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Penalizing Success – The FTC’s Google Investigation

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In theory, the antitrust laws do not penalize size, but it seems that virtually every firm that has become dominant in the technology sector—IBM, Microsoft, Intel, and now Google—ultimately becomes the subject of a major antitrust action.  The FTC started its investigation of Google formally last week and Paul Rubin and I wrote a piece on it that was published in Forbes.com.

We discuss the problems with antitrust action in high tech industries and, specifically, the nature of the complaints against Google:

Some websites are complaining that Google is manipulating its search results to advantage its own products and disadvantage its competitors. They want search to be “neutral.” But what does “search neutrality” mean? Does it mean that search engines should rank websites randomly?

Google’s market position was earned precisely because it found a way of ranking search results that is more useful for consumers, and it will quickly lose that position if someone can find an even better ranking algorithm. Before Google, the Web was much less useful precisely because search engines did not rank results in a way that consumers found informative. “Neutrality” could return us to that world.

Also problematic are the possible remedies the FTC could impose if it finds Google has violated antitrust law:

Google’s most valuable asset is its search algorithm, which is secret and constantly being refined. The secrecy of the algorithm is an integral part of its value because there is an entire industry trying to game it in order to achieve higher rankings. Would the FTC ask Google to reveal its algorithm so that the FTC lawyers and their technical advisors can try to determine how to make it neutral?

It is quite possible that the FTC investigation will not lead to further action because thus far there is no publicly available evidence that Google has violated the antitrust laws.  Let’s hope that the investigation doesn’t divert too much of Google’s attention and resources from what it should be doing—improving its current products and developing new ones.