FTC urged to reopen Google probe after record EU fine

By Kirk Victor. Originally published on FTC:Watch on July 21, 2017

Not long after the European Commission slapped Google with the biggest antitrust fine it had ever levied — $2.72 billion — calls came for the Federal Trade Commission to reopen its investigation into the tech giant's practices.

In 2013, the commission voted unanimously not to pursue charges that Google unfairly biased its search results page to gain competitive advantage over rivals. FTC documents later obtained by The Wall Street Journal showed that the staff had concluded that it was "a close call," though they recommended against a challenge on search bias.

But some contend that it's no longer a "close call" as issues relating to Google are dramatically different today.

They point not just to last month's ruling by the European Commission, the executive arm of the European Union, charging that Google steered consumers to its shopping service by giving it prominent placement in searches and demoting its rivals.

They also say that even more far-reaching is the EU's preliminary conclusion that Google abused its dominant position with its Android mobile operating system and its AdSense advertising service.

"The FTC shamefully gave Google a pass in 2013 after it looked into Google's monopolistic search engine practices," John M. Simpson, Consumer Watchdog's privacy project director, said in a statement. "It needs to take action to stop the Internet giant's unfair and anti-competitive practice of favoring its own services in Android. The FTC must not leave its enforcement work for the Europeans."

"They blew it when it came to the search issue, but there is in some ways a bigger area of concern, involving the Android operating system," Simpson added in an interview. "It's the same kind of thing: You get an Android operating system or an Android device and by default all the various apps that are favored are all their own [Google] apps. So it is once again a way they monopolize the space in ways that are anti-competitive."

The FTC declined to comment about the push for a renewed investigation.

Those who follow the FTC closely point to the fact that only one commissioner — acting Chairman Maureen Ohlhausen — remains from when the agency decided to close its Google investigation. Commissioner Terrell McSweeny, a Democrat, joined the agency in 2014, and the other three commission seats are vacant. New leaders might well give such a high-profile matter a new look, some critics say.

"We have new leadership at the antitrust agencies, and we have a serious finding of the EU," Seth Bloom, former general counsel to the Senate Judiciary Antitrust Subcommittee, said in an interview. "The principles that the EU used are fundamentally not different than the principles that might be applied to a Section 2 monopolization case under the Sherman Act of the United States."

But given the fact that Ohlhausen is serving in an acting capacity, it seems unlikely that she would launch such a major investigation.

"I see no chance that the FTC will reopen a Google investigation so long as acting chair Ohlhausen remains acting chair," Stephen Calkins, a Wayne State University law professor and former FTC general counsel, wrote in an e-mail to FTC:WATCH.

"But some day the FTC will have a 'real' chair (perhaps Ohlhausen) and new commissioners," he added. "Given the EU decision and follow-up to that, it would be amazing were any new FTC Commissioner not to inquire informally about the FTC's work with Google, including what commitments Google made, whether they are being honored, and whether facts seem to have changed."

"So I'm certain that the FTC will be working informally on Google," Calkins added. "Whether that work ends up escalating into something more formal depends on (a) the views of the new commissioners and the new [competition] bureau director (and possible new economics director), and (b) the extent to which Google's activities seem more worrisome today than they did back then."

Another longtime veteran of FTC work, who declined to speak for attribution, agreed that "it was not a case that was black and white at the FTC to close the search bias investigation. And it's been four years, if the commission wants to go back and take a look, it has a right to do that."

Google insists that its activities are not worrisome — then or now. It disagrees with the EU decision and in a blog post, Kent Walker, the company's senior vice president and general counsel, took issue with the charges that Google boosted traffic to its shopping service, while substantially cutting traffic to its rivals.

Walker provided a different reason for the results: competition from Amazon. "With its comparison tools, reviews, millions of retailers, and vast range of products from sneakers to groceries, Amazon is a formidable competitor and has become the first port of call for product searches," Walker wrote in a blog post. "And as Amazon has grown, it's natural that some comparison services have proven less popular than others."

Even as Walker defended Google's conduct and said the company is considering an appeal, Bloom insisted that things have only gotten worse since the FTC's decision four years ago, including the Android issue, which wasn't explored by the agency at that point.

Bloom, who said he was speaking for himself and not for his client Yelp, a harsh critic and rival of Google, pointed to the EU's investigation of the installation of Google Search as the default search service on Android devices in Europe.

That practice, said Bloom, "is not at all dissimilar to the allegations against Microsoft," when the Justice Department, in a landmark antitrust case in 1998, charged the company had used its Windows monopoly to crush competitors. The case was settled so that Microsoft had to make Windows interoperable with non-Microsoft software.

Bloom also pointed to a study in 2015. Co-authored by Columbia Law School professor Timothy Wu, a former FTC senior adviser, and Harvard Business School professor Michael Luca, the study found search bias by Google harms consumers — a result at odds with the FTC's rationale for closing the investigation when it concluded there was no such harm.

But that study received financial backing and research assistance from Yelp, which led to criticisms that its findings had to be read skeptically. Bloom, in an interview last year, defended it, saying, "I don't care who funds that study. There is some pretty powerful evidence that what Google is doing today is not the best product for consumers."

Bloom is confident that "powerful" evidence will lead to a renewal of an investigation into Google's practices, saying there is "a significant chance" that the US antitrust watchdogs will resume their examination of the mammoth company. 

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