SCOTT CLELAND: EU Filling FTC Void of Google Law Enforcement

Scott Cleland Contributor
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 The evidence is mounting that the European Union is stepping in to fill the void of FTC law enforcement concerning Google. Currently, EU law enforcement is confronting Google on at least three different major law enforcement matters, and in the U.S., the DOJ, State Attorneys General, and Congressional overseers have taken a consistent, bipartisan tough law enforcement approach with Google. However, this is in stark contrast to the FTC’s consistently lax law enforcement record with Google. The evidence below indicates the FTC is the outlier in Google law enforcement.

A.  Active EU Law Enforcement:

The EU has a tough law enforcement record with Google.

  1. Search Discrimination Monopolization Case: The European Union’s Antitrust Chief, Joaquin Almunia just told Bloomberg:  “Next month I will have to decide how to continue this [Google antitrust] investigation. First we have to define our objections. We need to clarify the concerns after a year-and-a-half of complex investigation. And we will communicate these to Google and we’ll see what happens.” The FT reported that the EU’s expected Google Statement of Objections is 400+ pages long and documents how Google anti-competitively accords its own content top rank in Google search results while penalizing vertical search competitors with low search rankings and discriminatory ad pricing. (These EU findings largely mirror the Google antitrust findings of the U.S. Senate Judiciary Antitrust Subcommittee, outlined in a bipartisan letter to the FTC in December.)
  2. Google Patent Abuse Prompting New Antitrust Investigation:  In approving the Google-Motorola transaction, EU Competition Commissioner Joaquin Almunia made it clear the EU was concerned with Google-Motorola’s anti-competitive approach of withholding standards-essential patents from competitors via discriminatory terms. Commissioner Almunia told reporters: “This merger decision should not and will not mean that we are not concerned by the possibility that, once Google is the owner of this portfolio, Google can abuse these patents, linking some patents with its Android devices. This is our worry,” per Reuters.  (The DOJ echoed the EU’s concern about Google’s potentially anti-competitive approach to standards-essential patents.)
  3. New Google Privacy Policy Violates EU Law:EU Justice Commissioner Viviane Reding told BBC Radio that she believed Google’s [March 1st] changes violate European data laws by failing to consult with consumers making the changes, among other complaints,per eWEEK. (This is occurring in the context of the EU updating its privacy and data protection laws for the first time since 1995. The proposed legislation will greatly increase consumers’ control over their private data including a new right to be forgotten.)

B.  Tough DOJ, State AG,  & Congressional Oversight of Google:

The DOJ has had a long and tough law enforcement record towards Google.

  1. DOJ blocked the Google-Yahoo Ad Agreement as anti-competitive by threatening a Section 1 & 2 anti-monopolization case against Google in November 2008.
  2. DOJ twice opposed the Google Books Settlement in 2009 and 2010 as a violation of antitrust, copyright, and class action law; in 2011 Federal Judge Chin agreed with the DOJ and blocked the proposed settlement.
  3. DOJ sanctioned Google (and five other companies) for colluding to not poach each other’s employees, which harmed high-skilled employees’ compensation and career potential. Google has been subject to a five-year DOJ/court-supervised consent decree since 2010.
  4. DOJ conditioned Google’s acquisition of ITA Software with a court-supervised consent decree to mitigate its anti-competitive effects in 2011.
  5. DOJ sanctioned Google with a near-record $500m criminal forfeiture penalty in 2011 for knowingly, at the highest levels of the company, promoting illegal prescription drug imports into the United States for several years; Google entered into a two-year non-prosecution agreement with the DOJ.
  6. DOJ warned and will monitor Google concerning Google’s signaled potential anti-competitive abuse of Motorola’s standards-essential patent portfolio, stemming from its approval of the Google-Motorola acquisition.

State Attorneys General have a tough law enforcement record on Google.

  1. The following states have ongoing antitrust investigations into Google: Texas, California and New York.
  2. 38 States investigated Google Street View’s unauthorized mass wiretapping of tens of millions of American home WiFi signals without the permission of the homeowners in 2010.
  3. 36 State Attorneys General recently strongly objected to Google’s new privacy policy because it did not provide consumers with any choice to opt-in or opt-out.

The U.S. Congress also has a tough law enforcement record on Google.

