Inside Business

November 14, 2012 8:22 pm

Regulators weigh demands for Google

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The EC and FTC seek voluntary changes in the company’s business model to end antitrust probes

How far will Google go to head off the threat of long and damaging antitrust battles on both sides of the Atlantic – and how hard will regulators push to cramp its expansive style?

The answers to those questions should become clearer in the next few weeks, as the European Commission and the US Federal Trade Commission press the company for voluntary changes in its business model to end their antitrust investigations. Rivals want radical action, perhaps even extending to a break-up of Google into separate companies that handle search and other services. The likely outcome, though, is more minimalist.

Google has no incentive to give away the farm without a legal fight and unless there is strong evidence that it has acted in a deliberately anti-competitive way to squash competition, the regulators will find it will be hard to enforce stringent moves.

The most important issues involve search “fairness”. Does Google give undue prominence to its own services, such as maps and comparison shopping, robbing other sites of all-important search traffic? And does it discriminate against some sites by relegating them in its rankings?

This could play out very differently in Europe and the US. Extended discussions with Brussels have revolved around a package of possible measures that stop short of the more drastic scenarios painted by rivals, according to people familiar with the discussions. But the FTC, later to start its investigation, faces a tougher challenge given different US antitrust procedures and legal standards, making the outcome of its current effort to pressure Google into a settlement harder to handicap.

Among the issues under discussion:

Complaints The way Google deals with complaints from websites that feel they’ve been unfairly treated in its rankings can seem ad hoc and opaque. A more systematic complaints process would remove some of the sense of arbitrariness. This might even be reinforced with some sort of outside oversight, for instance from an ombudsman, though Google may well feel that infringes too far on its free-speech rights.

Transparency Google’s search engine is, of necessity, a black box: if it revealed how its algorithms work, websites would be able to game the system to appear higher in its rankings. However, that doesn’t mean regulators couldn’t establish some degree of technical oversight. There is a precedent here. For nearly 20 years, beginning in the mid-1980s, the US Department of Transportation policed the airline industry’s computer reservation systems to prevent any airline from giving unfair advantage to its own fares.

In depth

Google

google

Google is showing results from heavy investments in areas beyond search, with notable inroads in the mobile, video and display markets

Labelling Attaching clear labels to identify its in-house services when these are returned in search results (something Google has already offered to do) would help to fend off claims that it is misleading consumers. Like search adverts, these would clearly be seen as types of information that Google has chosen to put in front of users outside the normal run of its algorithmically ranked results. The FTC set guidelines a decade ago that touch on this. Updating and extending these decade-old rules would be one way to deal with the questions raised by Google’s promotion of in-house services, according to David Balto, a former head of competition policy at the FTC who is a strong proponent of minimalist regulation on Google.

Choice Giving Google’s users more choice over the results they want to see would be one way to level the playing field for other services. Users might be asked to select which maps service they want to get results from, for instance, when searching for a location.

Such an arrangement would echo the ballot screen that Brussels forced on Microsoft, which prompts buyers of new PCs to choose which browser they want to set as their default. Google, however, is likely to fight a requirement to promote rival services if it believes it can supply adequate results from its own.

Google’s famous “Don’t be evil” slogan has been looking a little frayed of late as its ambitions have grown, notably with the deeper integration of the Google Plus social network into search and a new privacy policy that has been heavily criticised. A package of remedies that enables regulators to hold its feet to the fire on search would help to ensure that it is still living up to some of its higher ideals.

But this would still be cold comfort for rivals who have hoped to use the antitrust process to break Google’s tightening grip on a widening range of internet activities.

Richard Waters is the FT’s West Coast managing editor

richard.waters@ft.com

www.ft.com/insidebusiness

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