A strong bipartisan letter to the FTC, which calls for a “thorough investigation” of allegations of Google antitrust violations from Senate Antitrust Subcommittee Chairman Kohl (D-WI) and Ranking Member Lee (R-UT), the FTC’s official Senate overseers, has several significant under-appreciated implications.
Highly Unusual Bipartisan Oversight Concern: This letter is not normal and far from “customary” as Google has characterized it. It is very rare for this Subcommittee to send antitrust authorities a bipartisan letter calling for a broad substantive antitrust investigation of alleged anti-competitive and deceptive behavior of a dominant company affecting a wide swath of the economy — that is not triggered by a proposed merger or acquisition. This strongly suggests the evidence in this instance is compelling. Thus this letter ratchets up the seriousness of the FTC investigation. The Senate Antitrust Subcommittee, which is responsible for the enforcement of U.S. antitrust laws, held a public hearing in September on Google’s alleged antitrust violations with witnesses testifying under oath. The obvious takeaway here is that the leaders of the Senate Antitrust Subcommittee were unconvinced by Google’s defense and explanations of the evidence presented against it.
Suggested Remedy Signals Seriousness: The Subcommittee telegraphed its central antitrust concern: “Rather than act as an honest broker of unbiased search results, Google’s search results appear to favor the company’s own web products and services.” The Subcommittee tipped its hand in suggesting a potential remedy to this problem: “We believe, under the FTC’s mandate to protect consumers from misleading and deceptive practices, the FTC should seriously consider requiring Google to label its ‘onebox’ or ‘places’ listing (or other similar listings), as Google products, just as it labels paid search results.” In a nutshell, the subcommittee’s letter suggests they believe Google has engaged in a classic “bait and switch;” after long and loudly representing their search as unbiased and interested in moving users most quickly to their destination because doing otherwise would be a “conflict” not good for users, Google now prefers/biases its own products in its search results to keep them on the Google website longer in order to offer them more advertising.
Expect Subpoenas: Practically this letter likely will prompt the FTC to issue Civil Investigative Demands (CIDs = subpoenas) of competitors alleging harm by Google in the coming weeks/months. Expect reports to leak out in the months ahead that the FTC has issued CIDs to a substantial number of companies alleging anti-competitive behavior.
Global Antitrust Concern: The letter notes that six states “have opened full-scale investigations” of Google’s alleged antitrust violations: Texas, New York, California, Ohio, Mississippi, and Oklahoma. The letter also noted the “European Commission is in its second year of its investigation, saying it is looking into whether Google might be giving its web services ‘preferential placement’ in search results.” Given that Google is also being investigated for alleged antitrust violations in South Korea, Australia, and Argentina, Google is now officially under antitrust investigation on five continents. FT reporting also indicates that the first official finding of antitrust violations will likely be a 400 page Statement of Objections from the EU early next year, alleging that Google anti-competitively penalized its search competitors with reduced rankings and higher ad rates while awarding its own content with top rankings.
U.S. Senate & EU Focused on Same Basic Problem – Deceptive Self-Dealing: At bottom, competition and a free market cannot work if it is short-circuited with misleading or deceptive practices, because it prevents users from exercising informed competitive choice. This letter makes it clear that the bipartisan Senate Antitrust Subcommittee’s findings that Google is not “an honest broker of unbiased search results,” are similar to the EU’s concerns that “Google might be giving its web services ‘preferential placement’ in search results.” This similar antitrust focus on the same deceptive anti-competitive behavior will become clear as the public focus on Google’s alleged antitrust violations shifts from a public Senate hearing and a public Senate letter to the non-public FTC investigation in the U.S., while in the EU the non-public part of the EU antitrust investigation will shift to the public arena when the EU is expected to publicly release its 400-page Statement of Objections that Google has been deceptively targeting and penalizing competitors.
Stealing Competitive Opportunity: The common thread behind Google’s antitrust, property, privacy and other legal problems is that Google takes what it wants without the requisite permission of others. Just in the last couple of days, there are several public examples of Google stealing the competitive opportunity of others. Yesterday the International Trade Commission found HTC’s Google Android software violated an important Apple patented innovation. In response, an Apple spokesperson said: “competitors should create their own original technology, not steal ours,” per the WSJ. Yesterday, BT sued Google Android for violating its patents. And yesterday authors objecting to Google stealing and copying their books without their permission filed a class action copyright infringement suit against Google. These most recent examples of Google taking from others without their permission are just the most recent additions to a long established pattern of Google illegally stealing competitive opportunity from others. How this pattern of behavior relates to the Senate letter to the FTC is that the Senators pointed out that “88% of consumers click on the first three links.” So if Google is a dominant gatekeeper to access competitive commercial opportunity online, and it deceptively represents that it is an honest broker when favors its search results with Google products and services, then Google is deceptively stealing the competitive opportunity of competitors and stealing users’ choice to choose competing products and services.
In sum, the Senate letter to the FTC urging a thorough antitrust investigation of Google has many more implications than many may appreciate at first glance.
Scott Cleland is President of Precursor LLC, a consultancy serving Fortune 500 clients, some of which are Google competitors; he is also author of “Search & Destroy: Why You Can’t Trust Google Inc.