Trade Commission Regarding Google’s Search Practices In the Matter of Google Inc.,” FTC File Number 111-0163.
  2. Id.
  3. “Opening Remarks of Federal Trade Commission Chairman Jon Leibowitz,” January 3, 2013.
  4. January 3, 2013, “Statement of the Federal Trade Commission Regarding Google’s Search Practices In the Matter of Google Inc.,” FTC File Number 111-0163.
  5. Id.
  6. January 3, 2013, “Concurring and Dissenting Statement of Commissioner J. Thomas Rosch Regarding Google’s Search Practices In the Matter of Google Inc.,” FTC File No. 111-0163.
Joseph Adamson

Joseph Adamson