FTC Approaches Google With Antitrust Hammer Swinging
By Rob Spiegel
If Google appears nonplussed by the FTC's attention, it doesn't have much company. Comparisons to Microsoft's long and painful antitrust saga abound. "Google seems to be making the same mistakes Microsoft made, only they're making those mistakes faster and worse," said tech analyst Rob Enderle. "Snubbing Congress was insane."
Google (Nasdaq: GOOG) was notified by the Federal Trade Commission on Thursday that a broad formal investigation will be launched. Google respects the FTC's process, it said in a blog post, and will be working with the agency over the coming months.
The FTC's Bureau of Competition will issue subpoenas to Google within the next few days, The Wall Street Journal reported on Thursday. Its investigation will focus on Google's dominance in search advertising, and determine whether it manipulates search results to direct users to its own sites and services.
Attorneys-general in California, New York and Ohio have also launched antitrust investigations against Google, The Financial Times has reported.
While the FTC probe appears to be the most intense investigation into Google to date, the company has been targeted previously over antitrust issues.
Google and the FTC did not respond to the E-Commerce Times' requests for comments by press time.
Following Microsoft's Troubled Path
Google could be at the center of a chapter of history repeating itself. Its present position is reminiscent of Microsoft's (Nasdaq: MSFT) in the mid-90s, which led to its prolonged battle with U.S. and European regulators. One question is whether Google's long dominance of search advertising has led company officials to have a sense of entitlement, creating a climate in which they've been routinely using search as a competitive weapon.
"The FTC called up Google and said, 'You've been naughty boys,'" Rob Enderle, principal analyst at the Enderle Group, told the E-Commerce Times. "Now Google is going down the same path Microsoft went down. Congress wanted to look at them as well, and they thumbed their nose at Congress. They said, 'No, we're not coming.' Instead, they sent their chief counsel. You don't snub Congress. As rich as they are, they're not a government yet."
Right now, Google's control of the Web is formidable.
"They control the page rankings," said Enderle. "They have the power to make and break companies on the Web, and many of those companies are Google competitors. That's an enormous amount of control, and the FTC sees that as restraint of trade."
The lessons of the past don't seem to have made a sufficient impression on Google, in Enderle's view.
"Google seems to be making the same mistakes Microsoft made, only they're making those mistakes faster and worse," he said. "Snubbing Congress was insane. Microsoft blazed this trail in the United States and Europe, so I think we're going to see this happen more quickly with Google."
If Google seems cavalier about the way it wields its power, the same could be said about its concern over its public image.
"It's almost like they've decided their image doesn't matter," said Enderle. "Their image has taken a beating over the past five or six years. This will hurt their image even more."
Cracking Open Google Search
Ultimately, the FTC inquiry may have a bearing on how online searches are conducted. Will Google continue to determine how to produce the best search results, or will its competitors get a chance to weigh in?
"Google's algorithms today currently select one set; Google's competitors would like to have a different set. At issue is how gets to decide what 'best' means," Carl Howe, director of anywhere consumer research at the Yankee Group, told the E-Commerce Times.
"If the subpoenas get issued, I think this could result in litigation that goes on nearly as long as the Microsoft antitrust trial," he said -- "not because the merits of the case warrant it, but because Google's competitors have everything to gain from it going forward."