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Digital River - Talk to the Experts

FTC Puts Lid on Google Search Teapot Tempest

By Erika Morphy
Jan 3, 2013 3:34 PM PT

The Federal Trade Commission and Google have reached a settlement on a two-year investigation the agency conducted into the search engine giant's business practices. In short, Google has agreed to give competitors access to standard-essential patents and allow its advertisers more flexibility in how they use rival search engines. Perhaps most significantly, Google has agreed to refrain from seeking injunctions to block rivals from using its standard-essential patents.

FTC Puts Lid on Google Search Teapot Tempest

"Ultimately the settlement was a win for consumers and perhaps for Google as well, as it will not have to face a government lawsuit accusing it of fundamentally violating antitrust laws," Ryan Radia, analyst with the Competitive Enterprise Institute, told the E-Commerce Times.

"I have long argued that Google's rivals never made a fact-based antitrust case against it," he continued. "The agency, if anything, was overeager to act against Google, and its failure to do so seems to strongly repudiate rivals' accusations."

An Extensive Investigation...

The settlement is the culmination of a two-year investigation that spanned many areas of Google's vast empire.

The FTC looked into the issue of "patent abuse" -- as critics would describe it -- as well as Google's apparent ham-handed attempts to keep AdWords customers from coordinating online ad campaigns across competing platforms.

...But No Search Bias Found

The FTC also looked into allegations that Google manipulated its search algorithms to unfairly promote its own vertical properties, a practice called "search bias."

In particular, the FTC evaluated Google's "Universal Search" product, which displays targeted Google properties in response to specific search categories, such as shopping and local. In the end, the FTC came to the conclusion that Universal Search could "plausibly" be justified as an improvement to Google's search product and its users' experiences.

The FTC closed that particular piece of the investigation, noting that the evidence it collected on those issues did not justify legal action -- and that its mandate is to protect competition rather than individual competitors.

Betraying FRAND Promises

The FTC did find evidence that Google was not living up to its responsibility to offer standard-essential patents it obtained with the acquisition of Motorola Mobility on "fair, reasonable and non-discriminatory," or FRAND, terms.

Google reneged on its FRAND commitments, the FTC alleged, and it pursued -- or threatened to pursue -- injunctions in federal district court and the U.S. International Trade Commission against companies that needed to use Motorola Mobility's standard-essential patents in their devices, and were willing to license them on FRAND terms.

Google has agreed to a Consent Order that prohibits it from seeking injunctions against a licensee that is seeking to use standard-essential patents.

This is a big deal, said Peter Toren, an attorney with Weisbrod Matteis & Copley.

"It is the first time that I have heard that the FTC has entered into a settlement in which it requires a company not to seek enforcement of FRAND patents," he told the E-Commerce Times. "It is clearly taking it very seriously."

How damaging this provision could be to Google is difficult to say without knowing the back story to the negotiations, Toren added -- which the general public is not likely to hear about.

"It could be that it was something Google agreed to in order to avoid other concessions and it doesn't feel it is that important," he said -- or possibly the government saw this as a key piece of the settlement and decided it wouldn't bend at all on the issue.

Delinking AdWords

Another concession Google made was to remove restrictions on the use of AdWords. In this case, the FTC noted the intensive manual process companies have to go through when preparing search ad campaigns. They have to build extensive bids, including keywords, price information and targeting information. Restricting advertisers from simultaneously managing a campaign on AdWords and competing ad platforms, the FTC decided, was unfair.

Another agreement Google is making under the settlement is to provide websites the option of keeping their content out of Google's vertical search offerings, while still having them appear in the organic Web search results. Otherwise, innovation might be hampered, the FTC said.

Google commmented on the settlement in a blog post but declined to provide further details.

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