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

By Jan 8, 2013, 2:26 PM Author's Blog  

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.

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