Google May Face Lawsuits Over Accusations of Unfair Practices

By Kerrie Spencer, staff writer – November 27, 2012

Google may soon be juggling multiple lawsuits, as the debate over whether the company uses its size to illegally squelch competition becomes increasingly heated. Google is currently in talks with the Federal Trade Commission (FTC), after the agency indicated it was leaning in favor of suing the Internet giant earlier this month. Now, the European Commission (EC) is moving toward launching a new suit related to how Google may allegedly be promoting its own services in search results ahead of others. The company may also become involved in arbitration or other legal action over patent issues involving its Motorola Mobility unit. (1)(2)(4)(7)

This is not the least of Google’s worries. The EC is also contemplating whether or not Google’s Android O/S should be regulated as it is becoming a dominant leader in advertising and mobile search queries. The main issue with regard to the mobile technology is that the software, given free to handset makers, appears at first glance as a form of illegal predatory pricing – some believe that Google is doing so to chase away rivals. While not a terribly original tactic, it does create a highly unlevel playing field, and it is viewed by many as being underhanded and unfair.

Man Controlling Trade sculpture that sits outside the FTC building. Photo: www.ftc.gov

Rumors of lawsuits are being closely watched by the legal community and industry pundits as accusations continue to arise. FTC chairman, Jonathan Leibowitz, is reportedly pressuring Google to quickly resolve their talks over the agency’s investigation or face additional action. The agreement being pushed by the FTC would govern Google’s future behavior relating to the search market. The threat of further action is a substantial lawsuit that could rival the one that hobbled Microsoft in 1998 and resulted in antitrust convictions. (1)(2)(4)

Overseas, the EC antitrust commissioner, Joaquin Almunia, is waiting for the results of talks with Google that have been taking place since this summer. Almunia feels Google unfairly favors its own products, quashing European competition by listing them considerably farther down in their search engine results. Most users of the search engine stick with the results they get within the first page of a Google search, feeling they have found the information they were looking for. The issue is that users do not generally go any further than the first page, causing click-through rates to drop dramatically for the results that do not make that first-page cut. Because searchers do not go further, Google’s competition misses out on customers. Almost 90 percent of Google surfers do not look past page one. (1)

What about the smartphone issue? It may turn out to be more contentious than at first glance, largely due to the fact that giving handset makers software for free and also expecting to make money by charging for licenses is considered to be commercially abusive. Competitors are increasingly accusing Google of throwing its weight around because, they say, it must believe there will be no consequences.

However, history shows that Google might not get away with it. Google has clashed with the FTC as recently as March of 2001. As a result, the FTC obtained a 20-year oversight relating to Google’s privacy policies for the Buzz social network and fined Google $22.5 million for deliberately getting around cookie protections in Apple’s Safari browser. (1)(2)(4) So, their latest attempt to avoid litigation or arbitration may not be successful, particularly if there appears to be enough valid information that casts Google in a predatory light.

Google is not exactly sitting still as accusations continue to fly. The company does not want an outside agency telling it how to order search results. To that end, Google honchos have hired a law professor from the University of California to help argue that search results are free speech, and are protected by the First Amendment, because the results are dictated by humans typing in various search terms. That people searching for whatever they want is protected is not in dispute. But the issue of whether the results from a proprietary algorithm are also protected is one the courts will have to deal with in the not-so-distant future.

Google is being monitored by both the EC and FTC, with both agencies wishing to regulate how search results are presented. If the agencies win, Google might be in the position of being monitored by multiple third-party regulatory agencies. That would potentially have a significant effect on their business model, as they typically make at least one algorithm change every day. If they have to deal with a third-party, changes like that will not be possible. (1)(2)(4)

If courts are asked to weigh in on these issues, Google could end up paying for its arrogance in still-to-be determined ways, ones which may substantially affect how they can operate in the future. And politics may also play a role in how aggressively federal agencies pursue litigation.

Several Republican senators have, in essence, told the FTC to lay off Google. Had the Republican Party managed to regain control of the Senate in the recent presidential election, these lawsuits might have had less chance of moving forward. Ten top Republican senators suggested to FTC Chairman Leibowitz that his agency tread with caution as they consider suing Google for antitrust violations.

One snippet of the letter sent to the FTC included the quote, “In the interest of providing more regulatory certainty for American consumers and job creators, we urge the Federal Trade Commission to act with humility and restrain itself to activities for which it has clear legal authority.” (5)(6) Some see this as a thinly-veiled threat that Republicans would follow through on by further limiting the power of the FTC.

Given that the election resulted in a continued split government, Republicans are much less likely to be able to influence the process. A Congress that is unable to pass funding measures that last longer than three-to-six months is unlikely to unite around legislation affecting the FTC. However, it is worth noting that some Republicans would have willingly turned a blind eye Google’s business practices and actively encouraged their tactics by not regulating them.

The whole Google drama will not be sorted out overnight. It may be in court for years. However, one thing is for sure, the decisions have the potential to change the technology industry in a big way and allow industry rivals a chance to make their names known in the market. Perhaps it is time.

Sources
1. http://www.guardian.co.uk/technology/2012/nov/15/google-legal-perfect-storm-android
2. http://www.techradar.com/news/internet/web/ftc-probe-into-google-antitrust-allegations-should-end-in-settlement-1112975
3. http://www.bizjournals.com/sanjose/blog/2012/11/rivals-have-big-opportunity-if-ftc.html
4. http://www.washingtonpost.com/business/ftc-staff-said-to-formally-recommend-suing-google-over-patents/2012/11/02/830f8bb6-24a5-11e2-92f8-7f9c4daf276a_story.html
5. http://thehill.com/blogs/hillicon-valley/technology/268317-republicans-fire-warning-shot-at-ftc-as-google-case-looms
6. http://news.cnet.com/8301-13578_3-57539276-38/google-is-many-things-but-not-an-illegal-monopoly/
7. http://www.washingtonpost.com/business/googles-motorola-mobility-unit-apple-weigh-arbitration-in-fight-over-standard-patents/2012/11/17/17ab8a90-3077-11e2-af17-67abba0676e2_story.html