Google’s dominance of Internet search advertising is expected to be challenged by U.S. antitrust enforcers.
The Federal Trade Commission may be on the verge of issuing subpoenas to Google as it initiates a long-anticipated antitrust investigation against the company.
The FTC declined to comment and Google did not respond to a request for a response. According to The Wall Street Journal, however, the government agency is within days of issuing formal demands to Google for information about the company’s online advertising business.
Google has faced few regulatory inquiries in the past. The FTC approved its acquisition of display ad firm DoubleClick in 2007 and looked into the relationship between Apple and Google in 2009, before Google’s then CEO Eric Schmidt left Apple’s board of directors.
The Justice Department is said to be reviewing Google’s plan to acquire Admeld. The DoJ has also been involved in reviewing Google’s proposed book scanning lawsuit settlement, dissuading Google from consummating an ad deal with Yahoo, and forcing Google and other tech companies to abandon their pact not to hire each other’s employees. The DoJ also recently approved Google’s acquisition of ITA Software under specific conditions.
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In February, the European Commission began looking into complaints about Google’s business practices.
Coincidentally, Google on Wednesday rebuffed the Senate judiciary antitrust subcommittee, which had requested that either executive chairman Eric Schmidt or CEO Larry Page testify at a subcommittee meeting. U.S. Senator Mike Lee (R-Utah), who disclosed that neither Schmidt nor Page would make themselves available, expressed his disappointment in a statement.
Google has been trying to avoid a serious antitrust inquiry at least since 2009, when it pitched its concept of “Competition and Openness” to journalists and regulators in the U.S. and in Europe. Boiled down to a sound bite, Google’s argument was, and continues to be, that “competition is only one click away.”
Yet no matter how small the mouse movement required to take users to Bing or some other search site, Google continues to hold a commanding lead in search market share. According to ComScore’s figures, Google in May had 65.5% of the U.S. search market, Yahoo had 15.9%, and Microsoft had 14.1%, with Ask and AOL accounting for 2.9% and 1.5%, respectively.
The impetus for the FTC investigation is said to be complaints from Expedia, Microsoft, TripAdvisor, and Yelp, which contend that Google favors its own websites in its search results, thereby limiting traffic to competitors.
In Europe, similar objections have been raised by Foundem, a U.K.-based price comparison website. Foundem participates in an industry e-commerce group that’s partially funded by Microsoft, a French legal search engine called ejustice.fr, and European shopping site Ciao!, which was acquired by Microsoft in 2008 and integrated with its Bing search engine.
Assuming the FTC goes ahead with its inquiry, it will have to determine the relevant market in which Google operates, and whether Google has unlawfully abused its power to the detriment of consumers and competition. Google has argued that its business accounts for only a small percentage of the total advertising market.
But those who believe Google operates an illegal monopoly argue otherwise. Wharton business school professor Eric Clemons–who likens free software to unhealthy junk food and directs an academic project that’s part of a larger Wharton program in which Microsoft has agreed to participate–contends that the relevant market is the search advertising industry. And there, for now at least, Google dominates.
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