Ugly documents surface in antitrust case that Google settled with FTC

Serious claims, made by FTC investigators, came just months before the commissioners decided against launching an antitrust suit against Google in 2013, according to documents obtained by the WSJ.

Google sidestepped an antitrust lawsuit in the US back in 2013, but newly released documents expose the depth of the accusations against the search giant.

Federal Trade Commission (FTC) investigators issued a sharp rebuke of some of Google's search and advertising practices in a 160-page document handed to their bosses in 2012, the Wall Street Journal reported Thursday after documents were obtained through a Freedom of Information Act (FOIA) request.

The investigators, who handed the document to the five FTC commissioners who would decide whether to launch an antitrust suit, found in 2012 that the search company's "conduct has resulted -- and will result -- in real harm to consumers and to innovation in the online search and advertising markets."

In early 2013, just months after receiving the report, the FTC commissioners decided against prosecuting Google on antitrust charges and accepted "voluntary" moves on the search company's part to improve some areas of competition in search and advertising.

The FTC and Google reached an accord on a nearly two-year investigation into the search company's practices in January 2013. During the investigation period, Google was required to hand over millions of pages of documents and its executives and key staff gave hours of testimony to the FTC. The government agency had received some complaints from Google competitors, including local-search service Yelp, that the online company was using its powerful position in search and advertising to hurt competition in the marketplace.

The deal between Google and the FTC saw the search company agree to allow companies, like Yelp and others, to remove their search results from certain Google services, like the company's local, travel and shopping pages. Google also agreed to allow advertisers to use data collected in their Google AdWords online ad campaigns for campaigns they had on other services.

"The conclusion is clear," Google general counsel David Drummond wrote at the time. "Google's services are good for users and good for competition."

The FTC was similarly celebratory in its announcement, saying that Google's modifications to AdWords and Search would "ensure that consumers continue to reap the benefits of competition in the online marketplace." All five FTC commissioners voted unanimously to end the Google investigation and accept the deal.

"The evidence the FTC uncovered through this intensive investigation prompted us to require significant changes in Google's business practices. However, regarding the specific allegations that the company biased its search results to hurt competition, the evidence collected to date did not justify legal action by the Commission," Beth Wilkinson, outside counsel to the FTC, said in a statement at the time. "Undoubtedly, Google took aggressive actions to gain advantage over rival search providers. However, the FTC's mission is to protect competition, and not individual competitors. The evidence did not demonstrate that Google's actions in this area stifled competition in violation of U.S. law."

The FTC's commissioners make the final call on whether antitrust proceedings should move forward. They base their decisions on the work of their investigators at the government agency who dig into a company, conduct interviews and seek clarification on key points. The inner-workings of those investigations is unknown and it's unclear how often commissioners heed the advice of investigators.

The Google investigation, which also included concerns over Motorola's ownership of standard-essential patents, centered on four core elements, the Journal reported:

  • Did Google illegally favor its own services, like Google Finance?
  • Did the company copy other companies' content for its own gain?
  • Did the company harm advertisers in their desire to run ad campaigns on other networks?
  • Did the company restrict other firms that published its content from working with competitors, like Microsoft Bing?

According to the documents obtained by the Journal, the investigators found that Google's control over search caused "harm to many vertical competitors" across the travel, shopping, local and finance industries. The investigators also found that Google forced companies to allow the search giant to use their content in search results or face an outright ban on its search engine, and made it difficult for advertisers to share data on other platforms.

The documents reveal that Google was accused of stealing content from Amazon, TripAdvisor and Yelp to bolster its competing services. In the case of Amazon, for instance, Google allegedly copied the e-retail giant's sales rankings and placed them on its own shopping service to rank items. Google also allegedly copied Amazon's reviews for those products.

After allegedly discovering a similar move, TripAdvisor and Yelp asked Google to stop its activity. The search company quickly denied the request and threatened to remove their services from search, according to the Journal's report.

