Google's FTC consent order that isn't

This post is NOT about the consent order the FTC proposes to enter into with Google over the patent portfolio Google bought from Motorola. It's about something else: the investigation that the FTC took up, and then dropped - without accusing Google of anything - over Google's business practices in search.

It's easy to separate the two issues and fair to do so, because the FTC and Google both do so.

I met a man that wasnt thereWhat pulls me in is how to make sense of the "commitment letter" the government obtained from Google on the search issue. What's being settled? What are the charges?

What's the FTC's standing to negotiate an agreement with a private company in the face of an FTC belief that the company has violated no law?

Here's how we're used to seeing the FTC disposing of cases: FTC prepares a lengthy, formal complaint, complete with factual findings or allegations, and an argument on how laws or regulations have been violated; FTC stops short of initiating proceedings on the complaint; subject company neither admits or denies it did anything wrong, but enters into a "consent order" under which it agrees to fix problems and subject itself to monitoring for a period of multiple years.

This consent order process is how matters in the past have been settled with Twitter and with Facebook. (Indeed, this consent order routine is pretty much the process followed with regard to the Motorola patent issues; see the FTC draft complaint in this regard.)

The consent order process is odd enough. If you're paying attention to the shadow dance, it might strike you as something of a mockery of legal process. The affair winds down with all the clarity of two private parties quietly settling a civil breach of contract case before trial, as though the public had no interest in knowing what really happened. (America needs you, Judge Rakoff.)

But this "settlement" over Google's business practices around search, it's odder still. Here's the text of the closest thing to the FTC's final word on the topic:

"The Federal Trade Commission has been conducting an investigation of the search business of Google Inc. to determine whether certain acts or practices may violate Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45. Upon further review of this matter, it now appears that no further action is warranted by the Commission at this time. Accordingly, the investigation has been closed. This action is not to be construed as a determination that a violation may not have occurred, just as the pendency of an investigation should not be construed as a determination that a violation has occurred. The Commission reserves the right to take such further action as the public interest may require."

Say what? Google needs to fix whatever may or may not have occurred (which the FTC can't characterize because "no further action is warranted" to figure out what the violations might be)?

Furthermore, backing up this stand down letter is something exactly the opposite of a draft complaint, a statement that reads pretty much like an exoneration. Here are two key excerpts from this FTC statement:

"The totality of the evidence indicates that, in the main, Google adopted the design changes that the Commission investigated to improve the quality of its search results, and that any negative impact on actual or potential competitors was incidental to that purpose. While some of Google’s rivals may have lost sales due to an improvement in Google’s product, these types of adverse effects on particular competitors from vigorous rivalry are a common byproduct of 'competition on the merits' and the competitive process that the law encourages.

. . .

"Reasonable minds may differ as to the best way to design a search results page and the best way to allocate space among organic links, paid advertisements, and other features. And reasonable search algorithms may differ as to how best to rank any given website. Challenging Google’s product design decisions in this case would require the Commission – or a court – to second-guess a firm’s product design decisions where plausible procompetitive justifications have been offered, and where those justifications are supported by ample evidence."

Do I sound righteous? I don't mean to. I'm certainly not angry at Google. It strikes me that Google, like Twitter, continues to find the right balance in the marketplace, exploiting user generated information, for sure, but not in ways that cause most of us to question whether the value proposition has tipped away from our favor.

But I do think something is not right with a political compromise dressed up as a legal settlement.

If all the FTC has nothing against Google on the search bias question, then there's no case to bring and Google should be left to go about its business.

If Google wants to take the occassion to re-calibrate where it draws lines between indifferent search and blatant advertising products, and to do so with fanfare, that's fine, too.

But dressing up a political compromise as a legal settlement mocks the law almost as surely as the December 2011 settlement with Facebook did.

Photo: Jonathan Reyes / Flickr.


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