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Monday, August 15, 2011

FTC Sharpens Google Probe

The Wall Street Journal
Aug 11, 2011

U.S. antitrust regulators are focusing their investigation of Google Inc. on key areas of its business, including its Android mobile-phone software and Web-search related services, people familiar with the probe say.

Six weeks after serving Google with broad subpoenas, Federal Trade Commission lawyers, in conjunction with several state attorneys general, have been asking whether Google prevents smartphone manufacturers that use its Android operating system from using competitors' services, these people said.

FTC Sharpens Google Probe

They also have inquired whether Google grants preferential placement on its website to its own products, such as Google's "Places" business listings, its "Shopping results" and Google Finance services above most other results.

And they're looking into allegations that Google unfairly takes information collected by rivals, such as reviews of local businesses, to use on its own specialized site and then demotes the rivals' services in its search results, the people said.

When the FTC probe first became official in June, Google said it wasn't clear what the agency was concerned about. But the early focus of the investigation suggests a potential threat to Google's plans to expand its commercial success beyond its current cash cow: the Web-search engine.

The European Commission, which has imposed restrictions on Microsoft Corp.'s ability to leverage its dominant computer-operating system to promote other services, has been carrying out its own broad antitrust probe of Google since last year.

Google denies that it engages in unfair or illegal competitive practices. The company has suggested the growing number of antitrust investigations have been spurred by rivals unsettled by its aggressive push into new business sectors.

"We understand that with success comes scrutiny," said a Google spokeswoman. "We're happy to answer any questions they have about our business."

An FTC spokeswoman declined to comment.

The FTC's probe is still at an early stage, with investigators seeking to learn the inner workings of a complex business. An investigation of this kind can last a year or longer and won't necessarily result in the FTC's filing a lawsuit.

Even so, the existence of the probe already appears to be affecting the Web giant's behavior. The company has made tweaks to its search engine to mollify rivals and head off a possible legal clash with antitrust authorities.

For example, FTC lawyers have asked several Web companies about Google's practice of including customer reviews from websites such as Yelp and TripAdvisor on Google's own "Places" service, which has millions of pages for individual local businesses, these people said. Google Places competes with Yelp and other business-review sites, which have alleged Google stole their content.

In meetings with some complaining websites, Google executives have held firm that the practice wasn't anticompetitive, according to representatives of those sites.

Late last month, Google said it had removed snippets of reviews that originated on other sites from Google Places.

As part of its probe, the FTC is preparing to send out civil subpoenas to third parties to provide documents and evidence in its investigation, said people familiar with the matter. Investigators have already held a series of exploratory meetings and interviews with Google, its competitors and other third parties, giving a flavor of the kinds of areas they're concerned about.

Investigators have been asking technology companies whether Google is restricting the use of rivals' services on mobile devices using its widely used operating system, Android, the people said.

One alleged example has come to light in a private lawsuit, filed against Google by Skyhook Wireless Inc. The Boston-based company accused Google of using its market power to pressure smartphone makers into dropping Skyhook's location-sensing technology in favor of Google's own, competing service. Google has called it a "baseless complaint."

FTC lawyers have also asked about the growing influence of Android and how it may be helping Google maintain its lead in Web search. Google's search engine is the default for many phones built using Android.

Research firm Canalys said this month that Android powered nearly half of new smartphones shipped worldwide in the second quarter of this year— ahead of both Apple Inc. and Nokia Corp.