The U.S. Federal Trade Commission (FTC) has issued a formal probe against the business practices of Google Inc.
The investigation is to look at the role of Google in Web-searching advertising.
The civil probe is the most legal threat yet to the 12-year-old company. Google Inc has faced several antitrust investigations in the recent past, but was limited to reviews of the company’s mergers and acquisitions.
The new enquiry will examine fundamental issues relating to core-searching advertising business. Google, it is believed that, the search results favor company?s own services.
Google which controls 69 percent of web searches can make or break a company depending on their ranking.
Policy watchers believe that this probe is just a watershed event and Google would not be an easy target for prosecution.
Competition law is popularly known as antitrust law.
The aim is to protect the interests of consumers and entrepreneurs.
The FTC’s competition mission is to enforce the rules of a competitive market. These laws also protect consumers from anticompetitive mergers and business practices.
The FTC’s Bureau of Competition, working in tandem with the Bureau of Economics, enforces the antitrust laws for the benefit of entrepreneurs and consumers.
The FTC?s landmark lawsuit against Microsoft Corp. in the 1990s is a typical example.
Microsoft was forced to spend years defending itself against the probe that it abused its monopoly in operating systems to eliminate competition in other areas. The long running case distracted the company from its operations and tainted its public image?a similar risk which Google also might have to face.
Microsoft finally settled the matter in the year 2002, and only last month emerged from government oversight.
The FTC probe is expected to be focused around Google’s advertising business, whether the search results are used to the company?s own growing network of services at the expense of rival providers.
Some firms have complained about Google?s ranking of searches and the amount they charge for placing ads by claiming its market power.
The search giant is also facing numerous complaints of unfair business practices in Europe too.
Fairsearch.org, a group of businesses and organizations united to promote a healthy Internet future, said “Google engages in anticompetitive behavior?that harms consumers by restricting the ability of other companies to compete to put the best products and services in front of Internet users, who should be allowed to pick winners and losers online, not Google.”
Complaints from travel sites like Expedia and TripAdvisor, health site WebMD.com, and local-business reviews sites such as Yelp.com and Citysearch.com claim that Google promotes links to its own services depriving their sites of potential traffic.
They also complained that Google is indulging in anti-competitive practices that include using other companies’ content without their permission, deceptive display of search results, manipulation of search results to favor Google’s products, and buying up competitive threats to its dominance.
Google, however, denies all these charges.
Google is quickly expanding its array of services that seek to directly answer users’ queries, departing from its original strategy of sending them quickly to the most relevant site.
Since 2009, for example, Google has directed people who search for mortgages or credit cards to its own marketplace for such offers.
Another example is the “comparison ads” that Google introduced in 2009, in which users can enter information to judge advertisers’ products against each other. Google then charges a fee for a detailed business referral to, say, a mortgage lender or an airline.
Google insists that it is merely providing a service to users, who want answers rather than just links to other services.
But that format is not open to services such as LendingTree or Kayak, which already provide referrals.
Google has also suggested that many of the complaints about its behavior have been orchestrated by Microsoft, which in April filed its own antitrust complaint against Google with European authorities. European probe was launched in November.
However, Microsoft commented saying that it is merely directing issues to the proper authorities.
The FTC has been making informal inquiries about Google’s business practices for several months. The preparations to subpoena Google are the first concrete signal that indicates the agency is proceeding with a formal investigation against Google. The probe is expected to take a year or more to unfold, and it won’t necessarily lead to any charges.
In addition, Texas, where a state investigation of Google was disclosed last year, the attorneys general of New York, California, and Ohio have started preliminary probes of the company
Although Google is not commenting on the case except say that “advertisers have a huge range of choices,” the companies, it seems, considers SourceTool as an example of “advertising arbitrage.”Google also said that it was not clear what the FTC concerns were and the company would still cooperate with the authorities.
The official response from Google’s Amit Singhal is below.
It’s still unclear exactly what the FTC’s concerns are, but we’re clear about where we stand. Since the beginning, we have been guided by the idea that, if we focus on the user, all else will follow. No matter what you’re looking for-buying a movie ticket, finding the best burger nearby, or watching a royal wedding-we want to get you the information you want as quickly as possible. Sometimes the best result is a link to another website. Other times it’s a news article, sports score, stock quote, a video or a map.
Whether Google will be able to handle the review better than Microsoft remains to be seen. Shares of Google reached more than $600 this year but ended down 1.11 percent at $474.88 on Nasdaq.
Source: Wall Street Journal, International Business Times, http://www.hg.org, Business week