Google (GOOG): Did FTC Made the Right Decision?

Thanks to the Federal Trade Commission, Googling an address will continue to return a Google (GOOG) map of the location; Googling a flight time will still show Google-driven flight results; and Googling a stock symbol will show you its information on Google Finance.

Many users take such integration for granted. But the FTC’s finding that Google’s all-encompassing reach does not violate antitrust laws was a blow to the company’s competitors, who claimed Google’s market dominance allows it to unfairly stack search algorithms in favor of its own products.

As I discussed last fall, it is noteworthy that the complaints against Google came from its competitors rather than its users. Google’s lawyers repeatedly made the point that “competition is just a click away,” reminding regulators – and its rivals – that if users disliked the way Google arranged its search results, the barriers to switching services were extremely low. Typing Microsoft’s (MSFT) “Bing.com” even takes fewer keystrokes than typing “Google.com.” That so many users haven’t switched suggests Google is still delivering the results those users want.

As Beth Wilkinson, a lawyer the FTC hired in connection with the investigation, observed, “the FTC’s mission is to protect competition, not individual competitors.”

The outcome was not only a win for Google, but for consumers as well. According to The Associated Press, Google agreed to charge “reasonable” prices when licensing patents considered essential for rival mobile devices. This change may ultimately encourage the development of more competitive, innovative devices that could make their way into consumers’ hands. Google also agreed to allow website owners to request the search engine not copy, or “scrape,” bits of text to display in its search results without being consequently penalized in search rankings. This practice is what spurred Yelp.com to lodge one of the original complaints that spurred the FTC investigation.

Even if Google might not have legally been required to make these concessions, or other changes it has promised related to its practices in search advertising, neither Google nor federal regulators seem to want to test the point in court. The FTC chose to close the investigation without bringing any charges against the search giant.

Google’s competitors are unhappy with the outcome, but they now have little choice but to wait for action from European officials or state attorneys general, which may or may not be forthcoming, or to accept the status quo.

In the meantime, the result is a good one for the rest of us. It was a smart “non-call” on the FTC’s part: If there is no violation, they were right to decline to issue a penalty. Being successful is not, on its own, evidence of anticompetitive behavior. The FTC concluded that Google’s search algorithms were improved for its users’ benefit, and that “any negative impact on actual or perceived competitors was incidental to that purpose.”

Which is to say: If other companies want to do better than Google, they are welcome to try. That’s what competition is about.

About Larry M. Elkin 507 Articles

Affiliation: Palisades Hudson Financial Group

Larry M. Elkin, CPA, CFP®, has provided personal financial and tax counseling to a sophisticated client base since 1986. After six years with Arthur Andersen, where he was a senior manager for personal financial planning and family wealth planning, he founded his own firm in Hastings on Hudson, New York in 1992. That firm grew steadily and became the Palisades Hudson organization, which moved to Scarsdale, New York in 2002. The firm expanded to Fort Lauderdale, Florida, in 2005, and to Atlanta, Georgia, in 2008.

Larry received his B.A. in journalism from the University of Montana in 1978, and his M.B.A. in accounting from New York University in 1986. Larry was a reporter and editor for The Associated Press from 1978 to 1986. He covered government, business and legal affairs for the wire service, with assignments in Helena, Montana; Albany, New York; Washington, D.C.; and New York City’s federal courts in Brooklyn and Manhattan.

Larry established the organization’s investment advisory business, which now manages more than $800 million, in 1997. As president of Palisades Hudson, Larry maintains individual professional relationships with many of the firm’s clients, who reside in more than 25 states from Maine to California as well as in several foreign countries. He is the author of Financial Self-Defense for Unmarried Couples (Currency Doubleday, 1995), which was the first comprehensive financial planning guide for unmarried couples. He also is the editor and publisher of Sentinel, a quarterly newsletter on personal financial planning.

Larry has written many Sentinel articles, including several that anticipated future events. In “The Economic Case Against Tobacco Stocks” (February 1995), he forecast that litigation losses would eventually undermine cigarette manufacturers’ financial position. He concluded in “Is This the Beginning Of The End?” (May 1998) that there was a better-than-even chance that estate taxes would be repealed by 2010, three years before Congress enacted legislation to repeal the tax in 2010. In “IRS Takes A Shot At Split-Dollar Life” (June 1996), Larry predicted that the IRS would be able to treat split dollar arrangements as below-market loans, which came to pass with new rules issued by the Service in 2001 and 2002.

More recently, Larry has addressed the causes and consequences of the “Panic of 2008″ in his Sentinel articles. In “Have We Learned Our Lending Lesson At Last” (October 2007) and “Mortgage Lending Lessons Remain Unlearned” (October 2008), Larry questioned whether or not America has learned any lessons from the savings and loan crisis of the 1980s. In addition, he offered some practical changes that should have been made to amend the situation. In “Take Advantage Of The Panic Of 2008” (January 2009), Larry offered ways to capitalize on the wealth of opportunity that the panic presented.

Larry served as president of the Estate Planning Council of New York City, Inc., in 2005-2006. In 2009 the Council presented Larry with its first-ever Lifetime Achievement Award, citing his service to the organization and “his tireless efforts in promoting our industry by word and by personal example as a consummate estate planning professional.” He is regularly interviewed by national and regional publications, and has made nearly 100 radio and television appearances.

Visit: Palisades Hudson

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