Google's rivals disappointed by FTC decision, hold out hope for action

Google won a major victory when the Federal Trade Commission, after a nearly two-year investigation, concluded Thursday that the company had not abused its power as the dominant Internet search engine.

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But the company's rivals, including Microsoft, Kayak and Expedia, are hoping that other regulators will step in to force Google to change its business practices, which they claim are stifling online competition.

The European Commission has been conducting a parallel investigation into Google and is expected to issue its decision in the coming weeks. Six state attorneys general have also launched formal probes.

"The good news is that other antitrust agencies, within the United States and overseas, are still examining Google’s conduct," Dave Heiner, Microsoft's deputy general counsel, wrote in a blog post reacting to the FTC's decision. 

"We remain hopeful that these agencies will stick to their established procedures, ensure transparency, and obtain the additional relief needed to address the serious competition law concerns that remain."

Google's critics argue that the company is manipulating its search results to ensure that its own services appear above those of its competitors.  

The critics argue it is illegal for Google to use its dominant search engine — which controls about two-thirds of the market— to suppress competition for other services.

In a unanimous decision, the FTC took no action on the complaints over search bias, although Google did make some commitments related to its patents, advertising platform and its use of other companies' content in specialized search results.

Gary Reback, a Silicon Valley lawyer representing some of Google's rivals, said the FTC bungled the investigation.

He claimed the commission ignored complaints and failed to follow up with some of his clients.

"The FTC staff is inept," he said. "They don't know how to put together a case."

He said that by not charging Google with antitrust violations, the FTC abandoned the precedent of the Justice Department's lawsuit against Microsoft, which Reback helped spearhead as an attorney for Netscape in the 1990s.

"We now learn the Microsoft decision only applies to Microsoft," he said.

Reback predicted that in the future, companies will turn to the Justice Department instead of the FTC when they have complaints about antitrust violations.

"The FTC's decision took them out of the antitrust business going forward," he said.

At a press conference announcing the decision, FTC Chairman Jon Leibowitz said his agency conducted an "exhaustive" investigation and reviewed more than 9 million pages of documents.

He said there was "some evidence" to suggest that Google uses its search engine to hurt competitors, but he said the primary reason the company made changes to its search algorithm was to improve the experience for users. 

"Some may believe that the commission should have done more in this case, perhaps because they are locked in hand-to-hand combat with Google around the world," Leibowitz said, adding that his agency followed the facts and applied the law.

But other antitrust regulators are not bound to come to the same conclusion as the FTC.

“The agreement between the FTC and Google has no bearing or impact on the State of Texas’ independent investigation. Texas will continue with its investigation,” Tom Kelley, a spokesman for the Texas Attorney General, said.

The other states investigating Google are New York, California, Ohio, Mississippi and Oklahoma.

The European Commission, which follows different antitrust laws, has a reputation of being more aggressive than U.S. agencies.

Joaquín Almunia, Europe's top competition enforcer, told Google last year that they would need to address four areas of concern, including whether the company favors its own content in search results.

David Schubmehl, an analyst for market research firm IDC, said that if Europe forces Google to alter its search business, the company might choose to apply those changes in the United States.

"I think they want a unified search experience around the world," Schubmehl said. 

But the European Commission has no control over Google's practices in the United States, and if the agency comes to a different conclusion than the FTC, it could mean U.S. and European users will have access to different versions of Google.

The situation becomes even more complicated if some states try to force Google to change its behavior. 

But no matter the outcome of the state and European investigations, Google is likely to remain under the spotlight of regulators around the world for a long time to come.

"As long as Google maintains the level of market share that it has in the search wars, I think it is going to continue to have these kinds of charges made," Schubmehl predicted.