Of the three EU antitrust cases against Google (search bias in shopping, Android tying, and soon search-advertising-tying), the expected new search-advertising case -- which focuses on how Google has long contractually required websites to use Google’s search advertising if they use Google search -- could be the hardest EU-Google antitrust case for the FTC to ignore, for the reasons below.
Summary of Why It’s Hard for FTC to Ignore the EU Search-Advertising Antitrust Case:
1. The FTC has been following the EU’s antitrust lead.
2. The FTC’s Google 2012 staff report agrees with the EU’s conclusion on search advertising.
3. The DOJ threatened a 2008 monopolization case over Google’s search advertising syndication.
4. The FTC approved two Google advertising acquisitions that substantially lessened competition.
5. The FTC fined Google a record amount in 2012 for a serious deceptive advertising offense.
6. This EU advertising case is based on strong contractual evidence.
The Reasons:
1. The FTC has been following the EU’s antitrust lead.
The FTC will likely quietly open a third FTC antitrust investigative front into Google’s alleged anticompetitive advertising practices because twice before, the FTC has followed the EU’s lead in reportedlyreopening antitrust investigations into Google: in 2015 over charges of Google abuse of its search dominance in comparison shopping, and in April 2016 over charges of Google abuse of its Android OS and app store dominance.
If the EU officially brings Google search advertising charges in the belief that it has enough evidence to survive legal challenge in the EU, then the FTC at least needs to investigate the new EU charges, if the FTC is to remain credible with antitrust authorities around the world.
2. The FTC’s 2012 Google staff report agrees with the EU’s conclusion on search advertising.
The first two sentences of the FTC staff report conclusion on Google’s 2012 antitrust violations states clearly: “Staff concludes that Google's conduct has resulted - and will result - in real harm to consumers and to innovation in the online search and advertising markets. Google has strengthened its monopolies over search and search advertising through anticompetitive means, and has forestalled competitors' and would-be competitors' ability to challenge those monopolies, and this will have lasting negative effects on consumer welfare.”
Simply, the FTC’s previous Google antitrust investigation apparently zeroed in on how Google’s tying behavior between the separate markets of search and search advertising was anticompetitive and monopolistic. To publicly criticize or oppose the EU bringing a highly similar Google search-advertising-tying finding and case in 2016, the FTC will have to better publicly explain why the 2012 FTC staff report was effectively “wrong as a matter of fact, law, and economics” in 2012, and also why Google’s “monopolies over search and search advertising” did not “strengthen” because of Google’s contractual search-advertising-tying.
3. The DOJ threatened a 2008 monopolization case over Google’s search advertising syndication.
The expected EU search advertising case appears to be highly similar to the anticompetitive problem the DOJ identified and opposed in 2008 in blocking the monopolistic Google-Yahoo Ad Arrangement which contractually tied Google search to search advertising. The DOJ’s special counsel that would have prosecuted that case if Google had not abandoned the deal, told Am Law Daily that the case: "would have ended up also alleging that Google had a monopoly and that [the advertising pact] would have furthered their monopoly."
This Google advertising case is especially timely to the marketplace given that investors are currently concerned about Google paying higher traffic acquisition costs (TAC) to big players like Apple to be their default search and search advertising provider. It is doubly timely given that Yahoo has reportedly asked the current DOJ for permission to do a search-search advertising agreement with Google, despite the fact that the DOJ blocked such an ad arrangement as monopolistic in 2008 with a threatened Sherman antitrust case, and despite the fact that Google’s search and search advertising dominance in the U.S. has only strengthened further since 2008.
To publicly criticize or oppose the EU bringing a Google search-advertising tying case, the FTC would have to better publicly explain why the DOJ in 2008, was also effectively “wrong as a matter of fact, law, and economics.”
4. The FTC approved two Google advertising acquisitions that substantially lessened competition.
In approving 4-1, Google’s acquisition of DoubleClick, the world’s leading online advertising server in 2007, as unlikely to “substantially lessen competition” the FTC then promised: “We want to be clear, however, that we will closely watch these markets and, should Google engage in unlawful tying or other anticompetitive conduct, the Commission intends to act quickly.” [Bold added for emphasis.]
In approving Google’s 2010 acquisition of AdMob, then the world’s leading mobile advertising platform, the FTC again concluded the transaction would not “substantially lessen competition” and promised again: “the Commission will continue to monitor the mobile marketplace to ensure a competitive environment and to protect the interests of consumers.”
