FTC did the right thing on Google

FTC did the right thing on Google

By Thomas Lenard

(This piece was published in The Hill’s Congress Blog on January 7, 2013)

After investigating Google’s search practices for almost two years, the Federal Trade Commission and its staff undoubtedly wanted more than the few voluntary modifications to which Google has agreed. But the Commission demonstrated its professionalism by concluding that the evidence did not support bringing an antitrust case and that no additional remedy was likely to benefit consumers.

The principal complaint against Google – primarily by its competitors, including specialized search and shopping services – was that its searches were “biased.” For example, Google now tries to directly answer users’ queries rather than simply referring users to other sites. When users search for travel information, Google gives them a list of the best flights to their destination in addition to links to other travel sites. Google’s primary competitor, Bing, provides similar information in its search results.

Consumers like this service, but for competitors it was Exhibit A demonstrating that Google favors its own content at the expense of competitors. One of the complainants, Jeffrey Katz, CEO of price-comparison site Nextag, explicitly stated in an op-ed that Google should work “the way it used to work.” Turning back the clock may be good for Nextag, but it is not a recipe for innovation.

In concluding the case, the FTC recognized that the circumstances surrounding Google do not mirror those of another technology sector case – Microsoft. A monopolization case requires unambiguous evidence that the company is in fact a monopoly. The evidence was strong with Microsoft, but the tech environment of 2013 is different from 1998. Today, technological leadership in the Internet ecosystem is shared among a number of firms – Google, Facebook, Apple, Amazon, Microsoft and others – who compete in multiple areas. Other players, including Internet service providers, also compete for their slice of the consumer dollar.

Setting aside the specious claims of an anticompetitive Google monopoly, it is even more difficult to imagine an FTC remedy that would benefit consumers. Virtually any conceivable remedy would constrain Google’s ability to improve its search results and vigorously compete in emerging interplatform markets. It would also signal innovators that the government will punish you if you get too successful.

Some of Google’s competitors, unhappy with the FTC’s findings, wanted the Commission to wait for the European Union, which has a parallel investigation, and is reportedly obtaining bigger concessions from Google. But the EU’s antitrust regime puts more weight on competitors and less on consumers than the U.S. does. The Commission is correct in resisting pressures to follow Europe.

In addition, at least one of Google’s competitors has reportedly met with the Department of Justice, pressing officials there to open an investigation. Given the lack of evidence found by the FTC after its thorough inquiry, it would be wholly inappropriate for the DOJ to subject Google to another investigation.

Antitrust, especially as it applies to the rapidly changing technology sector is far from an exact science. Errors can be costly and therefore antitrust enforcers need to show humility. They should have a high degree of confidence that the target of their investigation is causing significant harm to consumers and competition, and also that they can devise a remedy that will make consumers better off and not inhibit innovation. The FTC recognized that the evidence supported neither claim and, therefore, correctly decided to pass on this one.

Lenard is president and senior fellow at the Technology Policy Institute and a former senior economist at the Federal Trade Commission.

The Technology Policy Institute

The Technology Policy Institute is a non-profit research and educational organization that focuses on the economics of innovation, technological change, and related regulation in the United States and around the world. More information is available at https://techpolicyinstitute.org/.

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