Critics of Google Antitrust Ruling Fault the Focus

originally appeared in The New York Times:

One of the more surprising conclusions drawn by the Federal Trade Commission when it dropped its nearly two-year antitrust investigation into Google last week was that Google, far from harming consumers, had actually helped them.

But some critics of the inquiry now contend that the commission found no harm in Google’s actions because it was looking at the wrong thing.

Instead of considering harm to people who come to Google to search for information, Google’s competitors and their supporters say that the government should have been looking at whether Google’s actions harmed its real customers — the companies that pay billions of dollars each year to advertise on Google’s site.

In its reports, the F.T.C. did not detail how it defined harm or what quantitative measures it had used to determine that Google users were better off.

But interviews with people on all sides of the investigation — government officials, Google supporters, advocates for Microsoft and other competitors, and antitrust experts and economists — show that many of the yardsticks the commission used to measure its outcomes were remarkably similar to Google’s own. Not surprisingly, they cast Google in a favorable light.

At issue were changes that Google made in recent years to its popular search page. Google makes frequent adjustments to the formulas that determine what results are generated when a user enters a search. Currently, it makes more than 500 changes a year, or more than one each day.

Users rarely notice the changes in the formulas, or algorithms, that generate search results, but businesses do. If a change in the formulas causes a business to rank lower in the order of results generated by a search, it is likely to miss potential customers.

What customers are now seeing reflects changes in the format of Google results. For certain categories of searches — travel information, shopping comparisons and financial data, for example — Google has begun presenting links to its own related services.

People close to the investigation said that Google had presented the F.T.C. with the results of tests with focus groups hired by an outside firm to review different versions of a Google search results page. After Google acquired ITA, a travel search business, in 2011, it began testing a new way to display flight results.

The company asked test users to compare side-by-side examples of a results page with just the familiar 10 blue links to specialty travel sites with a page that had at the top a box containing direct links to airlines and fares.

People who reviewed the Google data said tests with hundreds of people showed that fewer than one in five users preferred the page with links only. Users said they liked the box of flight results, so Google reasoned that making the change was better for the consumer.

There is a deep science to search evaluation, according to a senior vice president who oversees Google’s search operation, said in an interview on Friday. A lot of work goes into every change we make.

But the changes were not better for companies or alternative travel sites that were pushed off the first page of results by Google’s flight box and associated links. By pushing links to competing sites lower, Google might be making things easier for people who come to it for free search. But it also is having a negative effect on competitors, shutting off traffic for those sites.

Drawing fewer customers as a result of Google’s free links, those competitors are forced to advertise more to draw traffic. And advertisers who aren’t competitors have fewer places to go to reach consumers, meaning Google can use its market power to raise advertising prices.

There might be no consumer harm if Google eliminates Yelp, said one Microsoft advocate, who spoke on the condition of anonymity because of the likelihood of further interactions with the F.T.C. But advertisers certainly are harmed.

Google’s suggestion that the correct way to measure the benefit of a design change was through user appreciation seemed to strike a chord with the commission. In its statement explaining why it took no action against Google on search bias, the F.T.C. said that the documents, testimony and qualitative evidence the commission examined are largely consistent with the conclusion that Google likely benefited consumers by prominently displaying its vertical content on its search results page.

F.T.C. officials said they considered data from a wide range of sources — those with interests aligned with Google as well as against it. The officials also bought quantitative data about Internet usage and conducted interviews with experts who were independent of all sides.

None of the data was taken strictly at face value, according to the director of the F.T.C.’s Bureau of Economics, said in an interview. We kick the tires hard on all of the data we receive.

While some of Google’s competitors might have suffered when Google made changes to the way it generated and displayed search results, the F.T.C. said, the totality of the evidence showed that any negative impact on actual or potential competitors was incidental.

The five commissioners at the F.T.C. voted unanimously not to pursue a case accusing Google of using unfair competition to enhance its search business. One of those commissioners, however, warned that there was little to prevent Google from misrepresenting the value of the changes it made to its search methods.

That commissioner, a Republican who criticized the F.T.C.’s decision not to seek a court order preventing Google from certain actions, said, Nothing in this ‘settlement’ prevents Google from telling ‘half truths’ — for example, that its gathering of information about the characteristics of a consumer is done solely for the consumer’s benefit, instead of also to maintain a monopoly or near monopoly position.

Google’s interest in maintaining its market dominance — it accounts for about 70 percent of all searches in the United States — goes beyond its dedication to improving the experience for users, of course.

The F.T.C. chairman, said that while some evidence suggested that Google was trying to eliminate competition, that was not necessarily illegal. Some may believe the commission should have done more in this case, because they are locked in hand-to-hand combat with Google around the world and have the mistaken belief that criticizing us will influence the outcome in other jurisdictions, he said.

The commissioners also appeared to view Google’s changes to its results pages as a design issue as much as an antitrust one. Product design is an important dimension of competition, the commission wrote, and condemning legitimate product improvements risks harming consumers.