Google investigation: Is it abusing its dominance?
Google investigation will focus on search results and advertising. Federal Trade Commission's launch of Google investigation could parallel federal probe of Microsoft in the 1990s.
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Melissa Maxman, an antitrust attorney in Washington, said the FTC wouldn't have opened its inquiry unless it thought the complaints were credible.Skip to next paragraph
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"There is smoke if not fire," she said.
The FTC's investigation threatens to put Google on the same course as one of its biggest nemeses, Microsoft, which was the target of a Justice Department lawsuit that began in the 1990s and dragged into the next decade. That case alleged Microsoft used its dominant Windows operating system to kill competing software makers.
"It's right out of the same playbook," Maxman said of the FTC's probe into Google.
Google executives have consistently brushed off the Microsoft comparisons, insisting that people can more easily switch to a different search engine than they could change to a different computer operating system. "Competition is just a click away" has emerged as a Google mantra that is uttered more frequently than its official motto: "Don't be evil."
Although Microsoft thwarted an attempt to break up the company, it was distracted for years, and the company has never been quite the same. The investigation may have made Microsoft more vulnerable to companies such as Google during the late 1990s as the Internet emerged as an important new platform on computers.
Now, Google faces some of the same threats as it tries to figure out how to counter the rising popularity of services such as Facebook.
In an extreme scenario, the FTC's inquiry could be the first step in a long process that ends with Googlehaving to spin off pieces of the empire it has built for 13 years. Although it doesn't have to, the FTC could hand its case off to the Justice Department, as it did in the Microsoft inquiry.
"Inevitably, if we get to the point where Google is found to have abused its power, we are going to be talking about divestiture because divestitures are always a better way to go than trying to regulate something like this," said Gary Reback, an antitrust lawyer in Silicon Valley who is representing some of the companies complaining about Google's practices.
At this early stage, breaking up Google still looks like a remote possibility.
Other antitrust attorneys think the investigation could result in less radical solutions, such as prohibitingGoogle from featuring its own services at the top of its search results. Google could also agree to periodic audits of how it programs its search engine, much as did earlier this year in a settlement of an FTC investigation into its privacy practices.
Or the FTC could conclude Google has been behaving properly, further emboldening the company to find ways it can reshape technology, advertising and other industries.
Google is expected to put up a fierce fight. The investigation is aimed at the heart of its business, its formula for ranking the quality of websites and ads, which has evolved since Google co-founders Larry Page and Sergey Brin began working on it at Stanford University. The company views the recommendations that it produces as a matter of opinion protected by the First Amendment.
"It's still unclear exactly what the FTC's concerns are, but we're clear about where we stand," one of Google'stop search engineers, Amit Singhal, wrote Friday on the company's blog. "Since the beginning, we have been guided by the idea that, if we focus on the user, all else will follow."
The decision to have the blog written by someone other a lawyer was probably a way for Google to remind people that it believes management of Internet search is best left to engineers who spend their time writing computer codes instead of legal briefs, said Steven Levy, author of "In The Plex," a book that takes inside look at Google's culture.
Levy said Google has been preparing for this battle since it was almost sued by the Justice Department over a proposed Internet search partnership two and a half years ago. The Justice Department drew up a complaint alleging Google had built a monopoly in Internet search, but never filed it because Google scuttled its agreement with Yahoo to avoid going to court.
Google has been under increasing government scrutiny since then. It has prevailed in the key confrontations and won regulatory approval for several key acquisitions, including its $3.2 billion purchase of online ad service DoubleClick in 2008, last year's $681 million purchase of mobile ad service AdMob and a $700 million purchase of airline fare tracker ITA Software in April.
To prove Google abused its dominance, regulators will have to get it to turn over sensitive documents that it has resisted sharing in the past. And Google probably won't be shy about fighting for the right to adjust its search formula to deliver more useful results to its audience.
The company says it needs to fine-tune search results to weed out the sites that try to game its system and win a high ranking even though they have little to do with whatever a person was searching for.