Connecting the dots, Google may gain a de facto Monopoly® "Get out of Jail Free" antitrust settlement from the FTC before the election. Bloomberg reports that the FTC has pushed to move up the conclusion of its antitrust investigation from "end of the year" to mid-September. Assuming that report is accurate, it has big implications. Let's connect the dots.
First, the sudden acceleration of the endgame of the FTC investigation strongly suggests external circumstances (i.e. the EU-Google antitrust settlement negotiations timetable) are driving the timing/outcome of the FTC's Google investigation, given that the EU and Google reportedly reached an "understanding" in late July that could result in a settlement of antitrust charges. This suggests the FTC is considering becoming a tagalong to the EU settlement, despite the very different law and process in the U.S.
Second, the externally-driven accelerated timing here puts the FTC at a particularly significant disadvantage in this case. That's because, Bloomberg reports that the FTC "staff will present its findings to the FTC's five commissioners by mid-September." If we indeed are two weeks out, all indications are that the FTC is not at the stage in the investigative process to prosecute by filing a formal complaint. If the FTC was serious about prosecuting or even signaling a willingness to prosecute, we would have heard that the FTC had issued follow-up CIDs (subpoenas) and/or was collecting information or affidavits in the form and quantity necessary to convince the FTC commissioners that they have a viable monopoly abuse case to be tried in court. If they enter into potential negotiations before they have their legal ducks in a row, Google will know the FTC is negotiating from weakness. In other words, saber rattling requires a real saber.
Third, the FTC appears to have a bias for settlement in their management of the Google antitrust investigation. The FTC's part-time hiring of former Federal prosecutor Beth Wilkinson in April to lead the antitrust investigation of Google -- in stark contrast to the full-time hiring and all-in commitment of both David Boies in U.S. vs. Microsoft and Sandy Litvack in the DOJ's threatened Sherman Section 1 and 2 case against Google over the Google-Yahoo ad Agreement -- suggests that the FTC may have been in settlement mode rather than prosecution mode as far back as April.
In addition, given all of the outside lawyers/prosecutors that the FTC could have hired full time to prepare a case, the FTC interestingly selected one who was a protégé of the Google outside litigation counsel, Jamie Gorelick, who helped Google negotiate the lenient $500m criminal forfeiture settlement and Non-Prosecution Agreement with the DOJ last year.
Fourth, the FTC's July 31st policy decision, which would make it much easier for the FTC to negotiate "disgorgement of ill-gotten gains" as a monetary remedy in competition cases, appears driven by the Google antitrust case because it is the only major case for which this authority would be needed in the very short term.
It is especially notable that this important policy change was rushed through the process. In FTC Commissioner Ohlhausen's dissent, she stated she was "troubled by the lack of deliberation" in deciding this issue and noted that it was unusual that it was rushed through without the normal public comment process.
This unusual policy change is relevant to the FTC's apparent settlement-first bias in two ways.
- It creates additional settlement negotiation leverage for the FTC, in order to compensate for being so behind the EU in its investigation.
- It also dovetails with Google's now well-worn pattern of buying their way out of prosecutions without having to publicly admit any responsibility or liability for wrongdoing, an outcome which generously protects Google from any brand damage for breaking the law or any civil liability for harming consumers or competitors.
It is important to note that in just the last year, Google effectively has bought its way out of admission of responsibility/liability or finding of wrongdoing with three different Government entities.
- Last August Google paid a $500m disgorgement penalty to the DOJ for breaking criminal laws relating to promoting imports of illegal prescription drugs for several years that endangered millions of Americans' health and safety, in return for no criminal prosecution of the individuals involved, when prosecutors publicly stated that they had evidence of individual culpability in the law breaking.
- Google agreed to a $25,000 FCC fine but no admission of liability for impeding the FCC's enforcement investigation into Street View's wiretapping of tens of millions of Americans homes without permission.
- And just recently the FTC fined Google $22.5m for supposedly not doing anything wrong in hacking into a competitor's Safari browser to bypass user and Apple's privacy and security settings.
Fifth, the FTC has a history of protecting Google from law enforcement. The FTC tipped Google to monopoly in approving Google-DoubleClick. The FTC facilitated Google's extension of its search advertising monopoly to mobile in approving AdMob. Google quietly closed its Street View WiSpy investigation without finding any problems, in contrast to a dozen other countries around the world. Google didn't even reopen its Google Street View privacy investigation after the FCC determined Google misled the FTC about Google's deceptive practices. The FTC even protected Google in court from the FTC investigating Google for violating the Google Buzz consent decree, when Google consolidated its privacy policy with no opt-out for consumers. Finally, the court overseeing the FTC-Google $22.5m privacy fine has agreed to hear a Consumer Watchdog challenge to the FTC decision that Google does not have to admit responsibility for its wrong doing.
In sum, when one connects the dots, Google has largely mastered how to game law enforcement. With $50b in cash and $25b in annual gross profit, Google cheerfully agrees to pay whatever fine or disgorgement necessary as long as law enforcement agrees effectively to protect Google from the real legal and public consequences of their actions, i.e. allowing Google to skirt any admission of wrong doing that would harm the brand or user trust which is what Google cares most about, and shielding management from any individual or fiduciary responsibility for their past and future wrongdoing. In effect, Google's settlement strategy is all about buying itself effective safe harbors to do whatever it wants to do without consequences material to Google.
The true measure of the Google antitrust settlement(s) will be in its real world effectiveness and deterrent capability.
- Will consumers of search and consumers of search advertising enjoy meaningful competitive choice going forward and be protected from anti-competitive Google behavior and harm in the future?
- Will Google admit it is dominant and thus accept special responsibility to not be anti-competitive going forward?
- Will the settlement reliably prevent further extension of Google's dominance into other markets?
- Does the settlement have sufficient provisions and claw-backs to adequately deter Google violations of the settlement, i.e. not just another fine that Google will gladly pay as the cost of doing business?
Time will tell whether the FTC finally gets serious in enforcing the law against Google, or if they again will settle with Google and effectively award them with their very own Monopoly® "Get out of Jail Free" card.
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Google Unaccountability Series:
Part 1: "Why Google Thinks It Is Above the Law"
Part 2: "Top Ten Untrue Google Stories"
Part 3: "Google's Growing Record of Obstruction of Justice"
Part 4: "Why FTC's $22.5m Privacy Fine is Faux Accountability"
Part 5: "Google's Culture of Unaccountability: In Their Own Words"
Part 6: "Google Mocks the FTC's Ineffectual Privacy & Antitrust Enforcement"