Current evidence indicates that the FTC was doubly and substantially wrong here, because first Google’s acquisitions of DoubleClick and AdMob did in fact “substantially lessen competition” (the different and stricter Clayton Act acquisition antitrust legal standard than the Sherman Act antitrust standard); and second because the FTC has not been vigilant as promised in overseeing these markets to address “unlawful tying or other anticompetitive conduct” or “to ensure a competitive environment and to protect the interests of consumers.”
When and if the FTC fully investigates these markets as thoroughly as the EU has, they will discover substantial and conclusive evidence that the Google’s search advertising monopolies that the DOJ found in 2008, and the FTC staff found in 2012, have strengthened further since the FTC approved Google’s acquisitions of DoubleClick in 2007 and AdMob in 2010.
Recently, a top theme to emerge from Mary Meeker’s influential annual Internet Trends report (p. 44), was that “Google + Facebook = 76% (& rising) share of Internet Advertising Growth, USA.” Ms. Meeker’s analysis also shows that Google alone commanded ~50% of the U.S. Internet advertising business in 2015.
When and if the FTC investigates the impact of Google dominating mobile much more than desktop, and that over half of user searches are mobile and growing, the evidencewill show that Google has strengthened its search and search advertising monopolies, in large part because of its contractual tying of search and search advertising, and because of Google’s apparent anticompetitive acquisitions of DoubleClick and AdMob.
5. The FTC fined Google a record amount in 2012 for a serious deceptive advertising offense.
In 2012, the FTC fined Google a “record $22.5 million civil penalty” because “it misrepresented to users of Apple Inc.’s Safari Internet browser that it would not place tracking “cookies or serve targeted ads to those users, violating an earlier privacy settlement between the company and the FTC.” “…the FTC charged that Google placed advertising tracking cookies on consumers’ computers, in many cases by circumventing the Safari browser’s default cookie-blocking setting. … Because of the particular operation of the Safari browser, that initial temporary cookie opened the door to all cookies from the DoubleClick domain, including the Google advertising tracking cookie that Google had represented would be blocked from Safari browsers.”
Ironically given that Google just agreed to abide by the new EU-US Privacy Shield, the earlier settlement referred to above was the 2011 FTC-Google-Buzz Privacy Consent Decree that the FTC boasted was “the first time the FTC has alleged violations of the substantive privacy requirements of the U.S.-EU Safe Harbor Framework.”
6. This EU advertising case is based on strong contractual evidence.
Like the EU Android-tying antitrust charges against Google from April 2016, the expected EU advertising-tying case is predicated on past and current contracts between websites and Google that have de facto exclusive requirements (i.e. tying) that if a website offers Google search on its website it must also use Google search advertising. This obviously creates a very substantial barrier for any advertising competitor that does not command a dominant search engine.
Apparently the EU has figured out that the strongest antitrust cases against Google are ones based on hard-to-refute, legally-binding, contractual evidence of tying to a dominant service, in this instance Google’s “general Internet search services.”
Conclusion:
The expected EU-Google search-advertising-tying case will be especially hard for the FTC to ignore given the FTC’s and DOJ’s detailed public history on this specific matter.
Remember the DOJ threatened a Sherman Act monopolization case against Google’s anticompetitive search advertising behavior in 2008, and its search advertising dominance has only strengthened since then.
Remember the FTC’s 2012 Google antitrust staff report concluded “Google strengthened its monopolies over search and search advertising through anticompetitive means; and its search advertising dominance has only strengthened since then.
Lastly remember, that the FTC publicly promised it would not let Google’s acquisitions of the world’s leading ad-serving company DoubleClick in 2007, and the world’s leading mobile advertising platform AdMob in 2010, “substantially lessen competition” in search advertising, when in hindsight, they both obviously did substantially lessen competition.
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Scott Cleland served as Deputy U.S. Coordinator for International Communications & Information Policy in the George H. W. Bush Administration. He is President of Precursor LLC, an emergent enterprise risk consultancy for Fortune 500 companies, some of which are Google competitors. He is also author of “Search & Destroy: Why You Can’t Trust Google Inc.” Cleland has testified before both the Senate and House antitrust subcommittees on Google and also before the relevant House oversight subcommittee on Google’s privacy problems.
