Google Anti-Trust Investigation One Step Closer

The likelihood of the United States government investigating Google for anti-trust violations increased today as senators Herb Kohl and Mike Lee called on the Federal Trade Commission to look into certain alleged practices. Specifically, they believe that Google favors its own services in its search results.

To get a better understanding of where this is coming from, we need to go back in time to September. At that time, Google’s chairman Eric Schmidt testified in person in front of the United States Senate’s antitrust subcommittee. You can read a summary of the three-hour hearing from Greg Sterling at Search Engine Land. The subcommittee meeting was attended by both Herman Kohl (a Democrat, and the chairman of the subcommittee) and Mike Lee (a Republican). The latter went after Schmidt “like a cross-examining lawyer at a trial,” according to Sterling.

So what is Lee’s problem with Google? Lee noticed, and showed on a pie chart, that Google’s shopping/product search results usually appear in the same position on Google’s search results page, but their competitors’ positions fluctuate. Lee seems to believe that this is a sign that Google is using one algorithm for third party content and a different one for their own content. As Sterling put it, “Lee argued that Google didn’t hold it’s own content to the same standards or rules, which was inherently unfair in Lee’s line of reasoning.”

Schmidt conducted himself well, but the second panel that day really grabbed attention. It included Thomas Barnett, an attorney for parties in the anti-Google FairSearch coalition; Yelp CEO Jeremy Stoppelman; Nextag CEO Jeff Katz; and Google lawyer Susan Creighton. Sterling noted that Stoppelman delivered devastating testimony. While his company and Google started out as partners, after that ended, “Google…began including Yelp reviews in Places (a competitive product) without permission. Yelp…asked that those reviews be removed, which Google declined to do without removing Yelp from the index entirely,” Sterling explained. Google did comply eventually…after an FTC investigation was announced.

Fast forward now to early November. Eric Schmidt sends a long written statement to the Senate’s antitrust subcommittee, following up on his September testimony as required. In his statement, he is trying to make the point that Google doesn’t actually have “separate products and services” that they can favor over competitors’ listings. Matt McGee, writing for Search Engine Land, quotes from Schmidt’s statement: “…the question of whether we ‘favor’ our ‘products and services’ is based on an inaccurate premise. These universal search results are our search service – they are not some separate ‘Google content’ that can be ‘favored.’” If you’re interested in reading Schmidt’s full statement, you can see it here, but be prepared to spend some time with it — it runs to 67 pages and deals with a number of potentially anti-competitive issues.

The reasoning seems to go like this: you’re accusing us of favoring our own products and services in our search results. But we don’t have any products or services of our own other than our universal search service. If we don’t have any other products, we can’t possibly be favoring our own “products and services” in the search results, so you can’t accuse us of anti-competitive practices. In short, as McGee correctly notes, Google is trying to make a semantic argument to wiggle out of this.

{mospagebreak title=Not Buying the Argument}

That argument is simply not going to fly. Google has been consistently talking about separate products for ages. McGee cited just three instances, including some items being referred to as “products” that are clearly part of Google’s universal search results.

In any case, Kohl and Lee seem to not be buying Schmidt’s argument. Yesterday,  they sent a five-page letter to Jonathan Leibowitz, the chairman of the Federal Trade Commission. In it, they reference the late September hearing, which was held “to examine allegations that Google’s search engine is biased in favor of its own secondary products and services, undermining free and fair competition among e-commerce websites.” The senators carefully refuse to take a position “on the ultimate legality of Google’s practices under the antitrust laws and the FTC Act,” but they do “believe these concerns warrant a thorough investigation by the FTC.”

They then proceed to detail the concerns raised at the hearing. The letter puts numbers to the growth of the Internet (and thus the importance of search engines), and Google’s dominant position in search. What really stood out for me was one statistic: Google holds a 95 percent share of Internet searches performed on mobile devices. If mobile really is the future of computing and the Internet, Google is as well positioned – or even better positioned – as Microsoft was when the software giant got hit with an antitrust suit for Internet Explorer.

The letter accurately discusses Google’s evolution from a simple search engine that sends users to other websites to an entity that “now seeks not only to link users to relevant websites, but also to answer user queries, provide a variety of related services, and direct customers to additional information on its own secondary web pages.” The question arises, then: can Google be both an unbiased search engine and “at the same time own this array of secondary web-based services from which the company derives substantial advertising revenues”?

My immediate reaction to this is that algorithms don’t work this way. But if Google truly is treating its own products differently from the way it treats its competitors, well, such behavior could certainly be built into an algorithm. It becomes a question of what the index sees, and how it sees it. And indeed, the letter quotes from a 2007 speech by Marissa Mayer, Google’s VP of Local, Maps, and Location Services, that seems to indicate a Google policy of giving preference to its own websites. Even if her statement is not meant in the way the senators understand it (and Schmidt’s later “clarification” of what she meant, as quoted in the letter, is anything but), it’s pretty damning.

So what’s likely to happen from this point forward? It’s hard to say, but Kohl and Lee argue quite cogently and convincingly that Google’s potentially anti-competitive practices warrant further investigation. There’s no telling how quickly the FTC will move on this, but my guess is that a lot of lawyers will be working right through the holidays at Google in preparation for what may come.

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