"It is clear that Google's threat was intended to produce, and did produce, the desired effect," the investigators wrote, according to the Journal, "which was to coerce Yelp and TripAdvisor into backing down." The Journal also claims that the report includes a message sent by Google telling competitors that it would "extract the fruits of its rivals' innovations."

Despite such accusations, the FTC investigators stopped short of seeking an antitrust lawsuit on the way Google was giving preferential treatment to its own services over competitors. The FTC investigators did, however, argue that the company was doing harm to competition and violated the law, according to the Journal.

In its statement in January 2013, the FTC did not directly comment on those alleged claims, but did acknowledge that Google's "Universal Search," which puts the company's own services front and center ahead of competitors, "may have had the effect of harming individual competitors." However, the commissioners argued that the preferential treatment "could be plausibly justified as innovations that improved Google's product and the experience of its users."

The commissioners also lauded Google's decision to allow third-parties to remove their content from its different sites, allaying FTC concerns.

Implications across the pond?

Despite the FTC's ultimate decision to not launch an antitrust lawsuit against Google, the newly revealed documents could have an impact on the company's current investigation by the European Union.

Google has been embroiled in an antitrust investigation in the EU since 2010 over claims that it may be providing preferential treatment to its own services. Google has tried on three occasions to settle the deal, but European regulators have each time decided against accepting an accord.

Last year, for instance, Google proposed a tentative settlement that would have forced the company to display search results for all services, including its own, in the same way. The company wouldn't have been required to pay a fine.

In September, European regulators, who had preliminarily agreed to the idea, said that they had received "fresh evidence" and "solid arguments" from 20 formal complaints. Those complaints, which came from competitors like Microsoft, prompted the regulators to send Google back to the drawing board.

"We now need to see if Google can address these issues and allay our concerns," said Joaquin Almunia, who was the EU's competition commissioner at the time. If Google's response doesn't satisfy the commission, the "logical next step is to prepare a Statement of Objections," Almunia said, referring to formal charges.

Google has several rivals that take issue with its ability to promote its services, including travel booking sites such as TripAdvisor, Expedia and Hotwire, and shopping sites TheFind and Foundem. All of those companies are members of FairSearch, a consortium of companies, mainly from the US, that have lobbied EU officials for greater regulation on Google and the ways it integrates its own services into search.

Google has argued that search engines are no longer just a list of links to other sites and the company should be allowed to provide relevant information without forcing a user to leave its pages. Google now has weather reports, medical information and calculators, among other tools, baked into its search pages.

"Larry Page, our co-founder, has always believed that the perfect search engine would 'understand exactly what you mean and give you back exactly what you want,'" Google senior vice president of global communications Rachel Whetstone said last year. "Initially, 10 blue links were the best answer we could give. But now we have the ability to provide direct answers to users' queries, which is much quicker and easier for them."

So far, Google's arguments has been unable to allay EU regulators' concerns. Indeed, there is a possibility that the current investigation into the company's search could only get worse and extend to another dominant Google platform: Android.

The FTC documents obtained by the Wall Street Journal were not meant to go public. The Wall Street Journal said that the FTC requested the documents back, but the news outlet refused. Whether that will result in the EU taking a tougher stance against Google is unknown.

Regardless of the nature of the leak, Google responded on Friday, reiterating to CNET that it was found to have not engaged in any wrongdoing and the companies cited in the document are doing just fine.

"After an exhaustive 19-month review, covering nine million pages of documents and many hours of testimony, the FTC staff and all five FTC commissioners agreed that there was no need to take action on how we rank and display search results," Google's current General Counsel Kent Walker said. "Speculation about potential consumer and competitor harm turned out to be entirely wrong. Since the investigation closed two years ago, the ways people access information online have increased dramatically, giving consumers more choice than ever before.

And our competitors are thriving," Walker continued. "For example, Yelp calls itself the 'de facto local search engine' and has seen revenue growth of over 350 percent in the last four years, TripAdvisor claims to be the Web's 'largest travel brand' and has nearly doubled its revenues in the last 4 years."

The FTC has not responded to a request for comment.

Update 10:35 a.m. PT to include Google's statement.

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