It's a hugely profitable business to control the
majority of the world's search traffic. And that's precisely the position
information giant Google Inc. (GOOG)
is in. But that leading role is drawing
scrutiny and may place Google as the subject of a pending U.S. Federal Trade Commission investigation according
to the Bloomberg news agency.
I. Google Search -- Strong Competitor or
As the world's largest search engine firm, Google
currently controls approximately 83.8 of the world's search traffic [source].
In the U.S., Google, whose name has become a verb
for "perform an internet search", has no large competitor.
While Microsoft Corp.'s (MSFT)
Bing search engine has managed small gains, it has largely just cannibalized
the search market share of business partner Yahoo! Inc. (YHOO),
who now uses Bing code as the backend of its own search page. Together,
the pair controls less than 10 percent of the world search market.
Outside the U.S. Baidu, Inc. (BIDU)
is providing a spirited challenge, but it still has less than 5 percent global
market share, and Google is growing nearly as fast as it, internationally.
According to sources quoted by Bloomberg,
the FTC is telling companies (likely Yahoo and Microsoft, among others) to
prepare to receive civil investigative demands for the information with
regards to Google's search dominance. Civil investigation demands for
information are similar to subpoenas.
The FTC reportedly
wanted to wait for the U.S.
Department of Justice to conclude its review of Google's recent $700M USD
purchase of ITA Software Inc. before launching the probe.
ITA -- a travel software provider whose clients
include Orbitz, Bing Travel, Kayak.com, CheapTickets, and airlines such as
American, United, US Airways, Virgin Atlantic, Alitalia, and ANA -- was a
startup founded by researchers at the Massachusetts
Institute of Technology, spawned from a project at MIT's famous Computer Science and Artificial
Intelligence Laboratory (CSAIL). The company today employs over 450
The acquisition was approved on April
9, under the provisions that Google continue to provide search rivals like Bing
access to its travel data, and that it allows the government to review
complaints that it acted unfairly with regards to said rivals.
II. A Tough Road to Building Case Against
Many legal experts say that the FTC's legal staff
would have a tough time compiling a case against Google. Google has
allegedly engaged in anti-competitive behavior -- for example Skyhook Wireless
LLC has sued Google in Massachusetts state court, claiming Google coerced
Motorola Solutions Inc. (MSI)
and another client to ditch its software product in favor of a competitive
product from Google.
It's unclear, however, whether the case could
somehow be related to Google's dominant search engine position. Google
largely came to its current search engine position by giving better results
than competitors, thanks to its legendary PageRank algorithm.
Google could face a challenge, though about its
dominant position in the smart phone market, which some would argue is an
emerging monopoly. The FTC has grown more liberal during the Obama
administration, as some might expect, more closely approaching its European
The agency recently hired Columbia University Law
Professor Timothy Wu [profile],
a prominent and controversial IT scholar, who contends that internet firms
should be banned from monopolizing multiple markets.
Some think that the case against Google has a
small possibility of leading to a major shake-up. For example, Eleanor
a law professor at New York University, said in an interview
with Bloomberg, "[An FTC investigation] has the
potential to be very significant. It could be 'Google as the next
Her comments refer to the important 1998-1999 case United
States v. Microsoft, which scrutinized Microsoft's dominant positions in
the operating system, internet browser, and office software industries.
While that case did not break up Microsoft, as some hoped, it did lead to
significant changes in how the company was allowed to operate.
Specialists with the European Commission (EC) in
the European Union (EU) are currently investigating
accusations with regards to Google's behavior in the search market.
The EU has leveled massive fines in the past against Microsoft and
against Intel, so Google clearly is likely concerned how these accusations play
In the U.S. antitrust law's central document is
Antitrust Act of 1890. Like many older laws, the Act's current powers
within the U.S. are largely spelled out by court precedents set in numerous
cases, including the U.S. government's legal scuffles with Microsoft, American
Telephone and Telegraph  (1974-1982),
the Standard Oil Company (1909-1911), and the American Tobacco
quote: i am not a google fanboy but...