  1. The U.S. Senate Judiciary Antitrust Subcommittee’s strong bipartisan letter to the FTC called for a thorough antitrust investigation of Google by the FTC in December of 2011.
  2. The U.S. House Judiciary Committee strongly questioned Google’s opposition to anti-piracy legislation given its admitted advertising promotion of prescription drug piracy and counterfeiting and the fact that it profits from a lax approach to online piracy.
  3. Congress has held privacy hearings upon learning that Google Android phones were tracking users’ location thousands of times a day without the users’ knowledge or permission. Congressional overseers and the Congressional Privacy Caucus have written the FTC multiple letters repeatedly over the last several years objecting to a variety of Google privacy problems.

C.  Lax FTC Law Enforcement:

The only major actions the FTC has taken against Google were:

  1. Pressuring Google CEO Eric Schmidt to step down from Apple’s Board of Directors; and
  2. The FTC-Google Buzz privacy settlement, where Google admitted to deceptive privacy practices and submitted to privacy audits for twenty-years.

However, apparently the FTC has little interest in enforcing that Google Buzz settlement because the FTC opposed an EPIC lawsuit in Federal Court urging that the FTC enforce the settlement against Google’s new privacy policy. Moreover, the FTC has been mum and taken no action to date on the Google privacy policy, despite objections from 36 State Attorneys General and Congress.

In addition, the FTC’s fateful decision to exclude privacy as a factor in antitrust enforcement has fostered a perverse and unintended online competitive dynamic where Google and others de facto are incented to competitively abuse, not protect, consumers’ privacy online, because the FTC effectively has signaled to Google and others that there is no antitrust law enforcement risk and only competitive reward for maximally abusing privacy online. The FTC unwittingly has created de facto antitrust safe harbors for firms like Google that seek to monopolize certain markets of private information.

The FTC, in stark contrast to the DOJ, has had an exceptionally lax antitrust enforcement record with Google in: tipping Google to monopoly by approving DoubleClick; enabling Google to extend its dominance to mobile advertising with AdMob; and not actively investigating Google for antitrust violations. This means other antitrust authorities around the world have had to step in to fill the FTC’s antitrust law enforcement void: the EU, Germany, UK, France, Italy, South Korea, Argentina, and Australia.

In 2007, the FTC in approving the Google-DoubleClick merger 4-1 over strong opposition, essentially tipped Google to monopoly; it combined the only two entities in the world that reached most Internet users, advertisers and websites. The combination gave Google business access to over 90+% of the world’s Internet users, advertisers and websites. At the time, the FTC pledged to stay vigilant if problems arose in the future, but they have yet to fulfill that promise.

In approving the Google-Admob acquisition in 2010, despite the FTC staff recommending it be blocked because of “serious concerns,” the FTC has enabled Google to extend their dominance of PC search advertising to dominance of mobile search/advertising as well.

Nine months after launching an antitrust investigation of Google, five months after a tough Senate Antitrust hearing on Google, and three months after the Senate Antitrust Subcommittee recommended a thorough antitrust investigation of Google, the FTC has yet to issue any subpoenas (Civil Investigation Demands -CIDs) to companies claiming harm. Tellingly, the EU was able to investigate and determine a problem and begin preparing a case in roughly the same time frame. Why can’t the FTC even figure out what they want to investigate after the Senate Antitrust Subcommittee and EU have drawn them a detailed roadmap to pursue?

When German authorities discovered Google Street View cars had secretly been recording tens of millions of households’ private information via WiFi signals, 38 State Attorneys General and 18 countries investigated; meanwhile the FTC dropped their investigation after Google blogged that they would not do it again. When the EU, privacy groups and 36 State Attorneys General objected to Google’s new privacy policy for not providing users with a choice to opt-out, the FTC was effectively mum. When Google was discovered to have hacked Apple’s Safari browser and bypassed user and competitors privacy protections, the FTC was effectively mum again.

In sum, the evidence shows a stark difference in the law enforcement vigilance towards Google by the FTC, relative to its DOJ antitrust counterpart, State Attorneys General, and Congress, and also relative to the European Union. The open question is why is the FTC such a law enforcement outlier concerning Google? Does it suffer from regulatory capture? Or is the FTC unwilling or unable to come to terms with its central role and many mistakes in enabling the Googleopoly problem?

Scott Cleland is President of Precursor LLC, a consultancy serving Fortune 500 clients, some of which are Google competitors; he is also author of “Search & Destroy: Why You Can’t Trust Google Inc. He served as Deputy Assistant Secretary of State for Communications Policy in the George H.W. Bush Administration.