How The Feds Got Googled

After much Sturm and Drang, the Federal Trade Commission’s landmark antitrust investigation into the most powerful company on the Internet ended with a wheeze that left most observers scratching their heads.

The Google settlement the FTC announced on Jan. 3 was less about Google’s search algorithms than its recently acquired Motorola Mobile patents, and dealt hardly at all with the allegations of anticompetitive “search manipulation” that supposedly formed the basis of the whole investigation:

…the FTC concluded that the introduction of Universal Search, as well as additional changes made to Google’s search algorithms – even those that may have had the effect of harming individual competitors – could be plausibly justified as innovations that improved Google’s product and the experience of its users. It therefore has chosen to close the investigation.

The only real concession the FTC was able to extract from Google was to swear off patent trolling on its standards-essential Motorola patents, which other technology companies must be able to use for their products to operate on U.S. networks.  But Google only agreed not to go to court to prevent other companies from using the patents — it can still continue to charge them royally to license the technology.

And while Google had kept up Motorola Mobile’s aggressive patent enforcement policies following its $12.5 billion acquisition last year, the company had been speaking out against software patent trolling since at least mid-2011, so getting it in writing doesn’t really seem like a huge “get” for the FTC after a 19-month investigation.

Baffled and disappointed by the FTC’s statement on the Google settlement, nonprofit advocate group Consumer Watchdog is demanding to see the FTC’s internal staff report on the investigation, hoping to find out how it all went off the rails.

Rumors began swirling late last year that the FTC lacked the evidence to make the search-manipulation charges stick, and that the case was becoming a frustrating embarrassment to the agency, which had won a hard-fought turf war with the Department of Justice in 2011 over who would lead the investigation into Google’s search practices.  The FTC even brought in a respected former DOJ prosecutor, Beth Wilkinson, last April in an effort to save the case, but clearly to no avail.

When the FTC case first appeared to be falling apart last November, Techdirt’s Mike Masnick suggested that the debacle may have had its roots in a legacy polishing exercise by the outgoing FTC chairman:

I keep hearing the same story over and over again.  They’re all variations on the following: FTC boss Jon Leibowitz is getting set to leave the job (and go into the private sector, of course), but would like a “defining moment.”  Somewhere in the last year or two, he decided that going after Google for anti-trust violations would be such a crowning moment.

So perhaps Leibowitz, like a Pentagon desk jockey officer pushing to get his combat ribbon before retirement, had wrangled a high-profile field command only to send his out-gunned troops up a hill they could never take.

Politico suggests that the FTC may have been spun by the prodigious lobbying effort Google unleashed.   Having seen how well Microsoft’s combative and aloof response to antitrust concerns worked in the 1990s, Google spent $25 million and hired a roster of Washington power players from both sides of the aisle to make its case to the FTC:

“It was a multiyear campaign focused on this very moment, knowing as the company  grew these issues were going to come up,” said Alan Davidson, former head of  Google’s office in Washington who left last year for the Massachusetts Institute  of Technology. “We had the benefit of watching those who had come before us, and  we saw the mistakes that were made. We didn’t want to replicate what they had  done.”

And the $25 million price tag for that charm offensive was huge bargain for the search giant, noted TheNextWeb:

Google, a company with cash and equivalents of roughly $50 billion, had to spend just 0.05% of its ready currency to fend of what could have been a nearly existential threat to parts of its core business.

But Google wasn’t the only one working the refs.   A driving force behind the “search manipulation” accusations was an industry group calling itself FairSearch, which includes Google competitors Microsoft, Kayak, Expedia, Hotwire, Nokia, Oracle, Allegro and several others.  After the FTC dropped the antitrust case, the anti-Google coalition released a statement calling for harsher judgments in separate investigations by state Attorneys General and European regulators.  The group has even launched a Eurocentric website — FairSearchEurope.eu — to press its case against Google on the other side of the Atlantic.

The FairSearch coalition isn’t alone in expecting Google to have a rougher ride in Europe, where the complaints from its competitors will carry more weight.  While U.S. antitrust enforcement relies heavily on finding direct harm to consumers, in Europe antitrust enforcement aims at fostering competition.

Indeed Google’s checkmate of the FTC’s antitrust case hinged on its lobbyists’ successful argument that no matter how its self-serving search algorithms might annoy Google’s competitors, they do not do measurable harm to consumers.   In Europe, Google’s rivals may have an easier time making a case that the company’s search tactics at least harmed them.