FTC-Googlegate Scandal Repercussions in EU & U.S.

Previously unknown facts about the FTC staff’s 2011 Google search bias investigation have the makings of a potential scandal and cover-up with broad repercussions for Google with the European Commission, other countries, the FTC, State AGs and Congress.   

The WSJ gained inadvertent access to the FTC’s 2011 staff report about its investigation of Google’s search practices. FTC staff concluded: Google abused its monopoly power in search and search advertising; harmed Internet users and competitors; and manipulated its search results by favoring its own content over competitors’ content.

These WSJ investigative articles are a must read: “Inside the U.S. Antitrust Probe of Google;” “How Google Skewed Search Results;” and “Excerpts from FTC Staff Report on Google Search Practices.”  

 

Summary

1. A Political Decision?  Public evidence concerning the sequence of events surrounding the FTC’s closure of its Google search practices investigation creates at least the appearance that politics, and not merits, drove the FTC’s ultimate conclusion.
2. Strengthens EC’s Hand  The FTC staff report effectively mirrors the EC’s conclusions in their Google competition case. America’s protection of Google from law enforcement is a Google glass house that makes it hard for it to throw stones at the EC. The FTC staff report also could embolden stronger antitrust enforcement against Google in Canada, Brazil, India and Russia, among other countries.
3. Exposes FTC Not Protecting Consumers   The staff report’s finding of Google search advertising harms exposes the failure of FTC’s approval of Google’s acquisitions of DoubleClick and AdMob. The report’s finding of Google search manipulation -- when Google has long publicly-promised to not manipulate search results -- exposes that the FTC is not holding Google to the Section 5 standard to which it holds other companies.    
4. Bolsters State AGs’ Enforcement Case    Legitimate concerns about whether or not Federal law enforcement is holding Google accountable to federal consumer protection laws, bolsters State AGs’ efforts to enforce State consumer protection laws against Google.
5. Calls for Congressional Oversight   The FTC’s apparent political rejection of the FTC staff enforcement conclusions expose irregularities and circumstances that require Congressional oversight to ensure the administration of justice is being fairly applied to Google.    

 

 

Relevant Political Context

The FTC staff findings and recommendation are very different from the ultimate FTC-Google settlement, which oddly did not focus primarily on fully resolving the FTC staff’s recommendations, but primarily focused on publicly resolving a completely separate DOJ antitrust investigation concerning Google’s abuse of Standard Essential Patents.

The swift and very odd conclusion of the FTC’s case should prompt further inquiry into the context and timeline of the FTC’s decision.

