FTC to Subpoena Google Over Search Practices
The Federal Trade Commission is preparing to issue subpoenas to Google as part of a wide-ranging civil antitrust investigation into practices in Google’s search engine business, according to two people with knowledge of the matter.
For several months, lawyers at the commission have gathered information about Google’s search and advertising business and whether the way it orders search results and related advertising constitutes illegal anticompetitive behavior.
This month, commissioners privately debated whether to authorize its Bureau of Competition to issue subpoenas to Google and are close to moving forward. As of Thursday afternoon, commission formalities remained before the investigation is officially started, but two people with knowledge of the matter said a final decision to issue the subpoenas was imminent in a matter of days. They agreed to speak only on the condition of anonymity because the action was not yet final and because it could be postponed if the commission required additional information.
The commission’s action was first reported online by The Wall Street Journal on Thursday. Spokesmen for Google and the Federal Trade Commission declined to comment.
Google has been the subject of repeated antitrust inquiries in recent years, most of them involving proposed acquisitions. In the United States, the Federal Trade Commission and the Justice Department have conducted reviews of Google’s acquisitions of the Internet advertising companies DoubleClick and AdMob.
More recently, the Justice Department reviewed Google’s purchase of ITA Software, a travel services company. In that case, the government cleared the merger only after Google agreed to conditions and continuing government monitoring. Just this month, the Justice Department began an investigation into Google’s $400 million acquisition of Admeld, which provides advertising services to publishers.
In 2008, the Justice Department also blocked a proposed advertising pact between Google and Yahoo because of concerns about its effect on competition. Last year, it also opposed a sweeping court settlement between Google and publishers and authors, in part because the agreement would have given Google too much power over the market for digital books.
But unlike those cases, which affected only small portions of Google’s business, the current investigation focuses on Google’s main business: Internet search and advertising. If it leads to charges against the company, its impact could be more far reaching, according to antitrust experts.
“This is the main act,” said Ted Henneberry, a former trial lawyer at the Justice Department and partner at Orrick Herrington and Sutcliffe.
If Google is found to have abused its dominant position in Internet search and advertising, the F.T.C. would not levy fines. But it has the authority to issue cease-and-desist orders for violations of the trade commission act, and it can also file a lawsuit seeking a preliminary injunction against certain behaviors. The Justice Department and the F.T.C. share jurisdiction over antitrust issues. But as a matter of practice they alternate as to which agency takes the lead in an investigation.
Critics of Google have been pushing for a broad antitrust investigation into the company’s search business, where it controls about two-thirds of the market in the United States. In the past, company executives have said that the increased scrutiny from regulators is a normal byproduct of its success.
Addressing its search results specifically, company officials say that its ranking decisions are made to benefit users and that, as with any ranking system, some parties will be unhappy with their placing.
The company’s market share has remained steady in recent years. According to the research firm comScore, Google controlled 65.5 percent of the market in May; Yahoo had 16 percent and Bing had 14 percent.
Last year, the European Commission opened its own antitrust investigation into Google’s search business, after complaints from smaller companies, which claimed that Google downgraded their sites in its search results while giving favor to its own Web services. That investigation is pending.
By making a site more or less likely to rise to the top of its search results, Google theoretically could affect how much traffic a Web site got and therefore how much it could charge for advertising. If another company’s Web site for, say, a travel service, competes with an ancillary business of Google’s, manipulation of search results could be considered anticompetitive.
Google’s main search-advertising business accounts for most of the company’s revenue, which totaled $29.3 billion last year.
FairSearch.org, an organization that represents several of Google’s critics including the Web sites Expedia, Travelocity, Kayak and Microsoft, said it was encouraged by reports of the F.T.C. inquiry.
“Google engages in anticompetitive behavior across many vertical categories of search that harms consumers,” the organization said in a statement. “The result of Google’s anticompetitive practices is to curb innovation and investment in new technologies by other companies.”
According to comScore, Google in May became the first company to have one billion unique visitors to its site in one month, a rate that was up 8 percent over a year earlier. Google’s share price is down 19 percent since the beginning of the year.