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Google in trouble? The FTC investigates charges of abuse

Federal regulators are looking into whether Google Inc. has misused its industry dominance in Internet-search advertising, and intend to slap the Web megacompany with a round of subpoenas, reported The Wall Street Journal.

Although the investigation may not lead to allegations of wrongdoing, and Google has faced several such probes before, the inquiry still poses a significant legal threat for the search engine company. Moreover, the probe will not just affect Google: It has the potential to dramatically remake the manner businesses compete online.

Involved parties said that the investigation, handled by the Federal Trade Commission, will address whether Google searches unfairly direct visitors to the firm’s network of services, steering them away from Google’s competitors. Companies have protested that Google has too much power in determining whether a business will succeed or not, and are upset that Google ranks its own services in its “natural” search results, while bulldozing rivals with high charges for placing ads.

"(Google) should compete on fair terms, but they're not subjecting their own content to the same standards by which they judge ours," Jay Herratti, CEO at CityGrid Media, a sector of IAC that operates Citysearch.com, Urbanspoon.com and InsiderPages.com, said to The Wall Street Journal. "They always guarantee themselves the top position with products that are largely built on other publishers' content.” He reports he had raised these concerns to the company some months ago, but they have turned "tone-deaf to publisher concerns and are proceeding with their own agenda."

Previous investigations have focused mostly on the firm’s mergers and acquisitions; this new investigation will look at Google's core search-advertising business, which is the company’s main cash cow. Some experts predict the probe may lead to a judgment as historic for antitrust policy as was the 1990s lawsuit against Microsoft Corp. by the Justice Department.

A ruling against Google will likely be difficult: The company is no easy target, antitrust lawyers say. After all, monopolies are legal under U.S. law, so investigators will have to prove the Internet giant abused its power.

"Google engages in anticompetitive behavior … that harms consumers by restricting the ability of other companies to compete to put the best products and services in front of Internet users, who should be allowed to pick winners and losers online, not Google," said Fairsearch.org, a group representing several Google detractors, including Microsoft and travel services Expedia Inc., Kayak.com, and Sabre Holdings.

These businesses have accused Google of appropriating other companies’ content sans permission, displaying search results in a misleading manner, scrambling search results to give an edge to Google products and purchasing any threats to its monopoly.

Google denies all such allegations, claiming that its visitors can easily navigate other options on the Internet. The Web giant maintains that it is simply supplying a service to its users, who are after answers instead of merely links to other services.

“(We) built Google for users, not websites, and our goal is to give users answers," the company declared in a statement.

Other companies have alleged that Google is exploiting its authority in search ads to take over other industries such as mobile phones, online television, publishing and airline travel.

While it remains to be proven if Google is abusing its dominance, it is clear the company has a giant share of the marketplace. Google manages about two-thirds of all U.S. Internet searches, according to comScore Inc.

Google has shifted from its original approach of sending users to the most relevant site to promoting a range of services and products that directly respond to visitors' inquiries. For instance, since 2009, the search engine company has directed individuals seeking mortgage services to its own marketplace.

“Given our success and the disruptive nature of our business, it's entirely understandable that we've caused unease among other companies and caught the attention of regulators," wrote two Google executives in a company blog post.

FTC commissioners will serve Google with civil subpoenas in the next few days and may request information from other companies down the road. The subpoenas are a sign that the FTC believes there is sufficient evidence to possibly launch a formal investigation. The agency has been informally inquiring after Google’s business activities for some months, and the case is anticipated to continue for a year or more.

Tagged in: advertising, case, google, ftc, federal trade commission, inquiry, subpoena, investigation,

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