• October 13, 2012, a month before the 2012 Presidential Election, the Washington Post with Bloomberg reported:  “FTC investigators pushing Google antitrust suit, memo says” “Federal Trade Commission investigators are circulating an internal draft memo [staff report] that recommends suing Google for abusing its dominance of Internet search in violation of antitrust laws, three people familiar with the matter said.
• November 6, 2012, President Obama reelected. Per Bloomberg: “During the 2012 campaign, Barack Obama’s reelection team had an underappreciated asset: Google’s (GOOG) executive chairman, Eric Schmidt. He helped recruit talent, choose technology, and coach the campaign manager, Jim Messina, on the finer points of leading a large organization. [See here for more] “On election night he was in our boiler room in Chicago,” says David Plouffe, then a senior White House adviser.Schmidt had a particular affinity for a group of engineers and statisticians tucked away beneath a disco ball in a darkened corner of the office known as “the Cave.” The data analytics team, led by 30-year-old Dan Wagner, is credited with producing Obama’s surprising 5 million-vote margin of victory.” Time Magazine explained the importance of data analytics to the 2012 Presidential election outcome:  “Inside the Secret World of the Data Crunchers Who Helped Obama Win … Data-driven decision-making played a huge role in creating a second term for the 44th President and will be one of the more closely studied elements of the 2012 cycle.”
• November 21, 2012, two weeks after the Presidential election, Bloomberg reported: “Google… may skirt the most serious antitrust allegations under investigation by the U.S. as regulators waver on whether they can prove consumers are hurt by the way the company ranks its search results, three people familiar with the matter said.
• January 3, 2013, eight weeks after the Presidential election, the FTC announced it closed its search bias investigation, but settled a Google patent abuse investigation for the DOJ. The FTC said: “Under a settlement reached with the FTC, Google will meet its prior commitments to allow competitors access – on fair, reasonable, and non-discriminatory terms – to patents on critical standardized technologies needed to make popular devices such as smart phones, laptop and tablet computers, and gaming consoles. In a separate letter of commitment to the Commission, Google has agreed to give online advertisers more flexibility to simultaneously manage ad campaigns on Google’s AdWords platform and on rival ad platforms; and to refrain from misappropriating online content from so-called “vertical” websites that focus on specific categories such as shopping or travel for use in its own vertical offerings.” “…the FTC concluded that the introduction of Universal Search, as well as additional changes made to Google’s search algorithms – even those that may have had the effect of harming individual competitors – could be plausibly justified as innovations that improved Google’s product and the experience of its users. It therefore has chosen to close the [search] investigation.”
• January 4, 2012, the day after settling with the FTC, Google General Counsel crowed in a statement: “After an exhaustive 19-month review… the FTC staff and all five FTC Commissioners agreed that there was no need to take action on how we rank and display search results.”“Speculation about potential consumer harm turned out to be entirely wrong.” Google Chief Legal Officer David Drummond said: “the conclusion is clear: Google’s services are good for users and good for competition.” 

 

 

Repercussions for the European Commission Antitrust Investigation into Google

Strengthens EC’s Case  The previously-undisclosed FTC staff report supports and reinforces the EC’s findings of fact, that Google is a monopoly with 69-84% American market share, and that Google abused its monopoly by favoring its content over competitors. It also directly contradicts Google’s benign characterization of the FTC’s findings.

America’s Google Glass House Should Not Throw Protectionist Stones   The new previously-undisclosed FTC staff evidence suggests at least the appearance that the Google antitrust case was resolved for political reasons and not based on the facts and merits of the staff-investigated case.

The FTC staff report adds potentially damning new evidence that the U.S. Government has developed such an extraordinarily close relationship political relationship with Google -- that it can’t be objective with Google law enforcement matters.

Seven U.S. Government Google Guardians?  Consider the facts about how exceptionally integrated Google has become with the U.S. Government on most all of the commercial matters most critical to Google’s business success.

1. Megan Smith has served as U.S. chief technology officer and assistant to the president since September. Smith served as a senior Google executive from 2003-2014.
2. Alexander Macgillvray has served as deputy U.S. chief technology officer for intellectual property & privacy since September. Macgillvray served as Google’s deputy general counsel for intellectual property from 2003-2009.
3. Mikey Dickerson has served as deputy U.S. chief information officer and administrator of the U.S. digital service since August. Dickerson served as a Google Senior Engineer from 2006-2013.
4. Michelle Lee has served as the head of the U.S. Patent & Trademark Office since November of 2012. Lee served as Google’s deputy general counsel and head of patents and patent strategy from 2003-2012.
5. Renata Hesse has served as deputy assistant attorney general for criminal and civil operations of the antitrust division of the U.S. Department of Justice since May of 2012. Hesse served as an outside counsel to Google during the DOJ’s opposition to the proposed Google-Yahoo ad agreement.
6. David Gelfand has served as deputy assistant attorney general for litigation of the antitrust division of the U.S. Department of Justice since August of 2012. In that capacity Gelfand also has served as the DOJ’s antitrust litigation liaison to the European Commission’s Directorate of Competition. Gelfand represented Google in the Federal Trade Commission’s 2010 antitrust review of the Google-Admob transaction.
7. Joshua Wright has served as one of five U.S. Federal Trade Commission Commissioners since January of 2013. Wright did antitrust-related academic consulting work for Google and formally recused himself from all Google matters before the FTC until January of this year.

