FTC concludes Google investigation amidst lack of evidence of unfair practices

Josh Peterson Tech Editor
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The Federal Trade Commission closed its 20-month investigation of Google on Thursday amid a lack of evidence that the company was manipulating search results to favor its own services.

Under the settlement, Google agreed to voluntarily change some of its business practices, including no longer scraping content from websites, and allowing companies to opt out of Google vertical services, like shopping or travel, without penalizing them in search rankings.

Google also agreed to stop excluding rivals from seeking licenses from Google to use its recently purchased Motorola patents — a condition made by Motorola under a previous agreement.

In a letter to Google counsel Susan A. Creighton, the FTC noted that the closing of the investigation did not mean that a legal violation did not occur and that agency “reserves the right to take such further action as the public interest may require.”

FTC Commissioner J. Thomas Rosch dissented from the other four commissioners, stating not only that Google didn’t violate any antitrust laws regarding its search practices, but the settlement lacked any enforcement teeth since it was not embodied in a descent decree or order.

Speaking of the practices Google agreed to change, Rosch said that “without a descent decree, the practices could be revived any time without penalty, even if they constituted a law violation.”

“In other words,” he continued, “after promising an elephant more than a year ago, the commission instead has brought forth a couple of mice.”

Google’s critics responded negatively to reports before Christmas that the deal between Google and the FTC was nearing completion, arguing that the FTC has lost its credibility as an agency.

“Some may believe the commission should have done more in this case, because they are locked in hand-to-hand combat with Google around the world and have the mistaken belief that criticizing us will influence the outcome in other jurisdictions,” said FTC Chairman Jon Leibowitz in his prepared remarks for the press Thursday, in response to the criticisms of the agency.

“Some may believe we should have done less,” he said. “For our part, we follow the facts where they lead, applying our statute faithfully to the unique circumstances of each case, with appropriate vigor and with appropriate restraint.”

Google’s critics — including the coalition, made up of largely Google’s competitors, including Microsoft, Expedia, Yelp and others — have also voiced concern that the administration had a conflict of interest in the investigation since Google Executive Chairman Eric Schmidt is also a close adviser to President Barack Obama.

“Is he speaking for himself, for the administration, or for Google?,” a source familiar with the investigation told The Daily Caller, stating that Schmidt should have stepped down as an adviser to the president as soon as his company came under investigation.

“When you have someone that close to the president whose company is under investigation, it raises questions,” they said.

Some critics have even said that they are prepared to take their case as far as the Department of Justice.

On Jan. 2, Microsoft again raised its hackles at the news of the proposed settlement, the Los Angeles Times reported.

Schmidt became the center of another controversy this week when it was revealed that he is scheduled to travel to North Korea with former New Mexico Gov. Bill Richardson. The U.S. government — tense after North Korea fired a rocket some believe is capable of reaching the U.S. — called the visit “unhelpful.” Schmidt’s visit is, according to CNN sources, a “private humanitarian visit” and not on behalf of the Obama administration.

Google, however, is unashamed of its lead over its competitors.

In an interview at Bloomberg’s New York headquarters, Google’s Schmidt boasted of his company’s lead over Apple in the mobile-software rate, stating that it mirrored Microsoft’s lead over Apple in desktop-software in the 1990s.

While companies like Apple and Microsoft have long insisted on tightly-controlled systems, Google’s strategy has relied upon the opposite concept: open systems that can be easily improved upon by its users.

According to Gartner Inc., while Apple only held 14 percent of the market in the third quarter, Android devices held 72 percent — ceding revenues to hardware company’s like Samsung Electronics, a strategy which Schmidt says creates a “bigger pie” from which to generate revenues.

Governments starving for revenue — such as France, Italy, Australia and the U.K. — are also currently probing Google in response to the recent revelation that Google saved $2 billion in 2011 by using off-shore tax shelters.

Schmidt, who insisted that Google pays for and saves on taxes legally, said during the interview, “It’s called capitalism.”

“We are proudly capitalistic,” he said, “I’m not confused about this.”

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