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ENGINE KNOCK – Feds launch antitrust probe into Google’s market influence

By , THEDAILY.COM

Fri, Jun 24, 2011 at 12:14 pm

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Google is about to get searched by the Feds.

The

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U.S. Federal Trade Commission is reportedly launching a widespread antitrust investigation into the world’s largest Internet search company, and civil subpoenas could come as early as today, according to the Wall Street Journal.

The FTC is looking into whether Google abuses its dominance of Internet search to extend its influence into other lucrative online markets, such as mapping, comparison-shopping and travel. Rivals complain that the ubiquitous company, which handles two out of every three Internet searches in the U.S., manipulates its results to steer users to its own sites and services and to bury links to competitors.

Google stocks fell on the news, to close down $6.785 yesterday.

“I think Google would prefer a quick fix,” said Daniel Crane, a law professor at the University of Michigan specializing in antitrust claims, who has communicated extensively with the company.

“The company will want

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to settle quickly, with a very little loss of blood,” he told The Daily, noting that the investigation is in its early stages and it will likely be months, if not years, before a formal complaint is filed.

That said, depending on how long the investigation drags on, the legal bills could cost Google anywhere from a few million to 100 million dollars, according to Crane.

Considering Google reaped $2.8 billion in earnings for the first quarter of this year, the company could definitely handle the hit, but it comes at an especially inconvenient time, when Google is already fending off antitrust investigations launched last year by the European Commission and the Texas attorney general’s office. The Ohio attorney general’s office is also said to be mulling its own probe.

While Google’s dominance isn’t anti-competitive per se, some companies allege that when it comes to delivering search results for users, Google favors its own suite of free products — Google Maps, Gmail, Google Docs, Google Shopping, etc. — at the expense of smaller companies, whose products may appear lower down or on secondary search-results pages.

Google “pretty clearly is using its dominant position to its own advantage,” said John Simpson, spokesman for Consumer Watchdog, a nonprofit advocacy organization that has called for an investigation into Google’s practices for the past two years.

As evidence, Simpson pointed to a study his group published last year under the project name “Inside Google.” It found that Google Maps managed to edge out rival Mapquest, owned by AOL, reducing its market share from 57.24 percent to 32 percent in three years.

Consumer Watchdog concluded that the dethroning was “due in large part to the steps taken by Google to favor its own locator service.”

Still, other legal experts argue that complaints by other companies should have little merit because Google’s dominance was the result of pure consumer choice.

“A fair question is why do the vendors not rely on the other engines and actually promote them?” said Vivek Ghosal, an economist at the Georgia Institute of Technology. “This would lead to greater market share of those search engines, alleviating some of the supposed competitive concerns. This is a fair question to ask of those filing antitrust lawsuits.”

Ghosal warned that the FTC’s investigation signals to other government regulators around the globe that it is open season on Google. A barrage of investigations would dampen not only Google’s drive to innovate, but also that of competitors, he said. He cited the numerous lawsuits filed against Microsoft in the wake of its 2001 antitrust settlement with the Justice Department, which have sought billions from the software maker.

Google and the FTC refused to comment.

Carl.Franzen@thedaily.com

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