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Google wriggles out of FTC search smackdown. Now to Europe!

Fight or flight time for commissioner Almunia

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Analysis The dust has yet to settle on yesterday's ruling in which the US Federal Trade Commission cleared Google of biasing its search results to nobble its competitors. But rival Microsoft is already accusing the ad giant of failing to be a "responsible" leader and is claiming victory in the lengthy antitrust case.

Google may have reason to celebrate, however, given that the FTC was satisfied that Google's business tactics were not bad for competition but instead showed product "innovation" that apparently improved search for its users.

While the FTC statement conceded that the introduction of Universal Search as well as additional changes made to Google’s search algorithms "may have had the effect of harming individual competitors", it also argued that these could "be plausibly justified as innovations that improved Google’s product and the experience of its users."

Google's own chief legal officer David Drummond couldn't resist playing on the commission's wording by saying that his company would "head into 2013 excited about our ability to innovate for the benefit of users everywhere."

But significantly there remains a potentially big hurdle for Google in the form of the competition office of the European Commission, headed up by Joaquin Almunia, which has yet to issue its conclusions on whether the search giant's business practice has amounted to an "abuse of dominance".

Google's search engine has an incredibly strong grip on the market in Europe, with a more than 90 per cent share. Rivals have long complained that they feel flattened by the Larry Page-run monster truck.

UK-based price-comparison outfit Foundem filed its complaints to the EC and the US Federal Communications Commission in February 2010 when it argued that consumer choice was being eroded, that competition was suppressed and that innovation had - in its view - been stifled by Google.

Last month, the company penned a letter to the FTC anxiously urging it to reconsider "anticompetitive search manipulations" that have been claimed by Foudem, Microsoft, Expedia, Trip Advisor and others. The missive came after reports - we now know - confirmed that the commission chaired by exiting Jon Leibowitz would end its investigation with the outcome being favourable for Google on search.

On 31 December, Foundem co-founders Adam and Shivaun Raff said to the FTC that such a conclusion would prove to be "a catastrophic mistake".

The letter continued:

It is no accident that search manipulation was the issue that sparked the US and European investigations; its insidious, anticompetitive impact outweighs all of Google’s other anticompetitive practices by a considerable margin. While virtually undetectable to users, Google’s search manipulations lay waste to entire classes of competitors in every sector where Google chooses to deploy them.

The Raffs further claimed that Google was, in effect, a master at confusion, obfuscation and intimidation.

It's now clear that the FTC disagrees with those allegations.

And the spotlight inevitably turns to Almunia, who has suggested that he will require a more stringent set of agreements from Google than those set out by the FTC. Lobby group Fairsearch, which is backed by Microsoft and other complainants, argued, meanwhile, that the Stateside competition commission had jumped the gun with its conclusions. It said:

The FTC’s decision to close its investigation with only voluntary commitments from Google is disappointing and premature, coming just weeks before the company is expected to make a formal and detailed proposal to resolve the four abuses of dominance identified by the European Commission, first among them biased display of its own properties in search results.

The FTC’s settlement is by no means the last word in this case, leaving the FTC without a major role in the final resolution to the investigations of Google’s anti-competitive practices by state attorneys general and the European Commission. The FTC’s inaction on the core question of search bias will only embolden Google to act more aggressively to misuse its monopoly power to harm other innovators.

A defeated Microsoft grumbled in a blog post from deputy general counsel Dave Heiner that Google was failing to recognise its "responsibilities as an industry leader" following the FTC's decision not to trample over the company's alleged "search bias".

"That is certainly consistent with the lack of change we continue to witness as we and so many others experience ongoing harm to competition in the marketplace," he said.

But nerves appear to be jangled at Redmond, with Heiner expressing some anxiety about the EC's investigation of Google.

In Europe Vice President Almunia has made clear that he will close his investigation of Google only with a formal, binding order that addresses search bias and other issues. We remain hopeful that these agencies will stick to their established procedures, ensure transparency, and obtain the additional relief needed to address the serious competition law concerns that remain.

In mid-December, Google was told by Almunia's office that it must convince its rivals that it competes fairly in the web search market or else face sanctions for alleged "abuse of dominance".

Google was given a month to come up with a solution to complaints that it favours its own services over its competitors' products in web search results. Google could be fined $4bn - 10 per cent of its revenue - if no deal can be reached and it loses a subsequent legal battle with the European Commission. ®

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