Seven former employees of, or consultants to, Google, all are conveniently and simultaneously  positioned perfectly as potential “Google Guardians,” and eyes and ears, in every single major federal policy or law enforcement area of interest to Google.

This creates at least an appearance of a conflict of interest problem that Google enjoys partial and extraordinary special treatment within the United States Government at the highest level.

Emboldens Other Country Google Antitrust Actions   This new FTC staff evidence and assessment, that in the U.S., Google has monopoly market share and has anti-competitively favored its content over competitors in search results will likely embolden other international antitrust investigations of Google in: Canada, Brazil, India, and Russia, among other countries.

 

 

Repercussions for the FTC

The FTC has shown no public interest in investigating Google since the FTC formally dropped its Google search and search advertising investigation eight weeks after the Presidential Election.

The disclosure of the FTC staff report findings of facts, that Google now has a monopoly share of 69-84% and that it is manipulating search results to favor Google’s shopping and travel services over competitors’ services, puts a spotlight on the FTC that it may be protecting Google more than it is protecting consumers.

First, the FTC is not keeping its Google merger review promises to protect consumers.

Consider what the FTC promised after it closed its antitrust reviews of Google’s acquisitions of DoubleClick and AdMob.

FTC on closing its DoubleClick investigation: “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.”

FTC on closing its Admob investigation: “In a statement issued today, the Commission said that although the combination of the two leading mobile advertising networks raised serious antitrust issues, the agency’s concerns ultimately were overshadowed by recent developments in the market, most notably a move by Apple Computer Inc. – the maker of the iPhone – to launch its own, competing mobile ad network.” … “Though we have determined not to take action today, the Commission will continue to monitor the mobile marketplace to ensure a competitive environment and to protect the interests of consumers.” [Subsequently, Apple’s iAd competition did not materialize as the FTC imagined; Apple now reportedly has a meager 3% share of this relevant market.] 

Apparently, the FTC did not want to admit that its approvals of Google’s acquisitions of both DoubleClick and AdMob may have resulted in violations of the Clayton Act. That’s because it appears Google has illegally acquired market power, and then used it to act anti-competitively in multiple ways.

Second, the FTC is not protecting consumers from Google deceptive practices.

The most damning evidence in the previously-undisclosed staff report is that the FTC is not protecting consumers from obvious deceptive advertising by Google.

Obviously, no one at the FTC has bothered to read Google’s blanket public representations that it never manipulates its search results, despite the FTC staff report concluding that Google in fact does manipulate search results to benefit itself financially.

Consider this incredibly public and self-incriminating evidence to which the FTC has apparently turned a blind eye.

• From the top of Google’s current “About” page -- “Ten things we know to be true. We first wrote these “10 things” when Google was just a few years old. From time to time we revisit this list to see if it still holds true. We hope it does—and you can hold us to that.” … “You can make money without doing evil.” …“Advertising on Google is always clearly identified as a “Sponsored Link,” so it does not compromise the integrity of our search results. We never manipulate rankings to put our partners higher in our search results and no one can buy better PageRank. Our users trust our objectivity and no short-term gain could ever justify breaching that trust.”
• From Google’s 2004 Founders’ IPO Letter  -- “Don't be evil. …Google users trust our systems to help them with important decisions: medical, financial and many others. Our search results are the best we know how to produce. They are unbiased and objective, and we do not accept payment for them or for inclusion or more frequent updating.”

Consider the evidence below that the FTC has ignored when it comes to whether Google is fairly representing its business to consumers.

In October of 2012, the FTC staff report concluded that Google in fact was manipulating its search results in many ways.

Then after the FTC closed its investigation into search bias, the search industry’s widely-recognized leading expert, Danny Sullivan of Search Engine Land, twice documented how Google was obviously manipulating its search results and breaking its public promises. See: Search Engine Land, 4-30-12: Google “Comparison” Units Get New Look; Change Highlights Paid Inclusion In Some Vertical Search Areas; and Marketing land, 11-17-13: Google’s Broken Promises & Who’s Running The Search Engine?

