Google and the FTC Reach a Settlement

Search engine giant Google has faced heavy scrutiny from U.S. and European Union regulators in recent years.  In 2011, the Federal Trade Commission (FTC) launched an anti-trust investigation into the company.  This investigation was partly a response to the dozens of companies that complained that Google was manipulating search results to ensure that Google products appeared high in search results rankings.  Because so many companies depend on a favorable ranking in Google search results, Google’s alleged manipulation of search results devastated their businesses.  In short, the complaining companies believe that Google uses its dominant market position- roughly 67 percent in the U.S. search engine market- to steer consumers towards Google’s products rather than its rivals.  Such a complaint, if true, is even more serious in that Google is expanding into such fields as the online travel industry.

The FTC recently announced that it has reached a settlement with Google.  Although Google volunteered to make some minor changes to its practices, industry observers unanimously viewed the settlement as a complete victory by Google.  Google had two powerful arguments in its defense.  First, its actions have benefitted the parties that anti-trust law is concerned about- consumers.  Consumers pay nothing to access the internet’s dominant search engine.  Second, Google’s position poses no costs on consumers who wish to switch to other search engines; Bing, Yahoo!, and other search engines are just a click away if consumers so choose.  Aside from substantive arguments, Google launched a massive lobbying campaign.  It hired over a dozen lobbying firms, spending an estimated $25 million in an outreach to politicians and organizations.

Although the FTC essentially admitted that Google had not acted improperly, it is interesting to consider what would have happened if its conclusion was the opposite.  Imposing ongoing regulatory oversight over Google would be a challenge for several reasons.  Google is wildly popular with consumers, search engine technology is beyond the grasp of most regulators, and the online commercial landscape can change in a matter of months.

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