Google’s high-handed tactics with US regulators are backfiring
Google’s high-handed tactics with US regulators have come back to haunt it, with critics saying the tech giant set the stage for a dramatic showdown with the Department of Justice nearly a decade ago.
The DOJ last week sued Google, accusing it of using anti-competitive tactics to maintain its search engine’s dominance over rivals. The focus of the suit — massive cash payments to smartphone makers like Apple and Samsung to make Google’s search engine the default option on their devices — is a fresh one.
But industry sources say the Silicon Valley giant has nevertheless made itself vulnerable to a battle with the heavyweight DOJ by refusing to cooperate with lesser regulators in the past.
In 2012, a Democrat-led Federal Trade Commission offered the search engine giant a plea deal over allegedly anticompetitive practices that would likely have protected it from its current legal dispute with the DOJ, sources told The Post.
The FTC’s offer, which has not previously been reported, came in the form of a consent agreement that carried no admission of guilt for Google if it would agree to rein in some of its controversial search practices.
Those included Google’s scraping of content from third-party websites like Yelp to use on its own platforms without linking back to those sites, and restrictions the FTC claimed Google created to prevent advertisers from doing business with rival sites, sources said.
The offer — led by then-FTC chairman Jon Leibowitz, a Democrat — was soundly rejected.
“Google resisted everything,” a source with knowledge of the events told The Post. “They said, ‘We don’t think you have the votes to sue.’ ”
Indeed, Leibowitz didn’t have the support he needed to sue. He had backing only from fellow Democratic Commissioner Julie Brill, but not from Edith Ramirez, also a Democrat, or the FTC’s two Republican commissioners, Maureen Ohlhausen and Thomas Rosch, sources said.
In 2013, after a two-year probe, the FTC announced that Google had agreed to changes to its scraping and ad sales policies via a nonbinding “commitment letter” that gave the FTC zero authority to ensure it followed through.
Had Google agreed to Leibowitz’s original offer, sources say, it would have been under the FTC’s jurisdiction for between seven and 10 years — a period during which Donald Trump’s DOJ would have been barred from stepping on its turf.
“They would have been smart to sign a consent decree with the FTC,” a source with knowledge of the 2012 discussions told The Post.
“I think it’s a great ‘the road not taken’ story,” added George Washington University Professor William Kovacic, an FTC commissioner from 2006 through 2011 who confirmed that the plea deal was offered after he left the agency.
“If the FTC had come home with a real order, that could have been seen as a much more legitimate law enforcement measure. The whole narrative of government ineffectiveness in dealing with big tech would have been different,” Kovacic added, pointing to loud calls from DC to rein in Silicon Valley.
“It’s entirely possible that emboldened Google,” Kovacic said of the FTC’s refusal to sue.
Google, which declined to comment for this story, has vehemently denied that its practices are anti-competitive and last week blasted the DOJ’s lawsuit as “deeply flawed” in a blog post. The Alphabet-owned company controls 90 percent of all online searches in the US, which helps it generate $160 billion in annual sales through advertising. It says it got there by being the best search engine around.
The DOJ claims it was unfairly helped along by convincing phone makers to make it the default engine, thus locking up the distribution channels. It does this through its Android operating system, which powers nine out of 10 phones, the DOJ says. It also pays Apple to make it the default search engine on the iPhone — resulting in payments to Apple of as much as $11 billion a year, or roughly one-third of Alphabet’s annual profits, according to the feds.
If Google tangles with the DOJ and loses, it could be forced to sever its relationship with Apple — a scenario so stark for Google that it’s been labeled “Code Red” inside the company, prosecutors said. While Android-operated phones are more common, almost half of Google’s search traffic last year came from Apple devices, the DOJ complaint said.
Google, which competes against Microsoft Bing and DuckDuckGo, is expected to argue the efforts to slow its growth would only hurt consumers. “People use Google because they choose to, not because they’re forced to, or because they can’t find alternatives,” the company’s senior vice president of global affairs said in a blog post last week. “This lawsuit would do nothing to help consumers.”
And while the company has effectively used this argument to fend off regulators in the US and Europe for years, Seth Bloom, a longtime general counsel for the US Senate Antitrust Subcommittee, says the DOJ could still win if it can show that Google’s actions “are stopping other search engines from prospering.”
“I think Google’s monopoly in search is unquestioned,” he said.
Nicolas Vega contributed to this story.
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