The extensive evidence above strongly indicates that since the 2012 Presidential election the FTC does not appear very interested in investigating Google or enforcing consumer protection law as it pertains to Google. 

 

 

Repercussions for the State AGs’ investigations of Google

Ironically, Google learned of confidential information about a State Attorney General investigation of Google from a leak of Sony documents from North Korea’s hack of Sony Pictures.

Google used that confidential information to file a Federal lawsuit to quash a subpoena from Mississippi State Attorney General Jim Hood into whether or not Google was continuing to violate its Non-Prosecution Agreement with the DOJ over illegally aiding and abetting in the illegal import of illegal prescription drugs, that was the focus of Google’s $500m criminal forfeiture penalty.  (For more background, click here.)

This new FTC staff report could be a game-changer in this Google versus the State AGs case.

The FTC staff report evidence, combined with the public evidence that the Federal Government may not be holding Google accountable to the law in multiple ways, suggests that the Federal Court should not prevent States from investigating Google’s alleged illegal activities.

At a minimum, this new evidence suggests that the court should err on the side of allowing investigations of Google, not disallowing them. 

 

 

Repercussions for Congress

The Senate and House Judiciary Committees held hearings on Google search bias in 2011.

The new revelations in the FTC’s staff report, in combination with the appearance of Google being treated differently by the FTC after the 2012 Presidential election, could warrant some oversight inquiry by Congress.

Is the FTC operating as an objective expert agency, independent from the Executive Branch? 

Did Google accurately answer all of the Committees’ questions in 2011 in light of what the FTC staff investigation concluded?

If the FTC staff report concluded Google’s anti-competitive search advertising behavior harmed users and competitors, why has the FTC not reopened their Clayton Act investigations of the DoubleClick and AdMob acquisitions by Google, as required by law if in fact, they have “substantially lessened competition?” 

Why is Google not required to fairly represent its business to consumers like other companies are? In other words, why is it not a deceptive and unfair practice under the FTC’s Section 5 authority to represent all Google search as unbiased and objective to gain and maintain user trust when the FTC staff report found sufficient evidence Google in fact was manipulating search results in ways that did not best serve users?

 

 

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Google Unaccountability Series

 

Part 0: Google's Poor & Defiant Settlement Record [5-1-12]

Part 1: Why Google Thinks It Is Above the Law [4-17-12]

Part 2: Top Ten Untrue Google Stories [5-8-12]

Part 3: Google's Growing Record of Obstruction of Justice [6-21-12]

Part 4: Why FTC's $22.5m Privacy Fine is Faux Accountability [7-12-12]

Part 5: Google's Culture of Unaccountability: In Their Own Words [8-1-12]

Part 6: Google Mocks the FTC's Ineffectual Privacy & Antitrust Enforcement [8-10-12]

Part 7: An FTC Googleopoly Get Out of Jail Free Card? [8-30-12]

Part 8: Top Lessons to Learn for Google Antitrust Enforcers [9-14-12]

Part 9: Google Mocks EU and FTC in Courting Yahoo Again [9-26-12]

Part 10: FTC-Google Antitrust: The Obvious Case of Consumer Harm [11-25-12]

Part 11: Why FTC Can't Responsibly End Google Search Bias Antitrust Investigation [11-27-12]

Part 12: Oversight Questions for FTC's Handling of Google Antitrust Probe [11-30-12]

Part 13: Courts Not FTC Should Decide on Google Practices (The Hill Op-ed) [12-10-12]

Part 14: Troubling Irregularities Mount in FTC Handling of Google Investigation [12-17-12]

Part 15: Top Ten Unanswered Questions on FTC-Google Outcome [1-3-13]

Part 16: Top Takeaways from FTC's Google Antitrust Decisions [1-7-13]

Part 17: Google’s Global Antitrust Rap Sheet [1-31-13]

