FTC, Senate rachet up Google antitrust probes

The Federal Trade Commission and the U.S. Senate appear to be stepping up their antitrust investigations of Google, a development that could prove perilous for the Mountain View, Calif.-based company, which is already fending off a formal investigation in Europe.

The FTC is planning to serve Google with civil subpoenas as part of an examination of market power in Google's search advertising business, according to a report this morning in The Wall Street Journal.

A Google representative declined to comment on any discussions with the FTC or the possibility of a broad antitrust investigation.

Google has shed market share to Microsoft over the past year, according to data released last week by research firm Compete. It's dropped from 73.9 percent to 63.6 percent, while Microsoft's Bing has increased its market share to 17 percent.

So far, at least, Google has managed to avoid experiencing what happened to Microsoft at the hands of an ungentle Justice Department, which filed a broad antitrust suit in the late 1990s that eventually included a demand that the Redmond, Wash., company be split into halves. In 2001, a federal appeals court rejected a breakup but allowed the rest of the case to proceed.

Microsoft was not exactly eager to compromise with Washington, D.C., regulators and bureaucrats. Chief Executive Steve Ballmer once said "to heck with Janet Reno," the attorney general during the Clinton administration (see Ballmer's explanation in a CNET interview).

For a while, it sounded like Microsoft founder Bill Gates was channeling capitalist doyenne Ayn Rand, saying in 1998 that the technology industry's successes were due to lack of interference from Uncle Sam, and claiming that "the government is still trying to slow Microsoft down." It even launched a Web site, FreeToInnovate.com, which let like-minded souls send a pointed note to their member of Congress.

Google, by contrast, has shown more of a willingness to compromise: In March, it settled an FTC investigation into Google Buzz by agreeing to 20 years of privacy oversight. A few days later, it inked a deal with the Justice Department, including non-discrimination terms, that let it buy ITA Software for $700 million. Most prominently, Google abandoned a proposed advertising partnership with Yahoo at the last minute, a move that avoided a near-certain DOJ antitrust lawsuit.

Also this week, a U.S. Senate committee probing antitrust and Internet search topics is threatening to subpoena Google CEO Larry Page or Chairman Eric Schmidt to testify on a hearing that will be held before the August recess.

These types of tussles over witness lists are commonplace: politicians know that a CEO's appearance will draw more press attention, so they tend to ask for it. But when Apple was pressed for details about location privacy by a Senate committee last month, it sent a vice president, not CEO Steve Jobs.

Google has been reluctant to provide either Page or Schmidt for the Senate antitrust subcommittee's hearing, saying other executives would be more appropriate. Utah Sen. Mike Lee, the senior Republican on the panel, said yesterday he was "very disappointed in Google's response."

"We're in talks with the subcommittee and will send an executive who can best answer their questions," a Google spokesman told CNET this morning.

Google has proposed David Drummond, its senior vice president and chief legal officer, who also heads its business development and acquisition teams, as the executive best able to address the committee's concerns.

In 2007, Drummond testified before the Senate antitrust subcommittee about the antitrust implications of the Google-DoubleClick merger. A year later, he returned to the same panel to discuss the proposed advertising relationship with Yahoo.

A June 10 letter to Google from Lee and Wisconsin Sen. Herb Kohl, the Democratic chair of the subcommittee, said: "A hearing on this important topic would be incomplete without the direct perspective and views from one of Google's top two executives, each of whom has played a prominent role at the company throughout the last decade."

Just over a billion people worldwide visited Google in May, according to data released this week from ComScore. Microsoft was in a close second place with 905 million visitors last month, up 15 percent from a year earlier.

Disclosure: The author of this post, Declan McCullagh, is married to a Google employee.

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