The U.S. Federal Trade Commission is reportedly preparing a probe into whether Google Inc.'s dominant position in the search market is illegal. Any resulting case would likely hinge on possible abuses by Google designed to limit competitors' access to the market.  (Source: Google Images)

The FTC recently hired Columbia Law professor Timothy Wu to advise it. Professor Wu has suggested that the government should outlaw internet firms having a monopoly in multiple markets -- something Google arguably has or almost has.  (Source: BNET)
Google owns approximately four fifths of search market

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 Ruthless Giant?

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,, 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 people.

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 Google

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 peers.  

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 Fox [profile], 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 Microsoft'."

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 out. 

In the U.S. antitrust law's central document is the Sherman 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 [1] (1974-1982), the Standard Oil Company (1909-1911), and the American Tobacco Company (1908-1911).

"Google fired a shot heard 'round the world, and now a second American company has answered the call to defend the rights of the Chinese people." -- Rep. Christopher H. Smith (R-N.J.)

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