Google and the FTC

An Open IMHO Letter to Google

Dear Google:

I’ve heard that the FTC has served you with a civil investigative demand in connection with your search-advertising business. They have raised the question as to whether your search engine technology pushes consumers to your other services in a manner that is unfair to your competition.

Now the FTC will try to determine if your market power is dominant because your practices are unfair and whether consumers are harmed, either directly or by not having competitive choices in the marketplace. Of course, the FTC has taken into account the complaints of your competitors. That is significant because I’ve heard a rumor that companies rarely try to incite trouble for their competitors at a regulatory agency.

So what happens next? Senior executives scramble. Lawyers do research and prepare briefs. Finance people set up cost centers and budgets. Evidence is gathered. Experts are retained. Distraction will be pervasive, invasive, consistent and persistent – until a settlement is reached. It won’t be pretty. It won’t be fun. It never is. But it’s here and at least the sword of Damocles is not hovering above. The issues will be confronted and the scope will be expanded – government always uses what it finds as a basis for going farther than originally planned (it’s great leverage). Then the serious business of trying to reach an accord will begin.

This isn’t about winning or losing. It’s about making a point. But it’s de facto, a recognition that you are thriving at what you do and have grown large and successful as a result. True, this action is probably not the recognition you prefer, but when the government wants everyone to believe you might be too big, too dominant, too much in control at the expense of competition and the detriment of consumers, the target is painted on you and it’s just a question of how much pain is inflicted before a settlement is reached.

Now I am not an economist or a market dominance expert, I’m a lawyer and blogger; but I thought I might help out by offering some observations you can bring to the attention of the FTC that might give the government (maybe others in the industry and even your competitors), pause to question whether their analysis, their efforts, their investigation, is correct or necessary. I’ve taken the liberty of including an attachment to this letter (see Attachment A) that provides some tips. Feel free to use them and tell your lawyers to back them up with lots of research and briefs – those are always impressive and useful.

Sincerely,

Joe Rosenbaum at Legal Bytes.

P.S. If your people end up spending hours, days and months with government regulators, working through lunches, late nights pouring over documents, huddled around conference tables, it may give you an opportunity to point the officials to their next target. You know who.

P.P.S. Feel free to use these and other quotes from the FTC if you like:

“And, as the information industry is still emerging, quite dynamic, and not yet well understood, plausible efficiency benefits should, perhaps, weigh heavily in the balance against asserted risks of decreased competition, especially when the technology is changing so fast that adverse effects on competition are likely to be transitory.”

Antitrust and Technology: What’s On The Horizon?” Prepared Remarks of Federal Trade Commissioner Christine A. Varney, before the American Society of Association Executives, Legal Symposium, Washington, D.C., October 6, 1995

“A less confrontational approach suggests that because of the robust pace of innovation in high-tech industries, government should not intervene ‘unless certain that doing so will benefit consumers and the economy.’ (See, Priest, The Law and Economics of U.S. v. Microsoft, AEI Newsletter, August 1998).” Antitrust Analysis in High-Tech Industries: A 19th Century Discipline Addresses 21st Century Problems, Prepared Remarks of Robert Pitofsky, Chairman, Federal Trade Commission, to the American Bar Association Section of Antitrust Law’s Antitrust Issues in High-Tech Industries Workshop, February 25-26, 1999, Scottsdale, Arizona

You really need to see Attachment “A” so if it isn’t already displayed, point whichever browser you are using and click the “Continue Reading” text on the left below.

Attachment A

Responses to the FTC Antitrust Investigation *

Google is not a verb.

Brand and reputation management is more important than trademarks in the online and mobile space. Get over it. Google is a company. The presence of other search, advertising-supported browsers, platforms and technology is actual evidence that no specific company or technology is truly dominant through the exercise of “control,” but rather of the innovative appeal, utility and functionality to consumers. Do the names Netscape, MySpace or Sega ring a bell?

Google doesn’t and can’t control consumers.

Dominance implies barriers to entry, control and the evil things monopolists ostensibly do to protect their turf. My mouse is free to go where I tell it, free of any browser or search technology. Try this at home everyone: Open Internet Explorer. Firefox. Opera. Chrome. Safari. Don’t close any. Did Chrome take over control of your screen as the 1963 TV series “Outer Limits” did? Want more? Please refer to the Comparison of Web Browsers available on Wikipedia, starting with Nexus in 1991. You do remember dominant Nexus, don’t you?

Google presents no barrier to entry.

Bing searches. Facebook socializes. Twitter chirps. Groupon clips. FourSquare locates. LinkedIn networks. Anyone feel they can’t innovate? Generate buzz? Grow their own consumer-user base? Entry, algorithms, technology, costs almost nothing in this market – sadly hackers and cybercriminals often call attention to that fact. Perhaps a better question is whether innovation is stimulated by companies that constantly evolve and look for ways to improve the consumer experience, rather than lock them into one. I don’t have a two-year exclusive contract for my web browser with Google. Do you?

Google dominance based on consumer choice is neither bad nor illegal.

Dominance isn’t bad or illegal if it is earned, not coerced. Big doesn’t always equal bad – the government would be guilty if that were the measuring criteria. What if consumers prefer Google’s search technology because of utility, functionality, accessibility or another reason. I like the doodles on each day’s opening web page. Nothing is tied to my browsing, nothing controls or coerces my actions, and although I use a variety of browsers for reasons that are unique to me, none of them dominates my activity or behavior on the web. Just curious, does each government agency (e.g., the FTC) have a choice of browser used internally?

Google doesn’t harm consumers.

At the end of the day, if consumers aren’t harmed, if no unfair competition has occurred, if no barriers to entry exist, and if no control is exercised because of dominant position—the question we must all ask is whether the government is simply targeting each 800-pound gorilla in each decade, or whether some wrong must be set right. I wonder how many consumers have contacted the FTC complaining that they were forced to use a browser against their will. Does it not strike anyone as strange that a company that looks at the market, identifies an opportunity, and innovates for the benefit of consumers in that market, is targeted because it has done a good job? If there is no evidence that a consumer is harmed, precluded from making choices in a competitive marketplace, or prevented from using or benefiting from some product or service as a result of unfair or deceptive practices, riddle me this, Batman – whose interests is the government protecting?

 

* Note: Neither the author nor, to his knowledge, his law firm, represents Google. The author has not and does not do business with Google, although he has used its browser, used its search capabilities and other features and functions when he chooses to do so. The above analysis would and does apply to any similar situation. Why? Because it’s my humble opinion. IMHO, that’s why.