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FTC launches investigation of Google

Google acknowledges that the Federal Trade Commission is looking into its business practices, including search and advertising.

June 25, 2011|By Jessica Guynn and Jim Puzzanghera, Los Angeles Times
  • Google co-founder Larry Page. Google has acknowledged the FTC is investigating its business practices.
Google co-founder Larry Page. Google has acknowledged the FTC is investigating… (Justin Sullivan, Getty…)

Reporting from San Francisco and Washington — Running the world's most popular search engine has brought Google Inc. wealth, market share and now antitrust scrutiny.

After a chorus of complaints from rivals, federal regulators, state attorneys general and foreign governments are looking at whether its dominance of the Internet is harming consumers and shutting out competitors, much the way they scrutinized Microsoft Corp. a decade ago.

Google acknowledged in a regulatory filing Friday that the Federal Trade Commission had launched a formal investigation into its business practices, including search and advertising. The FTC confirmed that an investigation was underway but declined to comment further.

While Google has faced antitrust probes into its acquisitions of companies in recent years, it has never faced broad U.S. scrutiny of its search and advertising businesses, which generate nearly all of its revenue of about $29 billion a year. Google handles about two-thirds of Web searches in the U.S. and more than 80% in much of Europe.

The investigation may not result in Google facing charges of abusing its market power; a majority of the FTC commissioners decided only that there was enough evidence to launch a formal review.

But if the FTC found Google had illegally leveraged its share of the U.S. search market to funnel customers to its other services, the agency could force a dramatic change to the company's ever-expanding operations.

"You could limit Google to the search market. You could say Google may not go into these adjacent markets to unfairly leverage" its search dominance, said Robert Lande, an antitrust expert at the University of Baltimore School of Law.

The FTC investigation could become "of the caliber of the Microsoft case," he said.

The FTC has been making informal inquiries about Google's business practices for several months, said Silicon Valley antitrust attorney Gary Reback, who represents companies that have complained to the FTC about Google.

Google said it was not sure what the FTC's concerns were. But in an interview, Amit Singhal, one of Google's top search engineers, said the company would cooperate with the FTC and with the states investigating its business practices.

"We are here to answer all questions from all authorities," Singhal said. "We are going to answer everything they want to know."

Momentum has been building for months to investigate whether Google abuses its market power to favor its own services over those of competitors. In November, the European Commission began a formal investigation into allegations from several companies that Google had violated competition laws. Texas also launched an investigation into Google.

The gathering regulatory storm could pose a serious legal and business threat to the 12-year-old Internet company, similar to the impact on Microsoft in the 1990s when federal officials pursued a landmark antitrust case. Microsoft eventually reached a settlement with the Justice Department and a group of states after a judge ordered that the company be broken up.

A long-running investigation could distract Google executives just as the new chief executive, co-founder Larry Page, attempts to reenergize the company to counter rising competition from Facebook Inc. and gain ground in new businesses such as mobile advertising.

Google also faces rising scrutiny on privacy matters. In April, it agreed to submit to independent privacy audits for 20 years as part of a settlement with the FTC over allegations it violated its users' privacy with its social networking service Buzz.

"Google is going down the road plowed by Bill Gates," Reback said.

But observers said it would be tough for the FTC to prove any harm to consumers.

"Nobody really cares about harm to competitors," Lande said. "If there's no harm to consumers, the case is over before it begins."

Further, proving such harm could be challenging in an Internet marketplace where consumers can easily shift to another search engine, said David Balto, a senior fellow at the Center for American Progress and a former FTC official in the Clinton administration.

For that reason, Balto said the Google antitrust case "is not even a distant relative" of the Microsoft case.

"Competition is literally a click away. You can have three or four search engines on your computer at any time," Balto said. "If you didn't like Microsoft Windows, you had to uninstall it and pay $300 for an alternative.

"Any alleged power by Google is much more evanescent than the concrete power that Microsoft possessed."

Rivals argue that Google is the gateway to the Web and has the power to control — and choke — traffic to websites. They also complain that Google prioritizes its products in search results and uses content from other companies without permission. Fueling that criticism is Google's move in recent years to instantly answer searchers' questions rather than just direct them to the most relevant search results.

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