Part 18: Google’s Privacy Words vs. its Anti-privacy Deeds [3-8-13]

Part 19: Google’s Privacy Rap Sheet Updated – Fact-checking Google’s Privacy Claims [3-13-13]

Part 20: DOJ & FTC Report Cards [4-12-13]

Part 21: The Evidence Google Bamboozled EU Competition Authorities [4-19-13]

Part 22: EU-Google: Too Powerful to Prosecute? Problems with Enabling Google [5-1-13]

Part 23: Google’s proposed EU Search Bias Remedies: a Satire [5-17-13]

Part 24: Google’s Antitrust Rap Sheet Updated [5-27-13]

Part 25:  Is This the Track Record of a Trustworthy Company? See Google’s Rap Sheet [6-6-13]

Part 26: Top Questions as DOJ-Google Criminal Prosecution Deadline Approaches [7-12-13]

Part 27:  The Evidence Google Violated the DOJ Non-Prosecution Agreement [8-8-13]

Part 28:  Implications of EU Ruling Google Abused its Search Dominance [9-27-13]

Part 29:  Google-YouAd is a Deceptive and Unfair Business Practice [10-24-13]

Part 30:  EU's Google Antitrust Problems Not Going Away [12-16-13]

Part 31:  How the Google-EC Competition Deal Harms Europe [2-10-14]

Part 32: Open Letter to European Commissioners to Reject EC-Google Settlement [2-16-14]

Part 33: Google’s Extensive Cover-up [2-24-14]

Part 34: Open Letter on Google’s Opposition to Distracted Driving Legislation [2-27-14]

Part 35: The Growing EC-Google Settlement Scandal – An Open Letter to EC Officials [3-31-14]

Part 36: Google’s Glass House [4-14-14]

Part 37: Google’s Titan Spy-Drones Mimic Military Spy Planes [4-17-14]

Part 38: Google’s Anti-Competitive Rap Sheet Warrants Prosecution not Leniency [4-30-14]

Part 39: Google Apps for Education Dangers --Letter to School Administrators/Parents [5-17-14]

Part 40: Google’s AdSense Lawsuit Spotlights Google’s Corruption of Unaccountability [5-23-14]

Part 41: Google’s Title II Utility Regulation Risks – An Open Letter to Investors [6-3-14]

Part 42: Six Ways the FTC is AWOL on Google [7-16-14]

Part 43: Fact-checking Google’s Public EC Competition Defense [9-21-14]

Part 44: Top 10 Reasons Why Google is Causing EU More Problems than Microsoft Did [10-1-14]

Part 45:  Google Profiting from Hacked Celebrity Women Photos “How Google Works” [10-6-14]

Part 46:  Fact-checking Google Schmidt’s “Ich bin ein Big-fibber” Berlin Speech [10-14-14]

Part 47:  Google’s Dominance isn’t Peaking its Proliferating [11-4-14]

Part 48: A European Revolution against Google’s Virtual Colonialization? [11-24-14]

Part 49:  Google’s Serial Bad Acts Harm American Interests in Europe [11-28-14]

Part 50:  Evading Sovereign Accountability is “How Google Works” [12-10-14]

Part 51:  What’s Google Really up to in Wireless [1-30-15]

Part 54: Evading Sovereign Accountability is “How Google Works” [12-10-14]

Part 55: Bullying is “How Google Works” – Ask Law Enforcement [12-21-14]

Part 56: Deceptive Branding is “How Google Works” Ask EC Law Enforcement [1-7-15]

Part 57: Breaking Privacy Promises is How Google Works - New Student Privacy Pledge [1-22-15]

Part 58: What’s Google Really Up To in Wireless? [1-30-15]

Part 59: Google’s Title II Privacy Liability Nightmare [2-6-15]

Part 60: Why is Google Obstructing Justice in Mississippi? EC Pay Attention [2-12-15]

Part 61:How America Protects National Champion Google In The EU [3-5-15 ]