June 24th, 2011

FTC to Serve Google With Subpoenas in Broad Antitrust Probe

The Wall Street Journal

Federal regulators are poised to hit Google Inc. with subpoenas, launching a broad, formal investigation into whether the Internet giant has abused its dominance in Web-search advertising, people familiar with the matter said.

On today’s digits: the FTC is poised to serve Google with subpoenas as the Commission looks to explore the company’s dominance on the Web; Walt Mossberg gives us his review of the Google entirely cloud-based laptop, the Chromebook; and, tips for creating protective passwords (first step: stop using “QWERTY”, maybe?)

The civil probe, which has the potential to reshape how companies compete on the Internet, is the most serious legal threat yet to the 12-year-old company, though it wouldn’t necessarily lead to any federal allegations of wrongdoing against Google.

While Google has faced several antitrust probes in recent years, the U.S. has limited its investigations largely to reviews of the company’s mergers and acquisitions. The new inquiry, by contrast, will examine fundamental issues relating to Google’s core search-advertising business, its biggest money maker, said the people familiar with the matter.

Many policy watchers think the Google probe ultimately could be as much of a watershed event for antitrust policy as the Justice Department’s landmark lawsuit against Microsoft Corp. in the 1990s.

Microsoft avoided being broken up, but industry and antitrust experts say the legal assault on the company—and its aftermath—helped check Microsoft’s ability to exploit its dominance in personal-computer operating systems to control other technology sectors. The long-running case also distracted the company from its operations and tarnished its public images—risks that might also face Google.

Google wouldn’t be an easy target for prosecution, antitrust lawyers say. Under U.S. antitrust law, it isn’t illegal to have a monopoly—only to acquire one unlawfully or abuse it. And courts have significantly narrowed the scope of antitrust law in recent years, further raising the bar for the Federal Trade Commission, which is handling the probe, to bring a successful case.

The people familiar with the matter said issues in the FTC probe are expected to include whether Google searches unfairly steer users to the company’s own growing network of services at the expense of rival providers. Some companies complain about the way that Google ranks its own services in its “natural” search results, or the amount it charges them for placing ads, claiming its market power gives it the ability to determine whether businesses succeed or fail.

Google’s Chairman is concerned about facial recognition software—so much so that the company built a product but never launched it. In the kickoff session for the D9 conference, Schmidt’s conversation with Walt Mossberg and Kara Swisher ranged from privacy to Android to turning over the CEO spot to Larry Page.

“Google engages in anticompetitive behavior…that harms consumers by restricting the ability of other companies to compete to put the best products and services in front of Internet users, who should be allowed to pick winners and losers online, not Google,” said Fairsearch.org, a group representing several Google critics, including Microsoft and travel services Expedia Inc., Kayak.com, and Sabre Holdings.

Those companies said that Google’s anticompetitive practices include using other companies’ content without their permission, deceptive display of search results, manipulation of search results to favor Google’s products, and buying up competitive threats to its dominance.

Google—which handles about two-thirds of all U.S. Web searches, according to comScore Inc., and more than 80% in many parts of Europe—has denied doing any of these things. It argues that users can easily navigate to other choices on the Web. In statements, the company has said it “built Google for users, not websites, and our goal is to give users answers.”

In November, the European Commission, the European Union’s executive arm, opened its own formal investigation into allegations by several companies that Google had violated European competition laws. The Texas attorney general has also opened a probe.

The FTC’s five-member panel of commissioners is preparing to serve Google with civil subpoenas within days, the people familiar with the matter said. They said other companies are likely to receive official requests for information about their dealings with Google at a later stage.

Google has drawn public complaints from travel sites like Expedia and TripAdvisor, health site WebMD.com and local-business reviews sites Yelp.com and Citysearch.com, among others. They claim Google promotes links to its own services—such as local-business information pages—depriving their sites of potential traffic.

Read more: http://online.wsj.com/article/SB10001424052702303339904576403603764717680.html#ixzz1QBQeUJXa

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